I worked at TCI and their interactive TV channels, and that eventually led me, in 1995, to starting my first company, an early consumer Internet company called Freeloader, which was the first push technology service on the Internet. That got acquired after seven months and then I went back to brainstorm mode, which led me to my second company, Support.com, which was an enterprise software company. I built it in pursuit of building a consumer service, and then I built an enterprise software company by accident.
[From] 2002-2003, I invested in Friendster and I started Tribe, which was one of the first social networking sites. That ultimately failed as a kind of locally focused Craigslist-meets-Friendster, but in 2006 I took it back over from the investors, repositioned it and sold it to Cisco. It became the nucleus of their new media division.
|"Social networks are like a great cocktail party: You're happy at first to see your good friends, but the value of the cocktail party is in the weak ties. It's the people you wouldn't have thought of meeting."|
Then I went back to brainstorming mode in 2006, and began working on my first game for Facebook. They had announced that they were opening their API in May of 2007, so I started building our first game, which was a social poker game, and launched that July 1st of '07.
Obviously, before they opened it up, nobody really even knew what a powerful thing a Facebook app could be. How did you see the opportunity for this at the time?
While I was doing Tribe, we realized that there would be a new arms race in new software features for social networks… The whole time I was doing Tribe, I thought that the thing I would have loved to do is games. I've always said that social networks are like a great cocktail party: You're happy at first to see your good friends, but the value of the cocktail party is in the weak ties. It's the people you wouldn't have thought of meeting; it's the friends-of-friends. And that's sort of the power since the beginning of Friendster -- seeing all of the other connections, not the obvious ones.
What I thought was the ultimate thing you can do -- once you bring all of your friends and their friends together -- is play games. And I've always been a closet gamer, but I never have the time and can never get all of my friends together in one place. So the power of my friends already being there and connected, and then adding games, seemed like a big idea.
|"Entrepreneurs are always at risk of mistaking stubbornness for conviction and commitment. Just because you'll stick with an idea doesn't necessarily make you a winner."|
It was really f*cking hard to do games. They're not viral by their nature. When you think about going to a poker table, you don't naturally think, 'Oh, it would be so much fun if I just got all my friends to the table, too.' The reason I stuck with it is that I was really interested in the potential for social games, and I thought that if I could get over the virality hump, they would have far more engagement.
What are some of the lessons you learned from your past ventures that are informing Zynga?
[The] No. 1 biggest lesson has been 'fail fast.' I wish I had just failed fast with Tribe. I think that entrepreneurs are always at risk of mistaking stubbornness for conviction and commitment. Just because you'll stick with an idea doesn't necessarily make you a winner, and it could delay you failing and getting to the right answer.
[The second lesson] is to test ideas as cheaply and quickly and often as you can. Tribe was just one version of a social network -- it's Friendster-meets-Craigslist and it's very public. Great! That's just one idea that we should test cheaply and quickly, let's do five others as well. A social network for Mormons, a social network for Chinese poker players. If I could turn back the clock, I would have spent more time turning Tribe into a testing platform for social networks rather than just committing to a single instantiation.
I've read that you have an annual revenue of over $100 million now, after just a couple of years. I imagine you can't confirm the actual numbers, but how quickly was the company profitable after you launched?
We have publicly stated that the company was profitable by September of 2007. And that was pretty intentional on our part. Another lesson that I've learned with this project is: 'If at all possible, control your destiny.' The best way to control your own destiny is to be profitable and to not need capital. If you're profitable and you don't need money, you have a different relationship with your investors. Then they're just your partners. In too many startups, the board and the VCs quickly become like your boss or your parents.
|"I wanted to have a business model where the deeper the engagement I had from the user, the more money I would make."|
To tie this into an online business lesson: Up until 2007, engagement was a bad thing on the Internet. Before then, the sites with the least engagement made the most money and the sites with the most engagement made the least money. Tribe had crazy engagement -- people spent all day on it -- but we couldn't make any money off of them because Internet ads are paid when you leave a site, and so the more time you spend on my site, the more money you lose.
When you think about being in the game business, where you're providing someone a really engaged experience, they don't want to leave. You don't want to leave in the middle of a poker hand to click on a Caribbean cruise ad, even if you want to go on a Caribbean cruise. So there's this inherent inverse relationship. So I wanted to have a business model where the deeper the engagement I had from the user, the more money I would make.
Is that why you are less focused on advertising as a monetization model for Zynga?
The bulk of our revenues come from users paying for items in the games. Either currencies or IMs or other things they want. So our revenues come from people who are the most passionate about our games. They're so into our poker game that they will buy more chips so that they can play at a high roller table. In an ad model, those are the people I would never make any money off of.
It was a priority for me that we would not just test for virality or for engagement, but that we would test for revenues, as well. So from the beginning it was one of our goals to come up with a different monetization model that we could scale with our user base and allow us to grow without support from ads and outside investors.
You got an early jump on apps, but now there are thousands more. When you introduce a new one, how can you make it stand out, and how has competition changed the way you do things?
We actually increased our market share in the past two quarters, and most of our growth has come from growing our existing game franchises. Unlike the games industry, we're running our games as a service. And so we are every day working on features and content and other things that will create long-term engagement with users, just like Facebook is. Our mission is to connect the world through games, not to build the most games or the best games. Everything we do is about helping our users build more social capital.
There's three fundamental principles that we innovate around with our games. Number one: Play with real friends. We do more and more to make sure your real friends are in the game with you and there's more and more things that you can do that are collaborating and competing with your friends. Two: Express yourself through our games. So we do more and more -- whether it's avatars and virtual worlds or just the way you can express yourself in a text role-playing game -- to let you express your unique personality in the game. Number three: Invest in the game. Whether it's owning items or properties or leveling, we give you a real sense that you have a deepening investment in the game -- that it's something you don't walk away from.
I do think that what's going on with Zynga is representative of bigger, macro changes and opportunities. The idea of consumer services that are distributed as an app and paid for through users paying the 'freemium' or whatever model -- that is an important and awesome change in the Internet business model that I think is going to be expanded and fleshed out over the next five or 10 years.
[This interview has been edited for length and clarity.]