FarmVille’s Destructive Downturn

Lauren Hockenson writing for on Zynga, creator of the FarmVille social gaming series:

What a difference a year makes.

In August 2011, social gaming and in-app purchase godfather Zynga was riding high. It had come off of one of the highest profile IPO filings just a month previous, and its play on secondary markets was signaling a valuation near or above $20 billion.

But now 12 months have passed, and Zynga is precariously positioning itself for a dramatic and thorough unraveling. Stocks plummeted as much as 40% after the company reported a drastic $22.8 million in quarterly losses, with a press statement indicating that changes in the gaming promotion structure by number-one ally Facebook had contributed to a one-third drop in engagement.

Zynga, above all, profited from the pecuniary addiction that FarmVille inculcated in its users. FarmVille is so known for its addictive traits that it has been labeled one of the 50 worst inventions of all time by TIME Magazine and has been the subject of an entire guide dedicated to kicking it. As with many destructive, albeit profitable, habits, it’s success simply wasn’t sustainable — nor should it be.

The deeper lesson in Zynga’s downturn is in recognizing that Zynga as a business was failing to create value. All too often those in business and government fail to ask themselves — what value are we creating and bringing to mankind? If you are creating value in your work, economics will support you. If you are not — and especially if are destroying it as Zynga arguably does –it is unlikely to last.

And for good reason.

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