Draw Something - Zynga’s Biggest Mistake?
It’s strange that I have only felt compelled to write my last two posts about a simplistic iPhone drawing game. At first, Draw Something fascinated me by its skyrocketing success. Now the fascinating part derives from its imminent demise. I love a good story that blends technology and business, so this is a perfect subject.
Zynga acquired Draw Something creator, OMGPOP, back in March for a cool $180+ million. A hefty but justifiable price given the company’s shining jewel of a success. Fast-forward one month later and that $180 million seems like it would have been better suited to burn for heat. This chart from third-party data collector AppData paints a morbid picture for the Pictionary knockoff.
This chart details the number of Daily Active Users (DAU) on Draw Something. You don’t need a statistics degree to see where that trend is going. The app has shed 5 million users in a month’s time and that trend is expected to continue. Investors tend to favor trends, so it’s no surprise that Zynga’s market price (ZNGA) has plummeted 44% from $13.75, directly after the acquisition was announced to $7.67 at the time of this writing.
How Zynga is trying to fix it
Zynga may try to spin this acquisition in a few ways to save its stock price. I was seeing the phrase “Talent Acquisition” thrown around a bit in the blogosphere. OMGPOP developed 35 games that were not Draw Something successes and the company was closing in on bankruptcy before their $180 million exit. If they had the “talent”, I doubt they would of cranked out 35 duds.
So if Zynga can’t spin this acquisition in the right way, they have to fix it. Latest reports are saying that Zynga is going to dip into advertising, but not the traditional in-banner format. They are going to make users draw the advertisements. Don’t be surprised to see “The Dark Knight” become an option or even “Ford”. Can this advertising turned content save the nose-diving amount of DAU’s? I don’t think so.
Why is it failing?
This isn’t an easy question to answer. The only way I can answer it is referring to my personal experience with the game. When it first came out, I must admit that I was giggling like a school girl as I watched my friends struggle to draw a cat. I would run through my list of open games and then eagerly await my turn. But when the games piled up, it took more and more time to shoot off a turn. The excessively long in-between animations didn’t help either.
On top of the timely commitment to play, you had to deal with the repetitiveness of the game. Sure I would see new words, but my artistic skill and passion only took me so far. I didn’t want to draw another damn stick figure family with my finger. Also, the iPhone is not the most conducive environment to facilitate artistic creativity. Without a stylus, my drawings looked like a six-year-olds finger-painting.
There is also no reward for playing and cheating is easy. Look at successful iPhone games like Angry Birds and Jetpack Joyride. They constantly give you challenges and levels to accomplish and beat that are actually challenging. I can’t tell you how many of my friends give up and write the word at the end of a Draw Something round. Gaining a high score means nothing.
What have we learned?
It is not completely set in stone that this is a $180 million blunder. Zynga could pull something out of their backpocket and save the acquisition. But losing 5 million DAU’s in a month is a strong trend that most likely will not bounce back.
Tech companies should learn from this mistake. Apps are a very easy thing for users to stop using. All it takes is a push, a hold, and a click on an X to delete one forever. If you are planning on shelling out the big bucks for something that is so easily discarded, you better be damn sure there is a long term strategy in sight. But still, I have to admire Zynga. In business, and especially the tech business, risk is heavily rewarded if the right decision is made. Unfortunately, this time the risk was not worth the reward.
