Zynga CEO Mark Pincus On Charlie Rose

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Charlie Rose welcomed Zynga CEO Mark Pincus on his show last night for a 15 minute interview. Pincus says 60-70 million people a day are playing social games on Facebook and MySpace, and 1%-2% are willing to shell out actual cash to enhance gameplay. Mobile social gaming is still small, just 5 million – 6 million/ day, he says. But mobile is a fast growing platform.

Pincus brought in a printed out screen of a CafeWorld game they created for Rose. Pincus, President Obama and Hillary Clinton are waiters in the cafe. Rose is the cook.

Up to half of all user time spent on social networks is spent playing games, says Pincus.

Pincus says his business model is direct payments for enhanced gameplay, and virtual gifts. What didn’t come up at all was Scamville. Rose also steered clear of the growing financial ties between Facebook and Zynga.

Watch the full interview here (it will re-air tonight on Bloomberg Television at 8PM and 10PM ET).

The transcript is below.

CHARLIE ROSE, HOST: Welcome to the broadcast. Tonight, Mark Pincus,
Founder and CEO of Zynga.

(BEGIN VIDEO CLIP)

MARK PINCUS, FOUNDER AND CEO, ZYNGA: I think there is a social media
revolution going on right now. And I think that we are changing our media
consumption habits at a rate that we haven’t done even with the advent of
the Internet. I think it’s going on right now.

I think the people regularly are consuming media while they’re at work
and while they’re doing other activities in a tab in their browser or on
their smart phone. And I think media will change. In order to thrive I
think media will figure out how to entertain me in several minute bites and
in ways that are more social.

(END VIDEO CLIP)

CHARLIE ROSE: We continue with Michael Specter, the author of
“Denialism.”

(BEGIN VIDEO CLIP)

MICHAEL SPECTER, AUTHOR: Everyone knows what denial is. Sometimes
you’re so depressed that that you can’t really face the facts. So you
hide, you pretend things aren’t true. And that happens to everyone. It’s
normal. It may even be healthy for a little while.

When society does it, I don’t think it ever is healthy. And I think
there are number of issues now, particularly in scientific life, where we
are in denial as a culture.

(END VIDEO CLIP)

CHARLIE ROSE: We conclude this evening with the architect Annabelle
Selldorf.

(BEGIN VIDEO CLIP)

ANNABELLE SELLDORF, SELLDORF ARCHITECTS: You start with listening
very carefully to what the mandate is. Unlike some architects, ours is not
an architecture of grand gestures or monumental statements, but rather sort
of subtle interventions.

CHARLIE ROSE: Pincus, Specter, and Selldorf, next.

(COMMERCIAL BREAK)

CHARLIE ROSE: Mark Pincus is here. He is the founder and CEO of the
social gaming company Zynga. It is behind some of those popular apps for
games.

Among them is Farmville, which allows users to manage a virtual farm.
It has 66 million monthly active users with farms, that is more than the
total number of farms in the United States.

Zynga’s games are part of growing world of apps available on various
platforms like smart phones and social networking sites like Facebook.
Analysts say the apps economy is worth $1 billion today and could be headed
to $4 billion by 2012.

I am pleased to have Mark Pincus at the table for the first time. And
one point, personal interest, I have small investment in a firm that
invested in his company. So I’m pleased to talk to Mark Pincus about
what’s going on in the world of apps. Welcome.

MARK PINCUS: Thank you.

CHARLIE ROSE: Tell me what do you.

MARK PINCUS: Sure. So the best way to think about what’s going on
with social games, it’s really a throwback to the kinds of board games that
we all grew up playing with our friends and families where the game was
really just a context for us to be social.

And that’s really what’s going on with social networks and smart
phones today, what we are all getting connected, and it’s like a cocktail
party which really started with Friendster, which is really the first time
we all got together online.

And if you remember, people complained there’s nothing to do now that
we’re all together on this social network. And so Facebook was one of the
first to start to add more dimensions to that experience with feeds and
pictures.

And when they opened up their platform and then others like MySpace
and the iPhone opened up, it gave independent third party game developers a
chance, like us, a chance to build games that their users could use to
interact with each other.

CHARLIE ROSE: You decided to start this company, and you saw what
opportunity?

MARK PINCUS: Well, for me, I had started a social network actually
before Facebook called tribe.net, which failed. But what I saw during that
time was that people did need something to do with each other.

And once Facebook opened up their platform to third parties, I
immediately thought the opportunity I was most excited about was to provide
a chance for people to play games together.

CHARLIE ROSE: And did you have any idea of the potential of it all?

MARK PINCUS: I’d say, at first we didn’t realize how big social
gaming could be. But once we launched our first game and we saw how viral
it could be and how many people would want to come and play games together,
we started to see how big the audience could get.

CHARLIE ROSE: And so those people who correspond in face groups, as
an example, how much time do they play games versus what other activities
they do?

MARK PINCUS: We don’t have any particular data, I think only the
networks have that. But we’ve heard that people in aggregate may be
spending as much as half of the time on these networks playing games.

CHARLIE ROSE: Tell me about “Mafia Wars.”

