Zynga's recipe for a turnaround

Starting Monday, there will be a new CEO in charge at Zynga, as current board member and former Electronic Arts executive Frank Gibeau will take over after company founder Mark Pincus steps down from the position for the second time.

On the day of the announcement, the outgoing CEO and his incoming replacement spoke with GamesIndustry.biz about what's been done over the former's somewhat brief tenure, and where the latter will take that strategy in the future. While the pair have only worked together for seven months (Gibeau joined the Zynga board in August), it's clear they've had ideas in common for a lot longer.

"On many fronts, I just kept finding that Frank had the pattern recognition and experience to really accelerate a lot of decisions and challenges that we were working through," Pincus said, explaining one of the factors that convinced him Gibeau was the right choice for CEO.

Gibeau said the Zynga position was a great fit from his perspective as well.

"[W]hen I came to Zynga, I saw a lot of the ingredients inside Zynga that you need in order to successfully turn a company around."

Frank Gibeau

"I spent a seven-month period as a board member just falling in love with Zynga," Gibeau said. "I came in on a one-day-a-week assignment that quickly spread to two days, three days, and four days. I'm a product guy, I love games. That's my passion, and when I came to Zynga, I saw a lot of the ingredients inside Zynga that you need in order to successfully turn a company around. It starts with product and vision, and the company has terrific vision for what social gaming can be like."

Pincus discussed that vision as a motivation for him to return to the CEO position last April after the person he originally turned the reins over to, former Xbox executive Don Mattrick, stepped down after less than two years on the job.

"I really thought the company needed to reset around a renewed commitment to our vision of social gaming," Pincus said. "As we moved to mobile, we had lost some of that. And really, the whole industry had lost some of that commitment.

"Some parts happened by design. When we moved to mobile, we were no longer deeply integrated with social networks like Facebook, so social got harder for everybody. But it meant we needed to innovate even more, not less. And sometimes it takes a founder to come back to spiritually move a company"

In his return, Pincus also wanted to reinstill an entrepreneurial culture to Zynga, and recommit the company to excellence in running games as a service.

"We had neglected some of these terrific core live franchises that were now making up so much of our mobile business and overall business," Pincus said.

Words With Friends and Zynga Poker in particular has been in decline for bookings and users, he noted, but have since turned around bookings and are now showing organic growth in the player base as well. As for the results of any shift in culture, those might not be seen until the company releases some new titles.

"As those games launch, they have the potential to substantially grow our mobile business and change the shape of our overall company profitability as those 10 games and studios move from cost centers to profit centers."

Mark Pincus

"Today we are poised to launch our biggest slate of new mobile games in our history," Pincus said. "And I'm not taking a victory lap on that because some of those games were supposed to be launched last year but we had to delay into this year... As those games launch, they have the potential to substantially grow our mobile business and change the shape of our overall company profitability as those 10 games and studios move from cost centers to profit centers."

One of Pincus' first moves upon his return to Zynga was to cut 18 percent of the company's headcount. At the time, he explained it as a move that would create the culture he wanted, as "tighter, more nimble teams can drive faster innovation and deliver more player value." He also added that his developers seemed frustrated with progress, that they wanted "to move faster and take more shots on goal."

Despite the lack of new releases since then, Pincus said Zynga has followed through on the plan. He narrowed the company's slate of games, cancelled plans to expand into sports ("We were not ready," Pincus admitted), and reduced the size of teams working on properties like Words With Friends and Poker, some of them by as much as half.

"We did cancel a few very large team efforts we hadn't even announced," Pincus said. "And that was painful, but in place of those games what sprouted up were some very small entrepreneurial teams that are working on innovative new starts."

However, none of those innovative new starts are among the 10 games slated for this year. Pincus said that fostering innovation with smaller teams means giving them time and space to work on their games without the pressure to add people to hit ship dates.

Gibeau likened the shift in the company to one he saw at EA starting in 2008 as it pivoted from a packaged goods model to a more digital business.

"Having a unified vision inside the company of who you are and what you're trying to do really helps you get out of the wilderness."

Frank Gibeau

"Having a unified vision inside the company of who you are and what you're trying to do really helps you get out of the wilderness," Gibeau said. "It really helps align all the efforts of the company and galvanizes the company when times are tough."

Other key components for a turnaround include proven brands, great development talent, and an existing audience.

"You don't want to start from zero in terms of going out to find players, and Zynga since its inception has had over a billion people play their games," Gibeau said. "Is the audience where it needs to be and is it growing as fast as we want it to? No, but the new releases will start to rejuvenate and get us back on a growth path there."

A good balance sheet with no debt, lots of assets, and ample cash reserves also helps, and Gibeau said that's another favorable comparison between EA circa 2008 and today's Zynga.

"So I combined all those things together and said 'Wow, we have all the ingredients to pull off a successful turnaround here.' It really comes down to engineering these products as hits and executing. And that's where I also have a lot of experience from EA in building world class teams, putting them together, and working with them to bring products to market and make hits happen. So I'm trying to help the teams here get into position for that and really unlock the value in the company."