The DeanBeat: Billionaire Mark Pincus breaks out of quiet period (exclusive interview)

Mark Pincus is the newest billionaire in Silicon Valley, thanks to the December initial public offering of Zynga, the social game giant he founded in 2007.

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For much of last year, Zynga was in a quiet period leading up to its IPO and Pincus had to wear a muzzle. During that time, Zynga haters came out of the woodwork in poorly disguised attempts to derail the IPO.

But the company managed to go public at an $8.9 billion valuation and raise $1 billion for its acquisition war chest. And now the muzzle is off. Pincus is now free to respond to allegations that his company is an untalented copycat — an issue that won’t go away — and that its business is overly dependent on Facebook.

Here’s an edited transcript of our interview with Pincus. And if you want more, check out our 25,000-word history of Zynga.

Gamesbeat: So I guess you were a millionaire last time I talked to you. Now you have a “B” in front of it.

Mark Pincus: Well … I think that the rest of the world has more fun and intrigue with all of it than I do, or any of us.

GB: Do you think you get too much attention for (being a billionaire)?

MP: I don’t think that this has been about that. I’ve been interviewed by someone on NBC who said, “Isn’t that what all you Silicon Valley people are about? Just trying to have more money or whatever?” And I said, “No, that’s really not what we’re about here. We’re way more ambitious than that. We want to change the world, make history.”

GB: How do you get them to come to understand that part?

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MP: I just saw the movie “Moneyball” yesterday, and I realized, everyone doesn’t have to understand you, or believe in what you’re doing, while you’re doing it. Sometimes it’s later, when people see the outcomes of what you’re doing, that they maybe change their beliefs.

GB: It was quite a while that you were in this quiet period. Do you have a lot to get off your chest now that you’re able to talk more? What are some things that you’re itching to address?

MP: If you go back to before the quiet period and look at what I was publicly talking about, that’s the thread we’ve still been on. We’re not just trying to build a company, we’re not just trying to build an industry, we’re trying to build a movement around play. We want people to put play in their day. We want to remind people to play with people and connect with people in their lives, and people are doing that. And I think we as an industry — and it’s now a broader industry — our industry goes all the way from fairly hardcore gaming developers to social developers.

If you go back to what I said when I keynoted the Social Gaming Summit industry conference at UCSF, I talked about how we need to work as an industry to build an awesome experience that convinces people that this can be the next great free medium since TV. I think we’re in the middle of this massive secular movement to free-to-play gaming. That’s been going on for a while, but I think it’s really accelerated. With mobile and social, it’s started to really penetrate the mass market.

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What we’re excited about is seeing how huge numbers of people are changing their behaviors, like hearing last year that social games had replaced soap operas. We’re seeing it cut across the culture, seeing Words With Friends now become a cultural meme. And not just for the success of that one game, but for the success of our industry. Because on the back of Words With Friends rides an entire industry.

GB: This idea of changing play goes back pretty far in Zynga’s history. I don’t know if it was there at the very beginning, or how early you adopted it. It is interesting to me that none of the traditional game companies thought in such an ambitious way about getting everyone to play. Why do you think that was?

MP: When I first walked into EA — it was the meeting where I met Bing [Gordon, now a member of Zynga’s board] — I said to the room full of EA people I thought social gaming was the best thing that had ever happened to them. I said that I thought it would create a whole new generation of online digital gamers, and I thought that whether or not companies like EA chose to play in that part of the market, these people would graduate to more hardcore, more sophisticated [games]. That TV might get you into video, and then you might want to go to movies. I don’t believe that TV cannibalized movies, and I don’t believe social gaming was going to cannibalize the video game industry. I think it was a renewed chance for growth.

GB: And it was about the same time that the Wii was starting to really take off?

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MP: Yeah! I thought the Wii was a real shot across the bow. It was orthogonal. All of a sudden it, it wasn’t that it had the fastest processor and could do the coolest new graphics. It was an innovation in accessibility, which led to more social. So why didn’t the traditional industry go after this opportunity?

