David Ko sees mobile as critical for Zynga’s comeback in 2013 (interview)

Mobile gaming is perhaps the most strategic market in gaming now, and David Ko, chief operations officer of Zynga and No. 2 in command next to chief executive Mark Pincus, knows it. Ko recently made the tough calls of shutting down Zynga’s social games on Facebook such as CityVille 2, The Friend Game, and Party Place. And he is throwing a lot more of the company’s 3,000 employees into mobile development. If the company succeeds in this market, it could turn itself around, rescue its stock price, and deliver a big jolt of confidence for the struggling game industry.

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For 2013, Zynga’s focus is on growing new franchises, building its network, shifting into mobile, and making money. That’s not going to be easy, given the sea of competitors in mobile. But fast-growing segments exist within the space, such as games played on mobile messaging services like Kakao Talk, Line, and We Chat in Asia. Ko is optimistic that Zynga will succeed in mobile with titles like Draw Something 2 (which Ryan Seacrest outed) coming this year. We interviewed Ko on stage at Business Insider’s Ignition Mobile technology event this week in San Francisco. Here’s an edited transcript of the conversation.

GamesBeat: So how is Zynga’s transition to mobile games going?

David Ko: About 297 million people come to us every month on our overall network, and of that, about 72 million are mobile. While the numbers may appear larger to some, what we’ve said is that it’s still very early for us in mobile. We’ve been proud of how quickly the team has been focusing on the shift to mobile. The shift has come because of our players. So many of our players are telling us — we’re seeing it in their usage patterns and their play habits — that they want to play more on mobile and across tablets. That’s not to say they don’t play on PC, but those usage patterns and play habits are changing. We want to make sure we continue to deliver games where our players are.

GamesBeat: Few people would dispute that Zynga won on social. What does it mean to win in mobile?

Ko: The core part of it for us today as far as winning on mobile has been around the company mission, which has been connecting the world through games. While people may focus on mobile today, what it’s really about is, we deliver content. We’re creating fun social experiences for our players. That shift, when we first started a couple of years ago, was on the PC. Today we’re seeing more of that shift on mobile. But we’re not stopping there. We’re thinking about other options in the future. That’s why we’ve done things around the television — Google TV and others — because we want to work across different platforms.

What we said today about what it would mean to succeed in mobile, it’s around delivering what we call core franchises. They may start with mobile-first experiences, and that may lead to experiences on the web or other platforms. But it’s about creating these leading franchises that are potentially mobile first.

GamesBeat: The mobile landscape keeps changing. I didn’t even know about some of the big things that are happening until more recently, like in Korea with Kakao, the messenger service there. It’s becoming a really big games platform. Some of these games are showing up in the top-10 list worldwide on Google Play. December had maybe four Kakao games. It seems to have come out of almost nowhere. Line also seems very big as a messenger service in Japan. WeChat is an option in China. A velocity of change seems apparent here. How do you look at that?

Ko: It’s something we follow very closely. My parents live in Korea, and Kakao is how I’ve been communicating with them for the past year. One of the things that we saw and got excited about with Kakao was just watching how they’ve taken an existing channel around communications — it’s not different from what’s been around for a very long time — and what we saw is that there’s an appetite for gaming on that platform. The gaming you see today on that platform is a very light touch. It’s a bit of a curated type of experience. A lot of it’s around virals.

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Some of those games that they’re launching, as you just mentioned, are in the top 10 grossing on Android, and that hit people by surprise. What you find, though, is that it really shouldn’t have surprised us. When people are on that network, they’re looking for other things to potentially go and do. A natural median, if you’re being social with friends, is to say, “Hey, is there a quick game I could go try,” and potentially send virals and invites back and forth. That’s what you see in Kakao.

The numbers have been interesting to watch there from not only a revenue perspective but also the number of people who have registered for the service. I’ve heard people say, “Oh, that’s just a service for Korea.” The reality is that more people have registered than there are in Korea today. You can see it starting to extend out. It’s no different from what you’re seeing with Line or WeChat in other places. There’s a lot we can learn from that here and potentially test out or launch.

GamesBeat: I’ve heard that some of the games are doing a million bucks a day in revenue. It almost reminds me of the craze around Draw Something. How does a big company absorb that kind of suddenness?

Ko: With every new platform that emerges, what you find is that initially there will be a couple of people on the platform. They’ll be the ones trendsetting. You’ll see a number of game apps start to appear across some of those platforms. You’ll figure out what works and what doesn’t work for those players. You’ll start to see that smooth out over time. But I do think there’s going to be a big rush to go onto some of those platforms and try to see if you can deliver and get some of those results.

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GamesBeat: What does your pipeline look like for 2013?

Ko: I’m excited. We’re very focused on our franchise model. That’s creating hit games. There are three that I can specifically talk about now. One you may have seen tweeted out by Ryan Seacrest earlier in the week. He talked about Draw Something 2 coming, which I’m personally excited about. When Draw Something came out last year, it was one of the biggest games to hit mobile. It’s had more than 100 million downloads to date. I think we’ve had 10 billion drawings or more. It’s been number one in 84 countries, I think.

We’ve been saying that we want to build on that franchise. We took a lot of player feedback as far as what they liked or wanted us to improve in the game, and we’ve incorporated that into DS2, which is coming out soon.

