What does Zynga's new management hope to achieve, moving forward? Clues came in the form of the company's investor call, where it talked up NaturalMotion, cost-cutting, and mobile development.
In the last year, Zynga came under new management in the form of CEO Don Mattrick and COO Clive Downie. In today's investor call, the pair projected confidence and optimism following the announcements of the company's full-year results for 2013, which saw decreased losses but also a marked decrease in players.
One of the themes of the call could be "refocus and regroup." The company announced a major layoff of 314 staff, but that number doesn't tell the story of why. "We're right-sizing our team structure to align our resources with the best opportunities for growth," said Mattrick. That's the kind of thing you always hear after a large layoff, but what's the context? For one, it's not just developers who will be affected: The company plans for a "reduced data center footprint," per Downie. It will consolidate its data centers to reduce power consumption and bandwidth needs without negatively impacting its game services, the execs promised. Downie also promised increased developer efficiency thanks to improved tech and tools, which means less need for staff. Downie and co. have "assessed our product pipeline using our project strategy lens," he said, "removing and replacing teams" as necessary. Zynga plans to take maintenance of existing web-based games away from some of its more expensive teams and move them to lower-cost teams and thereby enable those teams to create all-new games. Meanwhile, the nature of the teams themselves are changing: "We are moving towards smaller, decentralized, revenue-generating teams to address the mobile market," CFO Mark Vranesh said.
These changes imply that this is the year Zynga plans to finally charge ahead as a mobile-first company, a transition it has found very difficult. For 2014, "75 percent of all new games in development are mobile-first," said Mattrick. "For the first time in our company's history, we expect mobile bookings to surpass web bookings," he said, meaning that the company will finally be making more money from mobile than from web. The company plans to bring FarmVille to mobile in the second quarter of 2014. While Zynga launched an iOS version of the game in 2010 (which later hit Android) the new game is pitched as a mobile-first FarmVille experience designed to recapture audiences who have wandered away from the PC version of the game, with Downie saying the company hopes it'll appeal to "consumers who have already experienced FarmVille" and thereby generate organic rather than paid growth. "2014 is set to be a year of landmark growth for us in terms of content on mobile screens," Mattrick said.
Between cash and equity, Zynga also spent over half a billion dollars to acquire NaturalMotion, and it seems like this is the company's strategy to attack the mobile market effectively. NaturalMotion has two iOS hits: CSR Racing and Clumsy Ninja, which are graphically impressive 3D games. Zynga sees itself as a leader in farming, casino, and word games, and wanted two more important genres (Clumsy Ninja is a "people simulation," in case you were wondering) covered. "The mobile market is underdeveloped, with racing in a nascent stage," Downie said of CSR. "We see casual and core as two complimentary opportunities," noted Mattrick, which means that the former EA and Xbox man is not afraid of approaching audiences traditionally out of Zynga's footprint. So where do its core competencies come in? "Social mechanics will drive better engagement, better retention" for these games, he said. Downie said that CSR Racing and Clumsy Ninja are "both early days in their social development," and Zynga will leverage its expertise in this regard to turn them into long-term successes. Of course, Zynga wants the games, but even more, it wants the technology that powers them -- and is hoping to use it to leapfrog its competition on mobile. "NaturalMotion's strengths lie in the breakthrough technologies used to create delightful mobile games," Downie said. There was talk of the advanced skeletal and nervous system simulation that drives Clumsy Ninja's realism and, consequently, its appeal with players. Mattrick is also serious about the technological advantage of the acquisition of the company for Zynga: "NaturalMotion's technology and tools pipeline are unmatched, and mark a significant leap ahead in our ability to launch next generation entertainment," he said. Downie also called out the company's culture of small, innovative, fast-moving teams as one Zynga hopes to mirror post-acquisition. NaturalMotion's Euphoria middleware is used in movies and triple-A games, like Grand Theft Auto V, and that licensing business will continue, but in the mobile space, said Mattrick, "Zynga owns the exclusive proprietary rights to develop this breakthrough technology and apply it to any of our existing and future mobile games." This will allow the company to create "new experiences that are even richer," said Mattrick. "That is an exciting opportunity for us."
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