Zynga 2011 Annual Report Download - page 18

Table of Contents
Entering new international markets will be expensive, our ability to successfully gain market acceptance in any particular market is uncertain,
and the distraction of our senior management team could harm our business.
Competition within the broader entertainment industry is intense and our existing and potential players may be attracted to competing forms
of entertainment such as offline and traditional online games, television, movies and sports, as well as other entertainment options on the
Internet.
Our players face a vast array of entertainment choices. Other forms of entertainment, such as offline, traditional online, personal computer
and console games, television, movies, sports and the Internet, are much larger and more well-established markets and may be perceived by our
players to offer greater variety, affordability, interactivity and enjoyment. These other forms of entertainment compete for the discretionary time
and income of our players. If we are unable to sustain sufficient interest in our games in comparison to other forms of entertainment, including
new forms of entertainment, our business model may no longer be viable.
There are low barriers to entry in the social game industry, and competition is intense.
The social game industry is highly competitive, with low barriers to entry and we expect more companies to enter the sector and a wider
range of social games to be introduced. Our competitors that develop social games for social networks vary in size and include publicly-traded
companies such as Electronic Arts Inc. and The Walt Disney Company and privately-held companies such as Crowdstar, Inc., Vostu, Ltd. and
wooga GmbH. In addition, online game developers and distributors who are primarily focused on specific international markets, such as Tencent
Holdings Limited in Asia, and high-profile companies with significant online presences that to date have not developed social games, such as
Amazon.com, Facebook, Google Inc., Microsoft Corporation and Yahoo! Inc., may decide to develop social games. Some of these current and
potential competitors have significant resources for developing or acquiring additional games, may be able to incorporate their own strong
brands and assets into their games, have a more diversified set of revenue sources than we do and may be less severely affected by changes in
consumer preferences, regulations or other developments that may impact the online social game industry. In addition, we have limited
experience in developing games for mobile and other platforms and our ability to succeed on those platforms is uncertain. As we continue to
devote significant resources to developing games for those platforms, we will face significant competition from established companies, including
Electronic Arts Inc., DeNA Co. Ltd., Gameloft SA, Glu Mobile Inc. and Rovio Mobile Ltd. We expect new mobile-game competitors to enter
the market and existing competitors to allocate more resources to develop and market competing games and applications.
The value of our virtual goods is highly dependent on how we manage the economies in our games. If we fail to manage our game economies
properly, our business may suffer.
Paying players purchase virtual goods in our games because of the perceived value of these goods which is dependent on the relative ease
of securing an equivalent good via non-paid means within the game. The perceived value of these virtual goods can be impacted by an increase
in the availability of free or discounted Facebook Credits or by various actions that we take in the games including offering discounts for virtual
goods, giving away virtual goods in promotions or providing easier non-paid means to secure these goods. If we fail to manage our virtual
economies properly, players may be less likely to purchase virtual goods and our business may suffer.
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higher costs associated with doing business internationally;
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export or import regulations; and
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trade and tariff restrictions.