Zynga Game Network
In the middle of last year my friend Mark Pincus stopped by my office to tell me what he'd been up to. Facebook apps it turned out, of course. He said, "Fred, by this time next year, everything you invest in will be built on top of Facebook". I cringed. My beloved world wide web eclipsed by Facebook? How could that be?
Six months later, our firm became an investor in Mark's company, called Zynga Game Network. Currently all of Zynga's games run inside social networks, largely Facebook, but also Bebo and several others. And that list of social nets will grow longer in the next few weeks.
So what has changed in the six months since that conversation with Mark? First, we've come to understand how powerful the social net is as a platform for building and launching web apps. More importantly, Mark has shown us a model for a sustainable business operating web apps on top of other's platforms. Zynga has built the largest social game network in the short period of six months. And they've moved beyond Facebook to include the entire social web as their ultimate platform.
What is a social game network? It's a network of online games that you can play with your friends. There have been games on the web since I've been on the web in the early 90s. I was an investor in one of the first really successful web-based game networks, called Gamesville, in the late 90s. Gamesville taught me how good of a business web-based games could be. It was highly profitable when we sold it to Lycos in 1999.
But web-based games have never been able to tap into your social network. When you show up to play a game, you either play it by yourself, solitaire being a good example, or with people you don't know. What if you could decide to play poker after dinner on Tuesday night and instead of heading over to your friend's house, you simply "poke" your friends on Facebook and play from the comfort of your living room? Zynga Game Network has been offering that exact experience with it's hugely successful Texas Hold 'Em game on Facebook where almost 400,000 people play poker on Facebook every day, sometimes over 25,000 at the same time.
Some of Zynga's other games on Facebook are Triumph, Blackjack, Attack, Scramble, and Diveman. Other games in the Zynga Game Network include Battleship, Texas Hold'Em, Triumph and Stickerz on Bebo, and Texas Hold'Em on Friendster. In total, the games in the Zynga Game Network have been installed over 10 million times and reach almost 700,000 unique game players every day.
Building a game network on top of the social web is a big idea. It starts with great games, both real time like poker and blackjack and turn based like Scramble. But the most important thing is to plug into the apis of the various social networks so that you can easily find out which of your friends are online and ready to play with you. Doing both well is hard and to date, no company other than Zynga Game Network has done that with multiple games on multiple networks. You can log into Texas Hold'em on Bebo and play with your friends who are Facebook. That's jut a preview of what social gaming will be like in the coming years.
The financing that we provided Zynga, along with our friends Foundry Group, Avalon, Reid Hoffman, Peter Thiel, and several angels, has already allowed Zynga to double the size of its engineering team and to integrate several other social games and social game developers into their network. Building and supporting games across all of the major social net apis is a costly endeavor but one that we all believe will pay off as game players can access their friends wherever they are at that moment in time.
We are excited to be involved in a company that started as a single Facebook app. Mark is absolutely right that there will be many more companies that we'll invest in going forward that start that way. But more than anything, we are excited to be involved in a company that is bringing your existing friends back into your game playing experiences. It's about time.
January 15, 2008 08:44 AM, By Fred Wilson
Tags: facebook games zyngagamenetwork
Comments (14)
Can you reveal the $15bn question - what is their business model?
Posted by Yaniv , January 15, 2008 09:32 AM
Ah, another example of a VC investing in the startup of a friend. I wonder if the term VC should be renamed to "Friends and Family Funds" only. I have heard of similar issues with seed funds like Founders Fund. I went to an entrepreneurs meeting recently and this subject was brought up by someone who have met with quite a few angel investors (as well as a couple early stage VCs), and the general consensus is that without user adoption (or some super proprietary technology), it's going to be very difficult for a web start-up to raise a seed round unless you have a prior working relationship with the VC already established.
So my question is this, is it getting harder to get funding for Web startups now as compared to last couple of years or is it that only friends of VCs get funding?
Posted by Puzzled , January 15, 2008 12:57 PM
I wonder if the term VC should be renamed to "Friends and Family Funds"
If so, it's yet more evidence of the power of social networking... and hence in support of deals like this one.
Posted by Andrew , January 15, 2008 03:57 PM
@Puzzled -- it seems like you've answered your own question: "consensus is that without user adoption (or some super proprietary technology), it's going to be very difficult for a web start-up to raise a seed round unless you have a prior working relationship with the VC already established"
So, yes...if you don't have an existing product with real users or a really compelling new technology to demonstrate, venture capitalists will probably not be interested in funding your idea unless they already know and trust you. (I think that there were a couple of funds back in the late '90s that just handed out baskets of cash to everyone who walked in the door, but that didn't actually work out too well for anyone.)
And probably more significant: this is actually a situation where the entrepreneur is someone that the VC knows and trusts who also already has a real product with real users. My strong suspicion is that the latter part of that sentence was the real key here.
