This note describes the strategy of Zynga one year ago and shows the importance of getting your strategy right. Rarely has a quoted company showed such disregard for strategy.
Business unit strategy. Zynga's business-unit strategy is as follows: Social games played on the Facebook platform. The gameplay involves competing with the player's friends, typically by building something in virtual space. Most of the games are using the same format, but vary in their details. The games are free to play, but the company sells points (Zynga dollars) to its users if they want to get ahead in the game. 94% of revenue is coming from customers and the reliance on advertising is minimal. Typically, a player would get ahead in the game by spending many hours with the game, but by buying points the player does not need to spend hours playing the game. The player will beat his friends without putting in the effort! Less than 5% of users are converted to customers.