Zynga was made public in 2011, and it's developed rapidly thanks to the strength of social games like FarmVille. But that skidded in 2013 and the descent began. Frank Gibeau, a former Electronic Arts executive, joined the group as CEO in 2016, replacing Mark Pincus, the original CEO, who replaced his replacement, Don Mattrick, a former EA colleague at Gibeau. (Have you followed all this?)
It was a long job, but Zynga experienced a turnaround. In fact, Gibeau said this week in an interview with GamesBeat that the "recovery of the company is now over". The company has reached the breakeven point, even with 1,778 employees, and is posting 39% growth in bookings in 2019.
Part of the solution has been made up of acquisitions. As of November 2017, Zynga has begun to make new acquisitions, such as the purchase of board games and card games Peak Games for $ 100 million. In May, Zynga also bought Gramger, maker of Merge Dragons, for $ 250 million, and in December, 80% of Small Giant Games, maker of Empires & Puzzles, for $ 560 million.
But Zynga has doubled its number of "franchises forever" (those that can reach $ 100 million in one year and maintain a business for five years or more) and has boosted the growth of existing games such as Words With Friends and CSR Racing 2. Zynga Poker is still kind of lame, but nine new games are going on.
Gibeau will be a speaker at a fireside chat with Michael Metzger of Drake Star Partners at our GamesBeat Summit 2019, to be held in Los Angeles on April 23 and 24. Here is a transcript of our interview.
GamesBeat: It looks like you had a good quarter here.
Frank Gibeau: It was a good quarter and a good year. We beat up and down. We even beat our forecast for the quarter. We are ready for a very good year 2019. The activity is very dynamic. What we are passionate about is that Gram with Merge Dragons and Small Giant with Empire of Puzzles fit in perfectly with the portfolio, alongside Words With Friends, CSR 2 and Zynga Poker. We have a good range of games to create the foundation for us, then we have more than nine games currently under construction that will be released over the next two years, with many upcoming launches.
It's an exciting time. We came out of the turn. Had finished. There are more cleaning things "Spill on allle three!" We focus on business growth, game creation. It's very entertaining. The mobile is where you need to be right now.
GamesBeat: You have always had the decline of office activity on Facebook and the rise of mobile. Has this stabilized, or is it still happening, is slowing global growth?
Gibeau: There are many ways to think about it. We are more than 93% mobile. When we started, I think we were in the 60s. In the last two years, we have accelerated the transition to mobile. That's part of the way we cleaned up the recovery plan to get out and focus on the areas where we had the greatest growth. It was in mobile.
The good news is that over 90% of activities are in the mobile. We still have a wind that goes against what we call old mobile and the Web. We must overcome that when we talk about how we are going to grow the business. He is going down. It has not reached the bottom yet, but it's as close as ever. When you think about our performance this year and next year, we always start with a $ 50 to $ 70 million decline in revenue from these companies. Then you tackle the growth of our long-standing dealerships and the new games that are coming. We're almost at the end, but it's still an artifact we have to deal with.
I think what's encouraging is that if you remove that performance from our growth, we're moving even faster. We had a good year compared to this quarter, with 19% growth in the top segment. If you remove the wind from the Web, we would be growing in the 20's. That's encouraging to see.
GamesBeat: Are you already more confident about Empires and Puzzles than time of acquisition?
Gibeau: Last week he was in the top 10 on Android. Merge Dragons was in the top 20. We find that these two franchises are booming, especially on Android and international, which, as you know, has been a key strategy for us. We fall each day more in love with these guys.
If you expect next year, we expect 39% growth in the company. We will try to reach $ 1.35 billion. We finished this year a little less than a billion. This is a growth rate of 39% in terms of bookings. This should make us one of the fastest growing gaming companies, or even the fastest growing gaming company, next year. This should prepare us for growth in 2020 and beyond.
Empires and Puzzles and Merge Dragons are an important part of this evolution. You will also see growth in Words With Friends and CSR 2. Poker will also be in a good position. We have a new range of games to come. We will have several in progressive launch in the near future, some in the coming weeks. They will include Star Wars and Harry Potter, Game of Thrones, CityVille, FarmVille. We will have additional games of Gram and Small Giant.