First of all, they did. I’ll remind you that the EAs of the world had games on Facebook almost when we did. If you remember, the whole Scrabulous thing was EA, (in a legal fight over) the Scrabble rights. They did focus on and pursue it. I think what was different was that we came from a place that was more organic to the medium, and we believed that this was the whole thing.

I think that initially, for the traditional industry, this was seen as a channel to take existing intelletcual property to market. Which it could be, and is, and will be. But our approach was that you couldn’t have play, you couldn’t have social gaming, without social. And that it had to exist in places that people wanted to hang out and congregate, and not be a destination that required that much intent and pre-planned interest. We thought it had to be free. Similar to, I think, when Amazon innovated to get us to do e-commerce, they had to take down the barriers to commerce. They had to compete with offline commerce, they had to show you that it was fewer minutes and hopefully fewer dollars to shop online. To create a whole movement, a behavioral change, where people saw online as a convenience and not a hassle.

Similarly, we thought that we had to remove tons and tons of barriers that were stopping the mass market from playing. So free was one, but even beyond free it was the download, the complexity. And the areas that we’ve innovated sometimes are too small; they don’t come in big, explosive graphics packages. The innovations that we focus on are things like the FTUE, which stands for First Time User Experience. We counted how many clicks it took, how many seconds before you could understand what the game was and why you’d want to play it. We had to simplify what a game was to make it more accessible.

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GB: There was an interesting reaction, where you guys did do a great favor for the game industry, and the industry reacted so negatively.

MP: Yeah. That’s why it was so interesting watching “Moneyball” yesterday. You have to see it, and the book is even better. The whole story of this guy, Billy Beane, what he did with the Oakland A’s; he challenged the whole way that baseball had been managed. He said he was just going to focus on metrics and outcomes. He was scorned, laughed at, almost fired, and it didn’t work out at first. Everyone said he was an idiot, until it totally did work out, they had a 20-game winning streak that broke all records in baseball. It changed the industry forever.

GB: So that whole reaction, did it surprise you? It turned into game developers saying, “Zynga can’t innovate” or “Zynga is a copycat.”

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MP: We’ve elicited different reactions from the game industry, but they’ve gotten more and more positive. Whether it’s companies like EA or Activision. Bobby Kotick (CEO of Activision Blizzard) recently said in the Washington Post about how important he thought social gaming was and appreciated what Zynga was doing. I think that the gaming industry is warming up, not just to social gaming but to metrics.

At first, there’s always a fear of over-tuning. And so I think people went to an extreme. It’s in this movie Moneyball, the scouts who had been doing this for decades said, “A computer can’t understand the nuances that come in to what makes a great ballplayer. Metrics can’t tell you that. There’s an art that a computer can never learn.”

Similarly, I think that game designers and game industry people said, “You can’t design great gaming experiences just off of metrics.” In both cases, they were right, but it was the wrong question. It wasn’t whether you could replace a scout with a computer or replace a game designer with a computer. It was, could you give those people massive leverage to do their jobs a lot better and faster and get to the right answers faster?

That’s what I think we’ve proven, and I think we’ve innovated in lots of ways. I think that people in the industry are defining innovation differently than we are. When you define innovation you have to think, what problem are you innovating against? The problem that we’re innovating against is, how do we get a billion people to play together? That’s what we want to shoot for. We think we need to innovate as an industry to make that happen. And I think it’s a worthy goal. I think we are innovating as an industry and I think Zynga’s contributing massively to it. On many, many fronts.

We think there is a massive body of work in the video game industry and the gaming industry prior to that, that is going to be re-imagined for decades to come. In a way that is free, accessible, and social. That’s what we’re doing. I don’t think anyone should be surprised when they see us come out with games they’ve seen before, a decade ago or more. Because I don’t think there’s a whole lot of new games, totally new games and game mechanics invented. We are always trying to invent new mechanics. But to us they’re things like the crew mechanic in our games, that give you a new way to interact with your friends. The neighbor bar was a huge innovation. Picking friends I want to play with in a substantiated, permanent way. The crew mechanic, picking a smaller group of friends that are also active in the game, that I’m going to continue playing with.

