Just a year after a promising IPO, Zynga is crashing and burning. What Zynga lessons can other startups learn to avoid making the same mistakes?
Erik Sherman of Inc. writes that Zynga CEO Mark Pincus may be responsible for his company’s decline, and other startup CEOs should be wary of these Zynga lessons. “In the process of scaling up and believing in his own vision,” Sherman says, Pincus “forgot how a business based on fads and fickle consumer tastes can get into trouble very quickly.”
Sherman points to the instability of Zynga’s disappearing customer base, who “decide they’re bored and head off to do something else.” At the same time, Facebook users, who still constitute the bulk of Zynga customers, are spending less than they once did, hitting companies that rely on the freemium model especially hard. Sherman notes that “Zynga might have been able to succeed in a more sustained way on a smaller basis by focusing on core customers and revenue diversification.” For any startup relying on freemium services, these Zynga lessons are especially relevant. Forewarned is forearmed.