In a move that quietly (if not distastefully) validates most analysts’ cries that the browser and mobile gaming casual markets are a dead end, Zynga—a company best known for their fast expansion and acquisition of smaller mobile/casual studios bankrolled by hits like FarmVille—announced today that they are laying off 18% of their workforce, which translates to 520 cuts. Reuters reported that the company will take a net loss “of between $39 million and $28.5 million” this quarter, with these cuts only serving to make matters worse for the casual gaming company.
Zynga’s expansion over the past two years was unprecedented, acquiring fledgeling studios such as OMGPOP (Draw Something), Newtoy (Words with Friends), Bonfire Studios (which became Zynga Dallas, now closed), and the company behind the eponymous, odd social media/browser hybrid, Flock. Zynga had already made substantial cuts in their Boston and Austin studios seven months ago; and not to put a damper any Zynga employee’s mood, but with how often the casual gaming market shifts (it really isn’t a good long-term arena to play in) we’re wondering what other functional cuts are coming up in the fiscal year.
Kind of crazy that a company that expanded this quickly just two years ago is just now reaching critical mass. Though the cuts are supposed to save $70-80 million over the course of the year; which even divided across 520 employees is a substantial amount per head at $153,000 average. Silicon Valley-type corporate structuring is kind of a strange beast that I’ll never understand; one has to wonder what kind of overarching management structure the company expects having that many employees. There’s got to be a ton of dead weight in the company as it doesn’t take large-scale teams to develop, implement, and support mobile and browser-based applications. In a more local context, many of our friends from IGDA Manila create and maintain similar casual apps on their own as one or two-man shows, so from an outsider’s perspective I’m guessing there are a lot of middle/project management positions in jeopardy should the parent company decide to make more cuts in the next few months.
Far off financially from their very successful IPO back in 2011, Zynga had to put the shutters on 18 games this past year as they shifted focus away from browser-based experiences to the more fickle (if not easier to monetize) mobile market. As Zynga CEO Mark Pincus underscored this fact and the importance of today’s cuts in his email to employees today: “None of us ever expected to face a day like today, especially when so much of our culture has been about growth. But I think we all know this is necessary to move forward. The scale that served us so well in building and delivering the leading social gaming service on the Web is now making it hard to successfully lead across mobile and multiplatform, which is where social games are going to be played.”