We will be leaving 2018 with approximately $ 1 billion in revenue generated by our top five franchises, our five permanent franchises. These will grow and you will then play in the new games. We are very excited by the fact that we will grow in the next two years.
GamesBeat: Electronic Arts has given mixed perspectives for mobile. They described it as a difficult business. Command and Conquer did not do as well as they hoped. You seem much more optimistic than EA and a few others in the industry.
Gibeau: As you know, I spent time there. I've been heading the EA mobile sector for a while and everything has gone well. I think the problem for me is that it's not the fact that mobile is competitive. It's the fact that it's the biggest platform, the fastest growing platform. It reaches the greatest number of people and devices. It's a great platform. It's competitive, but it's professional. You must run. You must be able to compete.
We do not usually blame the competition here. We try to focus on what we can do better than anyone in the world. What is there between our games and the players? How can we find these players and get them to connect to our games and stay with them for a long time?
I understand their point of view, but that's one of the things for which – at Zynga, we are a mobile-driven company. We are focused on the mobile. In recent years, we have been really well prepared to compete and grow the business. If we were worried about competition, I would not tell you publicly that we are going to grow the company by 39% next year. Poker has been around for about 10 years. Words with friends is about eight years old. CSR is a five-year franchise. Empires and Puzzles and Merge Dragons now go like hotcakes. They grow up fast.
Merging the dragons was not so high on the charts when we started working with them. We think the combination of our studios, our publishing platform and the fact that we are here is curious. We are looking for franchises and talented gaming teams who want to join a company like ours. 2018 has been a good year. We leave with a lot of momentum. It's not that we are not paranoid about competition. We do not blame him.
GamesBeat: Is poker still trying to recover now?
Gibeau: He had a very good first half of 2018. Then, in the middle of the summer, he had some success following a platform change on Facebook, as well as challenges within the company. video game economy. We worked through that. As you know, with live services, it's a marathon. You will have periods when it will go quickly. You can calm down a bit, be forced to make some changes, and then return to growth.
This is the story right now on Poker. It ended 2018 as it did in 2017, a phenomenal year, so it's not as if it has reached its climax. It's performing at its peak. It's just not as big a growth as we want. As soon as I joined the company, we introduced new features such as tournaments. The product grew about 96% during this period. When you grow up so fast, you sometimes have to calm down and see things again.
This is where we are right now. We would like things to be better, but we feel comfortable with them. We need to make some adjustments to some tournament structures, to the economy. It will return to growth in 2019. This remains a franchise for us forever. We hope to be in business with him for another 10 years. But that's one of those things where, if you look at the Q4 calendar, it was really a story of Merge Dragons, Words With Friends and CSR. Poker worked well, but it did not increase year after year as much as we wanted.
GamesBeat: With respect to franchises forever, can you talk about them again and why some of them could be considered your franchises forever, even if they are new enough?
Gibeau: We have a definition for that, which is a game that generates more than $ 100 million a year in bookings, and a game that we think can last five years or more. We have two other definitions in terms of engagement metrics. Merge Dragons and Empires and Puzzles is well above the $ 100 million mark and is growing. They have a global audience. They have about a year and a half in their life, both under two, I think. We believe these games have the potential and depth to do the same thing over the next two years.
When we approve of new games, like the nine games we talked about, we look at the potential of each game and ask ourselves, "Can this last five years or more? Does it reach a global audience? Does it have the potential to make more than $ 100 million in a year? "Maybe not the first year, because you have to evolve in the mobile, but it is certainly not a buzzword. We use it as a point of decision to classify the games and investments we make at Zynga.
GamesBeat: You are at 1,700 people. Will this change a lot next year?
Gibeau: Much of this is international now. Our European organization is really cool. We have two teams in Istanbul, two in Helsinki, teams in London and Brighton. We have grown internationally because mobile has a lot of talent in terms of developers and franchises everywhere. We have grown through acquisitions. We have actually expanded our team in Bangalore. They manage a lot of new mobile games. We have also invested in new games for India.
I think you'll see us hanging around this number. But if we increase this capacity, it will probably be more related to acquisition than to organic growth. We believe we have a good grasp of the size of our business and our operating margins. With regard to the growth of 2019 and 2020, we do not see a significant increase in the number of employees. We are seeing much more efficiency than an army of large scale people.