Video games are a great source of entertainment for both kids and adults alike. Billions of users across the globe download numerous games to play on their powerful consoles, PCs, and cutting-edge smartphone devices.
Many companies produce these games and sell them online or offer them for free. But how does a company like Zynga make money even when all of its games are free to play?
Zynga primarily makes money by selling virtual in-game goods and displaying ads before and after the game. Digital merchandise and virtual goods are the main source of revenue for this company.
No one can make such resource-heavy games without any monetary return. But thanks to the in-game purchases, Zynga can afford to engage and entertain millions of users simultaneously through their powerful servers.
While many game developers create video games only to entertain users, Zynga makes them connect people! It mainly distributes its products on social media platforms and mobile phones.
So how does Zynga exactly makes a profit? What are its sources of revenue? Continue reading to find out!
What is Zynga?
Zynga Inc. is a US-based social video game developer. It was established in 2007 and its headquarters is located in San Francisco, CA. FarmVille is one of the most popular games introduced by Zynga back in 2009.
This company entertains millions of video game lovers on social networking sites as well as mobile phones. It aims to provide top-class interactive video games and connect people through video games.
Games introduced by this firm engage over 36 million active users daily and more than 134 million users monthly. It has become the market leader when it comes to providing engaging video games!
Zynga currently serves users across 175 countries. Its diverse portfolio allows the firm to draw the attention of users of all age groups. Zynga’s games have been downloaded more than four billion times on mobile devices. That’s a huge milestone for a video game development firm to achieve!
Games like FarmVille, CSR Racing, Empires & Puzzles, Hair Challenge, High Heels!, Harry Potter: Puzzles & Spells, Toon Blast, Merge Dragons!, and many others engage thousands of users 24×7.
Zynga also owns Chartboost, which is a popular mobile advertising and monetization company serving numerous gamers and developers to make a living.
Unlike other developers, Zynga offers all the social media platform games and mobile games for absolutely free.
And still, it is one of the most profit-making companies in this space. Therefore, people often wonder how this company makes money!
Mark Pincus had established Zynga as a project in January 2007. His project was to develop a social poker game and publish it on Facebook (FB).
Many people think this company’s name is a bit weird. Mark had a bulldog named Zinga and he chose to name the company after his bellowed furry friend.
Zynga is a shortened version of Enzinga, which means warrior princess in Swahili. This company’s first headquarters was established in the former Williams Potato Chip factory in San Francisco.
Mark launched the Poker game in July 2007 and it was the world’s first online poker game launched on a social media platform.
People could play this game through their Facebook accounts. It took no time to become the most popular free poker game on FB. Today, millions of people play this poker game online for free to test their knowledge and gameplay skills!
Zynga was the leading app developer for Facebook in April 2009. Its product had engaged over 40 users in that month and it was an astonishing figure for a newly established firm. It established the first external studio in Baltimore.
It was called Zynga East and Brian Reynolds was leading this studio. As the company grew, it acquired MyMiniLife, which created and published the FarmVille game on FB.
FarmVille became more popular and it was the first game to entertain 10 million active users daily! The company later introduced FarmVille.com as its first stand-alone online game.
Zynga collaborated with Facebook to expand their relationship and allow the use of FB credits in games introduced by this firm. This firm had later launched CityVille, which became the new most popular game with more than 61 million monthly users.
Zynga’s IPO was organized in July 2011 and its goal was to raise $1 billion through crowdfunding. The company began trading on NASDAQ in December and it drew many new investors.
Zynga continued to grow, announced the “Zynga With Friends” network to connect all the active users and also announced its official API. This company has collaborated with many prominent firms in the gaming and networking industries.
Everything was going great for this company until it lost nearly half of its user base in 2013. The same year this firm reduced its 18% workforce. Since the firm was not performing well, Pincus stepped down from his position as the CPO.
Zynga continued to lose its user base until Frank Gibeau became the CEO in 2016. His efforts paid off and Zynga experienced a 22% increase in 2017. It gained over 80 million active users by 2018 and over 1 billion users by 2022!
Take-Two Interactive, which is a well-known video game holding company, has shown interest to acquire Zynga. The deal might close by June this year!
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How Does Zynga Work?
Zynga follows a sophisticated approach to meet its ultimate goal. Anyone, who uses the internet via a mobile phone, tablet, or computer, is a potential client for this company.