GamesBeat: Who got Ryan to tweet that?

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Ko: He tweeted that on his own. He’s been a huge fan of Draw Something. He’s had a pretty big following on there. The second game, which is currently launched in Canada, is Running With Friends. It’s in the running genre. Very casual, social. We got excited about it because when we company playtested it, it had the best response of anything we’ve been testing to date. Finally, in our last earnings call we talked about FarmVille 2 for mobile. FarmVille 2 on the Web and the original FarmVille have been the epitome of a franchise for us in the company. We just celebrated the six-month anniversary of FarmVille 2. It’s really held its peak daily active user base since it launched. We’re finding a huge appetite for that type of game.

Building franchises is hard. We’ve found that a lot of people who came back and said, “You took that next step in pushing social, making it fun, and differentiating the games between 3D and 2D.” Now, they’re asking for that mobile version of the game. We’re working hard to deliver it. That will come out later this year.

GamesBeat: You guys did shut down some games recently. EA used to do something like 60 SKUs a year, and now they’re down into the 20s or something like that. Are we seeing a similar effect, a concentration on certain franchises?

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Ko: It’s hard to comment on their strategy. They have hundreds of SKUs. The games that we develop are built around trying to create franchises. What I talked about in our last earnings call is having a new set of disciplines around the company. The company grew really fast in the last five years. We’ve talked about becoming more disciplined in our approach for new IP going forward. The space is getting very crowded. Production values are getting very high in games. You can’t just put a game out there and expect to be number one.

We’ve pushed teams to say, “What’s that next level of innovation and social fun that we want to see in our games?” Then, we’ll back it through our network. There are some games that we launch, and if they don’t have that franchise potential, what we want to do as a company is make some of those hard decisions. Sometimes that means closing them down faster.

GamesBeat: It’s interesting how a company like Kabam, on one hand, has smaller games that draw really hardcore audiences. It gets a lot of revenue out of those people. Then, you see things like Angry Birds. It’s interesting to decide which direction to go.

Ko: We have a very casual base, but we launched a game last year that basically created an entirely new division within the company around the mid-core space. The reason why you’re going to see games come out in this category is, we started a game out in Asia. It’s a card-battling game called Ayakashi. It is the highest-monetizing game in the company per [daily active users] that we’ve launched. It doesn’t have the scale of other games in terms of reach, but the people who are on that game monetize very heavily. We started to look at those types of games and put them in front of our audiences. There was a certain percentage of our base that said, “We really like that type of game.” We decided to get more aggressive, and you’re going to see more games come out in that space later this year.

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GamesBeat: We’ve seen all these big changes happen in the traditional part of the game industry. THQ went bankrupt. Atari went bankrupt. EA fired John Riccitiello this week. How do you interpret some of these events? What does it all mean?

Ko: It’s hard for me to comment specifically on EA. What I would tell you is that, just in the ecosystem, there’s been a lot of shifts. We’ve seen shifts from traditional console gaming to where it went to on the web and where it’s going right now on mobile. That will continue to evolve. We look to create great, fun social content. This is what I tell a lot of our creatives. Our goal is to create this content and deliver it as widely as possible. Then, we want to deliver it where our players are at.

Our players are shifting quickly right now. We’re seeing that in our engagement. We’re seeing that in where they’re starting games. They’re telling us where they want to play games going forward. But as we start to create these new games, we also recognize that it creates shifts in terms of how you think about developing the game.

When I first came into the company two years ago and we said, “Let’s create a game on mobile,” our creatives would always start from the largest canvas possible, which was the PC. When they started to create mobile content, they would shrink that content down, and they would take away functionality and features. They were essentially making the game not as fun. We tried to change that mindset. We started to say, “Create the game from the smallest piece of paper possible and then create out. Make sure that the fun is in a smaller screen. Don’t take away functionality. Add to it. As you start to go to a tablet, whether it’s six, eight, nine inches, build outwards.” What we’ve found is our experiences have gotten a lot better, a lot more fun. We’ve seen our players react to that.

GamesBeat: The Game Developers Conference is next week. You guys got a little news out today ahead of that, with being able to log in using a non-Facebook login on Zynga.com. What’s that about?

Ko: We made an announcement today, which was just a continuation of what we talked about in our last earnings call. It centered around two things. One was an update to our agreement with Facebook, which just allows you to not only log in from Facebook but also log in from a Zynga.com ID. That’s just around flexibility. The second thing was around what’s best for our players. What we found was that there’s a large percentage of our players that like to play games on Facebook, connecting with their Facebook ID, which is great. But, there’s also a large percentage of our players who were coming to us and saying, “We want to play games in a gamer-specific environment.” We’ve tried to offer them that type of experience on Zynga.com.

GamesBeat: In closing, what’s the big story of GDC, and how would Zynga define success in 2013?

Ko: What you’re going to find next week is not just going to be around mobile. It’s going to be a lot of discussion around companies going tablet and tablet first. We’ve seen some companies recently saying, “I’m not building for mobile first. I’m building richer experiences for tablet.” Some of the form factors and the technology there let you have parity with a PC type of experience.

Success for Zynga is around three things this year. We’re focusing on creating franchises, which we’ve talked about in terms of some of our games. It’s going to be about creating and supporting our network. Finally, it’s a drive and focus on profitability.