The rest of the industry has followed all these innovations that we’ve done. The different kinds of revenue mechanics that we’ve re-imagined. We brought the mystery crate to social gaming. There’s many mechanics that we’ve brought for the first time to social gaming, or for the first time to a free mass market, that existed in MMOs or other places. But we re-imagined or re-invented them in this context, and the industry followed.

GB: A lot of the people who are concerned about the copying present a screenshot of two games. They point to it and say, “Here’s my screenshot, here’s Zynga’s screenshot, this is a copy of my game.”

MP: What I would encourage is to pull the lens back. That is a very zoomed-in focus. If you pull the lens back, whether you’re talking about a tower game… I think you should be careful not to throw stones when you live in glass towers. When you pull the lens back, as others did, you saw that their tower game looked incredibly similar to about five other tower games, going all the way back to SimTower in the early ’90s. There were tower games popularized on social networks and on mobile phones in Asia.

More recently, I thought it was a little ironic to see Bingo Blitz… I think if you pull that lens back, it might look bothersome to you if you look at Bingo Blitz next to our upcoming bingo game. But if you pull the lens back, and you look at our game Poker Blitz, and then Bingo Blitz, you see some striking similarities in those pictures. You can go back to FarmVille and look at Farm Town and say, “Those pictures are troubling, they look too similar.” But you pull the focus back again and you see Farm Town next to My Farm and next to Happy Farm and next to YoVille, and what you see is a series of games innovating on top of each other. You see games that are borrowing… Farm Town had a very, very similar avatar to YoVille. They had a movable farm that was very similar to My Farm. And My Farm had a similar concept of farming to Happy Farm, which had been popularized in China.

GB: What do you then get back to as far as, “What is original?”

MP: Here’s what you get to, okay. Two things. One is, what are we all innovating against? And what I would posit that we are working as an industry to do is to make play a mass-market activity for a billion people. And have a robust engagement and revenue model around that, with virtual goods to purchase. I think we’re all innovating against that. The second point is that what we’re really all doing here, but I feel like we’re kinda crawling around in the dark, as an industry we’re trying to get closer to what are the rules of engagement. There’s legal rules of engagement, which get to copyright and trademark law.

GB: Don’t use someone else’s code…

MP: Don’t use someone else’s artwork. We believed that there was strong evidence that Vostu had used our artwork, or something that was too close an approximation of our artwork. Don’t use someone else’s code. There are fairly clear copyright laws around that, and I think that’s good hygiene. But there’s rules of engagement that go beyond just that. This is where it gets more gray. There’s how differentiated your product needs to be to win and retain a large-scale consumer audience. And by the way, Dean, I’ll remind you that we run games as a live service that are updated weekly. And so FarmVille today is very different from FarmVille the day that we launched it. We’ve continued to innovate on that game, get player feedback and innovate, and we built things like crafting cottages. Which was the first time that crafting had really been brought to a very large mass-market audience, in a way that they could consume it.

GB: In that sense, then, if you take something from another platform of years ago, and you bring it to a new platform, that’s actually doing something new?

MP: It’s renewing it, it’s re-imagining it. And I think that is how art and media are innovative. It’s years and years of bodies of work. The brilliance is someone going back and seeing that there was some beauty in the 1970s whatever-movie Western and they re-imagine a 1970s spaghetti Western and call it True Grit. And we love it. But if we said True Grit is a copy because it borrows from all these Westerns and stories and other things that came before it, then we’re confining the medium’s ability to innovate. We saw two animated ant movies come out at the same time. One of ’em wins. At the end of the day the consumer wins. At the end of the day the industry wins. Because everybody is trying to innovate against this problem of…

Or eventually we’re against the same problem of, what do we need to do to make play a daily habit for a billion people? Amazon said, “What do we have to do as an industry to make a billion people comfortable doing e-commerce online?” Amazon said, “We need a wallet, we need an address book.” Amazon didn’t worry about whether or not they invented an address book the world had never seen before. Amazon worried about, what was the best address book? I’m sure that Amazon looked at every address book ever created before them, and either acquired it or built it. The same with the wallet. I’m sure that we as consumers today don’t care how Amazon got to the most convenient wallet and address book. We just choose Amazon because they did.