It builds and distributes games for free. That free tag gets removed once the user is engaged. Now, this firm can promote and sell anything it finds appropriate for the client.
This company has created and published several entertaining games. Users keep returning to the game several times a day because some games are quite addictive.
It is quite tough for gamers to completely forget about Zynga’s product. Therefore, it has a huge user base. Everyone wants to be at the top of the leaderboard and that’s why people play time and again.
People usually download games through the app store. Zynga has been serving people since 2007. Therefore, this company’s games are available on Facebook, its official website, and on all app stores. Its games are always among the top trending games, therefore it finds new users quite conveniently.
This company states that it is on a mission to connect people via video games. It allows people to play live games and meet new users. A person can also connect with other players via social media if he wants to play more frequently.
Zynga’s success has encouraged many competitors to follow the same method for success. Not all of them have succeeded because this video game developer has gotten quite engaging products!
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How Does Zynga Make Money?
Zynga has witnessed several ups and downs since 2013. However, it is still a major player in the mobile and social media gaming industry. This company offers all games for free, so how does it generate profit?
This company sells virtual in-game goods that millions of gamers demand to show their dominance. Zynga’s all games offer premium in-game items that allure both young and adult users.
Users pay real money to buy in-game money and other premium items. Such purchases produce huge revenue for the company.
Zynga is also making money by advertising. It shows ads in and around games to promote various products. Even though ads do not generate a huge profit for this firm, its user base draws numerous advertisers.
Revenue from advertisement
Zynga displays a variety of ads to users when they go to play the game on social media sites and mobile devices. There are mainly three types of ads displayed with social games, which include the following:
- Banner ads: This type of ad can be displayed at the top of the screen or on either side of the screen. It covers a small portion of the screen, but it is quite effective. Sponsors spend a lot to get their ads on Zynga’s banners.
- Video ads: This company often displays video ads before the launch of the game. Players can also get a few video ads in-between games. Some users find it quite irritating when the ad has no skip button. Since it generates good profit for Zynga, it shows several clips during the gameplay.
- Product placement: This company has found some ingenious ways of injecting brands or their products into games. It can feature the logo or the name of a sponsor on a major location in the game. Thus, users won’t be able to ignore that promotion and some people find it quite entertaining.
Revenue through virtual goods
Virtual goods sale has become a major source of revenue for Zynga. A virtual good can be anything from in-game coins to premium items featured in the game. Even though these goods are not mandatory to play the game, millions of users buy them.
It might surprise many readers that Zynga is the first American firm that sold virtual goods and filed for an IPO!
Its core business metrics are defined as ABPU or average bookings per user. The company describes it as average regular virtual goods sold per average regular active user.
This company is selling a lot of goods, but the numbers are not increasing that much. That is a worrisome condition for the firm and its leaders. Many players buy in-game items frequently and some users buy occasionally.
Buying premium in-game items is quite easy. Users can use their credit cards or other payment methods to acquire what they require. Many experts believe that it is an unsustainable business model because there is no data.
The sale of premium in-game items can increase or decrease at any time. Zynga always tries to allure users by featuring flashy products for characters, locations, and other in-game features.
Every player wants to get those in-game products, but many are not comfortable with paying for them.
Being an entertainment company, Zynga entertains users for free. Its user base may decrease if the firm decides to charge for the download of its games. Therefore, it offers all the social games and mobile games for free.
Zynga constantly features new upgrades for premium products. So, if players already own luxury items, they try to acquire newly released items as well.
The in-game currency is required more frequently for in-game upgrades. Therefore, a majority of users spend real money to buy virtual in-game money.
Zynga’s profit will skyrocket if this firm starts charging a few pennies for the download of each game. It has no such plans, but it might try this tactic to increase revenue.
Why do users spend money on Zynga’s premium virtual goods?
Passionate gamers try to be the best among their peers and competitors online. They like to boast the best device and gears which provides them a sense of achievement. Also, most users spend money on premium features like “extra lives” so that they can progress much faster in the game.
Products, such as in-game currencies help users acquire top-class products to beat the competition.
A user can achieve impressive goals if he/she invests in the top upgrades. That’s why most users don’t hesitate before pulling out their credit cards and making the purchase.
Beginners might not get too enthusiastic about the in-game achievements, but the real target market of the company is the hardcore-passionate people who really care about their game!
That desire encourages users to spend money on Zynga’s virtual goods and that’s how this company makes money!