Zynga 2012 Annual Report Download - page 3

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Challenge.
At Zynga, we love a great challenge, and the latter half of 2012 certainly presented us with a few. We
did not deliver enough customer delight, we produced fewer hits and we were not consistently profitable.
And yet Zynga continued to be the leading social game company in 2012. While we had a challenging
last few quarters, 2012 showed us that that our teams, technology and franchises can still produce the
industry’s best, most sophisticated social game experiences, as evidenced by player engagement and
revenues. We generated bookings of $1.1B and had a free cash flow of $119M, excluding the purchase of
our building. As of Q4, we engaged more than 290 million monthly average players (72 million of them on
mobile). And we had three robust game franchises: FarmVille,Zynga Poker and Words With Friends.
FarmVille alone surpassed $1B in total cumulative player purchases, inclusive of partner fees, in 2012. And
our broader portfolio of IP like Mafia Wars,CityVille and CastleVille continues to delight players and offer
great potential.
Our original mission – to connect the world through games – looks more right today than even a year
ago. However, this is a pivotal transition year for Zynga. We are encouraged by our better performance in
Q4 and energized by the opportunities ahead. In 2013, we continue to invest in our players’ gaming
experience by developing innovative new games and franchises and pushing the boundaries as to how and
where our games are played. We are focused on three strategic areas to lead in the development of social
gaming and return to being a growth company:
• Franchises: We are continuing to invest in great franchises—brands like FarmVille and Words
With Friends. This is our DNA. We founded our company on the belief that we could invest in games
as live services and then continually improve them with “bold beats”: features so positively disruptive
that players play with us longer. FarmVille2, a breakout hit with its impressive engagement and
retention, is bucking the recent trends of web games. Eight months after launch, it has maintained near
peak daily active users and bookings, despite a tougher growth climate on web and PC. This is a
testament to how well our teams are maintaining top franchises and delivering more delight to players.
The industry is experiencing explosive growth on mobile, so we are bringing our most compelling play
experiences, games like the FarmVille2, to smartphones and tablets. We are also dedicated to creating
new franchises. Inside Zynga, we are focused on finding the fun early, fully funding games we’re
passionate about and killing marginal projects to open up people for potentially great new games. After
all, we live in a world where a franchise game can generate $1 billion in lifetime gross bookings.
•Network: We recently launched our network on the web, and soon we’ll be launching it on
mobile where we believe it’s still too hard to find opponents and to play with your friends and family.
In fact, the top way our Words With Friends players currently find new challengers is through the
random button. We want to deliver something better for consumers. Our network will provide an
instant worldwide community of players that is centered on games for which they have a shared
passion. And, similarly to what we have achieved on the web, this network will offer a powerful
distribution channel. As we and our third-party partners build and launch compelling games, large
audiences will be waiting for them.
• Profitability: 2013 is an investment year, and we remain disciplined in our approach to
expenses. We believe the best products are born from entrepreneurial cultures. This means we value
being resourceful and driving hard decisions early. To this end, we recently closed some of our offices
and game studios. While it was painful to part ways with so many talented people, we needed to do so
in order to return to being a growth company. We are starting to see scrappier teams emerge across the
company, like the 10-person team behind What’s the Phrase, a new mobile game that quickly climbed
the charts. In 2013, we are also expanding our revenue focus by growing our advertising sales network
and incubating a new business in real-money gaming. Finally, we are investing in our talent and culture
and grooming a new generation of product leaders. Everyone who visits Zynga tells us the same thing:
They are amazed by our buzz and energy. After a year of major transitions, our teams are getting back
to what they love, focusing on our players and products. They are striving to lower the barriers to play
and to invent new ways to make the greatest game experiences accessible to the millions of us who