Zynga boss Frank Gibeau has told The Fourth Curtain podcast how he turned around “the worst operating company in the industry” to executing what was briefly the games industry’s biggest ever sale.
Gibeau told Fourth Curtain cohost and Bungie founder Alex Seropian about the problems he encountered at Zynga initially as a board member in 2015, then as CEO in March 2016.
There was “a huge culture war inside the company” sparked by a flood of IPO cash and previous boss Don Mattrick’s management, he said.
“It was just about ‘let’s hire 400 people’, not ‘let’s hire 100 good ones’…then Don Mattrick came in and was taking essentially what was a Facebook, data-driven company to become more of a studio, to balance the art and the science more,” Gibeau said.
Gibeau’s new regime removed “about 15 of 17 VPs and SVPs”, and Zynga also sold its lavish San Francisco HQ for $650m, having originally bought it for $150m. “We changed a lot of general managers, we brought up a lot of first-time GMs, we brought in some new leadership, and that’s when we started to cook,” he continues.
“I used to go around telling people, look, we can’t fall off the floor…we’re literally the worst operating company in the industry. We’re making about six or seven hundred million dollars and only 12 is coming out the bottom. So we’re clearly doing something wrong.”
Gibeau also describes how he hired fellow EA alum Bernard Kim, who later became Zynga president (and is now CEO of Match Group) through a game of Words With Friends. Gibeau said Kim was “hands down the best publishing guy I’d ever worked with.”
The current Zynga boss also identified that Zynga’s true strength was in publishing, and rebuilt the company around acquiring “sub-scale mobile games that were ready to pop,” as Gibeau puts it.
“Building all new games was not a skill that the Zynga studios had…Zynga hadn’t been a place where people wanted to go to make great games, we didn’t have a lot of talent there. We had to concentrate that on a few games and make live services cool again.”
“The basic thesis was, look, we’ve got great publishing, we’ve got great data science, we’ve got all these models and feature sets that we know we can add to games over time to grow them,” Gibeau continued. “And so we would go and talk to developers usually right around where they have to go raise a round to build the publishing team.”
This led to the deals for Peak, Gram and Small Giant Games, among others, who retained creative autonomy and control of their studios – a lesson learned from Gibeau’s former employer. “EA did a lot of acquisitions over the years and some went really, really well – like Maxis – and some were total disasters,” he said. “And so I had this accrued learning of 20 years of what not to do and what to do in acquisitions. You’d buy a company, but EA would be so arrogant about buying the company that it would going to show them ‘the EA way’…I felt that that was backwards – you’re buying them because they’re really good at something, so why do you want to screw that up?”
“We didn’t get it right all the time, we made mistakes,” Gibeau continues. “But for the most part, if we did make a mistake, the beauty of Zynga is – well, it’s kind of the curse and the beauty – it’s in the data. That was part of the culture too, which was it’s okay to be wrong. It’s not okay to be wrong, stubborn and wrong twice.”
After a turnaround that included several successful acquisitions and big COVID-powered player and revenue spike, Take-Two acquired Zynga for $12.7bn in a deal that was briefly the largest in games industry history, until Microsoft bought Activision Blizzard a week later.
“We were not looking to sell. We had a vision for our company,” says Gibeau of the deal. “I mean, it probably sounds crazy, but we wanted to be a hundred billion dollar company. We wanted to have a billion customers. We had an organic, internal plan that the board and I were aligned on and the management team, and we were pursuing that. But when you’re a public company, if somebody approaches you and says, I’m going to give you X, you have to listen. It’s your fiduciary responsibility.”
Possibly referencing the rumoured interest from Microsoft, Gibeau continued: “I would bring to the board, you know, different ideas and offers and why a fit would be good or a fit could be bad. And then we would compare it against our existing internal plan. And eventually, through our process, the board agreed that the combination of Take-Two and Zynga was a good combination to get to that $100 billion goal.”
“Ultimately, they didn’t have a mobile business at scale. We had a mobile business at scale. We were starting to look at cross-platform, and we were starting to look at distribution and some other things that, honestly, the combination to companies really created a more valuable company and a bigger opportunity for us.”