GB: The purist game developers who might wonder what you think. This game thing, is it an art, a business, a technology? Exactly what is it? How does Zynga look at it, say, differently, than people who consider themselves to be artists?

MP: I think that as a CEO and as a commercial for-profit company, we have three stakeholders that we need to delight and hold ourselves accountable to. We need to delight our players, we need to delight our employers, and we need to delight our shareholders. Probably in that order.

GB: What does that mean as far as what kind of games you create?

MP: It means that we will continue to look to move the medium. We want to make it more free, which means we want to keep moving the consumer value proposition. Every new generation of games we bring out, you should feel like we just gave you something even more valuable for free. We want to make it more accessible, both in terms of the technology, the user interface, the kind of content. And we want to make it more social. There’s a huge amount of innovation that we do behind the scenes on social. We’ve invented things like ASN, which is a metric that we measure, your Active Social Network. In all of our games we look at how our features and content move your ASN.

For a given new piece of gameplay or a whole new game, or the ergonomics around it, we have a social lobby, our Zynga Social Center. How good a job did we do in reducing the friction in you connecting with other people you care about? And creating more feedback loops. ASN is measuring the number of feedback loops that you have a week in our games. We invented a metric that let our game designers design against social in a way that was measurable. To move that third one, ever more social. I said all this in the online IPO roadshow, I said our strategy. We want to go into every category or genre of play that we think our audience is going to be interested in, and make it more free, accessible and social.

GB: You went on an IPO road show. What was your reaction to it? The part that must be a little frustrating is you communicated a lot of this to everybody, but the stock didn’t pop like it was supposed to in IPOs.

MP: One thing we’ve done with this company from the beginning is question every assumption. We haven’t always been applauded for questioning all those assumptions, we haven’t always been right in questioning all those assumptions. But we continue to challenge every assumption. One of those assumptions was the whole point of the IPO. We were not going to define the success of our company by a pop in our stock. We wanted to have an efficient trading market in our stock. We had an offering that was many times the size of other IPOs and offerings. I’ve looked at the stock less than six times since we went public. It’s really not something that I spend my time thinking about or worrying about. Again, I think I need to deliver delight for customers, then employees, then shareholders. I think I need to deliver against our mission. We need to innovate to bring play to the world and I’m confident that if we do that, there’ll be a big business and that will probably be more valued in the world.

GB: There were some things that the analysts brought up. I wondered what your reaction is. They would say, “Zynga is vulnerable because it’s 95 percent dependent on Facebook,” or “It’s 95 percent dependent on virtual goods.” “If they grow that 5 percent part then we’ll be happier, we’ll feel like there’s less risk in this thing.” From your view, how would you react to some of that?

MP: Yeah. I think you could have taken that approach and not invested in us a couple of years ago, too. I believe that something bigger is going on. I believe that people are discovering play. I think people have… They’re on Facebook, they’re on iPhones and iPads, they’re hanging out and they want to do something. And I think that they’re discovering that there’s more fun things to do on your iPhone than e-mail. Or SMS. I think we’re seeing that people are voting with their app downloads, that games are the biggest activity that they can engage in on their mobile device. It’s by far the biggest app install on Facebook or any other social network. I think the bigger thing for us to focus on, to worry about, is delivering on the promise of play. Delivering on the promise of free, accessible, and social. And growing that audience. I don’t look at Facebook as a risk, I look at Facebook as an accelerator. I think Facebook has been a wonderful and amazing accelerator of bringing play to the mass market. Just like iPhone has been, and Android. I suppose that if it were a different time and if 95 percent of our business was on the iPhone, then people could say to us, they’re worried that we’re so dependent on the iPhone.