Posted by W.B. McNamara , January 15, 2008 04:41 PM
i got a comment like these on my personal blog and i'll repost my reply here:
it's a good point you raise. the way i became friends with mark was by investing in his first startup in 1995 (freeloader which he did with Sunil Paul)
since then i have backed each of them (mark on several occasions)
so this is more a matter of following successful entrepreneurs again and again than backing friends.
often times, they become one in the same.
fred
and:
we have made a number of investments in unproven entrepreneurs including Rob Kalin/Etsy, David Karp/Tumblr, Jack Dorsey/Twitter, and several others. i wrote a post about this about a year ago that explains how we think about this
http://www.unionsquareventures.com/2007/01/foun...
i hope that helps
fred
Posted by fred wilson , January 16, 2008 09:05 AM
And do "friends" have a better chance at success? I mean, just because they're YOUR friends, doesn't mean the World could care less who they are. Does anyone on Facebook play Texas Hold 'Em because of Fred Wilson? I realize you have backed some you weren't previously acquainted with, but that doesn't answer this question.
In fact, I have in mind one particular investment you have going right now, that is in a very troubling position, and I wonder if it began this way.
Don't misunderstand me, I'm not questioning anyone else's experience and insight, just what might be commonly left on the table JUST BECAUSE they're not friends. I read a lot of other VC commentary, and recently heard someone from Granite say that plans submitted electronically have ZERO chance. I took that to mean that even if someone reads them, they're treated like Sunday comics.
It's your money, not mine. Do what you want. I couldn't care less about playing games on Facebook, for crying out loud. I come here to, possibly, gain some insight into others' experiences on startup successes. Perhaps, what began well and went bad, or vice versa.
Thanks for allowing me to comment.
Posted by s , January 16, 2008 12:18 PM
People who make friends with Fred probably do have a better chance of success... because Fred's got incredible intellectual ability (this is what my girlfriend said after meeting him once at dinner) and to see strategic problems with great insight. This is the kind of person that an entrepreneur in the trenches needs around... so if you were a good entrepreneur in the spaces he looks at, you'd be an idiot not to try and become friends with Fred.... and given his personable manner, if you wind up working with him on one deal, you will inevitably become friends with him.
Any kind of sale, even of investment securities, is about relationships. If you're not smart enough to realize that relationships matter, then you're unlikely to be a successful entrepreneur.
Mark's network is huge. It's not just knowing Fred that makes him a good guy to back... it's that he can walk into almost anywhere tomorrow and strike distribution deals, attract talent to work for him, and get the advice of other smart, successful people.
A guy with an idea who has no friends can't do this.
Posted by Charlie , January 16, 2008 02:17 PM
s:
if you can be specific about the "one particular investment you have going right now, that is in a very troubling position", maybe I can respond with a thoughtful reply.
thanks
Fred
Posted by fred wilson , January 17, 2008 09:31 AM
My little company had built some multiplayer games for cell phones a few years ago along the same lines. You can find and play against friends in real time.
They all worked well but the social "find my friends" was definitely the problem. It was there but never got critical mass.
Since people are obviously already linking up on FB with friends, that problem basically comes pre-solved.
I wonder though. Perhaps there is a way to link cell phone versions of those games into the app as well so that I can access those friends and game opponents on my cell when I am mobile.
The games are simple and mobile devices are now certainly better than they were...
A nice IPhone/Touch version could be quite attractive as well...
May help to have a presence somewhat outside of FB but connected the platform in pursuit of revenue sources as well.
Andrew
Posted by Andrew Holz , January 18, 2008 09:12 AM
My question is simple;
When was the last time you clicked on a banner advertisement while playing a game?
Whilst it might be a great business model for making 'hits' eventually advertisers (you know that revenue source that pays the bills) is going to want to see 'clicks'.
Of course you can build branded (eg burger king and others) games as a business model but I'm not seeing enough of these out there.
Cheers,
Dean Collins
www.Cognation.net
Posted by Dean Collins , January 23, 2008 10:48 AM
There are advertising opportunities in casual games although the core gamer would probably pay north of $40 per game with no ads. I previously worked at a startup that delivered video ads in casual games and its quite a good model. I am a big facebook fan but there is a huge world of casual gamers outside of facebook. I would venture to say that a majority of casual gamers play a game by themselves - pacman, tetris, bejeweled and thousands of flash games. Multiplayer is great, but probably multiplayer games that don't require people to be there online at the same time would be a better model on facebook - like scrabulous on facebook ?
We just launched a search engine and community site for gamers - gameseekr.com. For sure the gaming business is big with more than just advertising as a business model. We are hoping to bring gamers together to find, play, buy and exchange games.
Posted by Sri , February 6, 2008 07:00 PM
I know a few casual games site, e.g. WildTangent, that are generating serious advertising revenues on a advertising or micro-transaction model. We're talking CPMs north of what major news portals do, both for loading screens or post-game rolls.
Posted by Max Niederhofer , February 20, 2008 09:08 AM
I just had a fraudulent charge posted to my credit card originating with Zynga. Today is the first day I had ever heard of this company. Apparently it is associated with facebook...for which I have no account. I am not sure how they obtained my credit card info. The charging company (the go-between) says they have recently received a large number of complaints about fraudulent charges originating from this company Zynga.
I didn't know venture companies invested in thieves.
Posted by Anonymous , May 14, 2008 07:10 PM
Congrats on the investment, Fred and thanks for sharing the rationale. Sounds like your original reaction about Facebook replacing the WWW is correct as services like Zynga will grow far beyond the walls of Facebook.
Posted by Tom Nixon , January 15, 2008 07:31 AM