Zynga is making big bets, when it needs little bets in the transition to mobile

Zynga's FarmVille 2FarmVille 2 seems to be performing well, passing 8 million daily active users. Heights Zynga hasn’t seen since releasing CastleVille a year ago and naturally that makes them bullish for CityVille 2. But the Wall Street Journal post points out – the ‘FarmVille’ era is stalling.

But here’s the thing — while 8.5 million daily players is impressive compared with most games, it’s nothing compared with the numbers early Zynga games like FarmVille and CityVille, which had more than 10 million daily users, used to have. And FarmVille 2 was much costlier to make than its predecessor: While FarmVille took only five weeks and about 10 people to make, no. 2 took about a year to develop by more than 50 people.

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People have speculated that the era of social games is coming to an end. Others are convinced Zynga’s pain stems from a lack of creativity. I think Zynga’s been caught by the rapid transition to mobile. It’s not like the mobile transition hasn’t caught other companies off guard either, the problem is Zynga’s response - analyze the situation and place strategic bets. However in an environment where everything is changing and almost nothing is known, Zynga is bound to apply the knowledge gained from the last battle. Zynga is investing more and more to polish established game mechanics, growing what was a team of 10 to 50.FarmVille 2 was a big bet. Buying OMGPOP now looks like an act of despriation but I’m guessing they did their due dilligence. It was a big bet and you don’t bet big unless your confident. But you only gain confidence from experience, experience Zynga gained winning the social games battle on Facebook. Instead of big bets, Zynga needs to make ‘little bets’. As Peter Sims, author of “Little Bets” explains:

We’re taught from an early age to use certain procedures and rules to analyze and solve problems, such as for math or chemistry. There’s an emphasis on minimizing errors and avoiding failure. These skills serve us extremely well when we have enough information to put into a formula or plan. But what happens when we don’t even know what problems we’re trying to solve? In those kinds of situations, engaging in a process of discovery and making little bets complements more linear, procedural thinking.

Big bets are safe; they’re about looking back. Little bets are about learning. With an upheaval like we’re undergoing with the transition to mobile, it’s all about learning. It’s the old saying, fail fast to succeed faster.

Some might say Zynga is just waiting for smaller companies to make the little bets to see what works and then pounce. But as Peter Sim’s outlined in his book, the same strategy is what brought down HP after decades of unparalleled success. When a big business you need to move the needle and that naturally lends to big bets.

Barnholt recalls, “Around that time, people said, ‘We don’t even want to look at opportunities unless it was going to be a billion dollar business.’ A billion dollars kind of became a mantra.” They then researched and analyzed the markets, segmented them, and developed products. As Barnholt recalls, “It was very much a deductive, analytical process to identify a grand set of opportunities. We had all these ideas. And they were big,” Barnholt recalls, “but they all failed!”

As Barnholt goes on to explain, they all failed because someone was already there. They needed that guinea pig to justify the market but unlike the guinea pig they never picked up the learnings.

HP’s assumptions turned out to be wrong because of what Barnholt calls intangible factors, the realities beneath the surface: the underlying customer problems, needs, preferences, and supporting market dynamics.

Simply put, HP wasn’t learning. They felt forced to make big bets and in therefore never in a position to learn. Zynga should look more like Google and make hundreds of little bets. FarmVille in 3D is just a stopgap and will distract them from the real battle – the battle for knowledge.

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