GB: And you’d also wind up like SGN, sold to MindJolt for 30 million bucks or so.

MP: Well, it depends, I guess, on how big the business is that you built on top of that platform. I don’t know if SGN sold for a low price because they were so dependent on iPhone.

GB: There’s an elementary level of second-guessing that comes with being the center of attention.

MP: On our roadshow, I met a lot of really smart people. I was impressed with the questions and the sophistication. They encouraged us, they asked questions that encouraged us to think more broadly about free-to-play gaming than we had. Think more broadly about international markets than we had. There were a lot of provocative investor questions that I feel like I learned a lot from. I also learned how to talk in shorter sentences, soundbites. [laughter]

GB: There were things like… “If only Zynga did this,” it would be more interesting. If only you had more advertising revenue. Or if only you could double the number of people who pay for something in your games. What do you think of those comments as well?

MP: I think that investors like to find the upside in the story. I think that we do have low advertising revenues, compared to the amount of minutes and engagement that we have on our network. It hasn’t been much of a focus until recently. We do have considerably lower buyer penetration than we’ve seen in Asian markets. So investors saw those as upsides in the whole story on monetization.

GB: If you look at the whole industry, what is a thought that you’d have for 2012? If there was a history of things that happened since 2007 here, what do you see the year of 2012 being like?

MP: My prediction is that by the end of 2012, everybody is going to consider themselves in the business of play.

GB: Meaning more gamification happening? Or other things?

MP: Well, when I say “play” I mean… I think the idea that the biggest opportunity in gaming going forward, wherever you are in gaming, whether it’s… Maybe this is already obvious, so maybe it’s less of a prediction, but whether it’s console, MMO, mobile, social, I just think by then that almost all gaming will be defined as “social.” I think the idea of single-player gaming… And I think even more so at the consumer level. I think because so many consumers are engaging in gaming, I think that by the end of the year we may not even say “social gaming” anymore. It may be redundant. That’s what I mean by “play.” But maybe you can tell me that’s not even much of a prediction. Maybe we’re already there.

GB: I don’t know if you think this matters, but do you feel like a gaming insider or a gaming outsider?

MP: I’d say that I’m an outsider to the traditional gaming industry. I think I’m an insider to the new industry of play. What do you think?

GB: That sounds good. Maybe it is why you were able to attract some of your key people?

MP: Well, I have so much respect for the gaming industry. And we have so many amazing game-makers here at Zynga, people who have designed some of my favorite games of all time. Like Brian Reynolds, who made Rise of Nations. I’d say that I’m a “blue ocean, not a red ocean” person. I think that strong competition grows an industry. Smart competitors innovate and grow an industry. I also think that by the end of the year, if it’s a successful 2012 for the industry, I think that you’re going to see the EAs and Zyngas and small game developers way more arm-in-arm and shoulder-to-shoulder, working together on standards that drive what we all need to grow this industry, raise all boats.

GB: So it would be a red ocean if you were in a death battle with EA.

MP: It’s a red ocean when you’re fighting each other for market share. It’s a blue ocean when each new product and innovation grows the overall audience. I believe that each new game we’ve brought to market has grown the market for play. I don’t believe that FarmVille took users from anybody. I believe that FarmVille created new users for the industry, new players. And I think that with every successful game that we’ve brought to market, I think we’ve increased the size of the industry for everyone. I think that our competitors, when they brought successful games to market, have done the same thing. That’s why I keep coming from this place of… How do we as an industry get to a billion people playing together? How do we create a robust business around virtual goods, in-out purchase, and engagement-based advertising? That’s the dialogue we should all be having with each other. It’s way more productive for the end players and it’s more productive for us as an industry.