MARK PINCUS: Sure, so “Mafia Wars'” is a game where you form a mafia
with your friends and you — it’s kind of like a game like “World of War
Craft” but it happens in text and pictures instead of immersive
environments.

The key difference is that you are relying on your friends. You’re
collaborating together throughout the game. There’s features like “declare
war” where if somebody attacks you, you can declare war on them and it
tells all your friends to come help you.

People have taken it to this much more extreme place where they have
actually created whole clans that can have thousands of members to them. A
game like “Cafe World,” we actually created one for you.

CHARLIE ROSE: Great. This is great.

MARK PINCUS: This is Charlie’s Cafe. And if you look, you’re the
cook, I’m a waiter, Hillary Clinton is a waiter, and Obama is a waiter.
And so you are virtually playing with all of us. And you can hire us to
work in your restaurant, you can come to our cafes, you can gift dishes to
each other.

And everybody is building out their restaurants, sometimes in
competition and often in collaborations.

CHARLIE ROSE: Talk a little bit about virtual gifts.

MARK PINCUS: Sure. Gifting was from early on when Facebook opened
the platform, gifting became a very popular activity. If you think about
what is going on in social network, I like to say that you’re in a game of
building your social capital.

So, if you’re playing the game of Facebook or MySpace you’re building
out your network and you’re actually doing things that elevate your status
with all of these other people. And gifts is a terrific way to build your
social capital with people. And virtual gifts are much easier and quick
tore give people than UPS-based gifts.

CHARLIE ROSE: Right.

For your company, you look ahead, is games between social network
members the principle source of revenue, or do you see this having some
potential that you — hasn’t fully developed yet.

MARK PINCUS: Well, you may see something I don’t, but we are excited
about the future of social games and virtual goods as a revenue model
within social games.

So, what I mean by that is, our users, these are free games. And one
to two percent of the users will spend money on the games. And they can
spend them on virtual goods, virtual gifts we just started selling. And
that has been a revenue model that has enabled our company to be profitable
for eight straight quarters.

And we are very bullish on the growth that have business, and we’re
not really looking for other business.

CHARLIE ROSE: Tend to your own knitting, as someone once said.
What’s the size of the app market today?

MARK PINCUS: There are different ways to think about it. There are
only three ways. You can think about it in terms of the number of apps
that have been downloaded. And there’s lots of estimates, I think it’s
probably something in the range of four billion apps have been downloaded.

CHARLIE ROSE: And that’s a business that was not in existence how
many years ago?

MARK PINCUS: Three years ago.

CHARLIE ROSE: Three years ago. A totally new business.

MARK PINCUS: Yes.

CHARLIE ROSE: Go ahead.

MARK PINCUS: Second is you can look at it by numbers of users. And
again, there’s all kinds of estimates. But people think out of the 400
million users on Facebook, more than half of them regularly use apps and
probably two-thirds have participated, 80 percent of iPhone users download
games and apps. So I think they’re supposed to grow to 50 million users.

So I think there are several hundred million users interacting with
apps today.

Third, you can think of it in terms of the revenues, which is good way
to think about businesses. And from a revenue perspective, I think people
are estimating more than two billion in revenues next year.

CHARLIE ROSE: And what’s the prospect say for five years out?

MARK PINCUS: Well, you can look to the Asian market where it’s not so
much apps as it is free games with virtual goods. And that’s already
several billion dollars.

I think most analysts predict that the worldwide market will grow to
north of $8 billion in revenues in the next couple of years. And I think
we’ll see. I think it could grow to 15 billion in the next five years.

CHARLIE ROSE: You have no particular interest in games but you were
just looking for entrepreneurial opportunities?

MARK PINCUS: I saw that social games looked like a perfect
opportunity that could be launched because of social networks.

CHARLIE ROSE: How much of it is played by smart phones, on smart
phones?

MARK PINCUS: It’s actually a smaller percentage. It’s maybe — I’d
guess five or six million people a day that might be playing games on smart
phones.

CHARLIE ROSE: And how many on computers?

MARK PINCUS: I’d say that’s probably in the range ever 60 million or
70 million a day.

CHARLIE ROSE: Will that equation change over the next five years?

MARK PINCUS: Yes. It’s changing rapidly. So with the iPhone and
iPod touch, that market is growing incredibly quickly. And I expect that
the rest of the phone market will catch up.

CHARLIE ROSE: The Droid and everybody else will be in there with apps
and competing, right?

MARK PINCUS: Yes.

CHARLIE ROSE: The penetration of smart phones will change the world
that we know in what way?

MARK PINCUS: I think that the penetration of the Blackberry has
already changed our world in a way that we’re not even completely aware of
yet. I was walking around Central Park this weekend and literally I’d say
seven out of ten people were on their Blackberries. And –

CHARLIE ROSE: Blackberries, and specific, not iPhones but
Blackberries?

MARK PINCUS: Mostly Blackberries but also iPhones. And I believe
that it’s not all bad. I believe that what’s happened because of these
smart devices, we can be productive all the time now. And so we can be on
e-mail, we can be doing business, we can be social, playing games in all
the nooks and crannies of our time.

And it actually raises our opportunity cost of doing other activities.
It’s hard now to sit on our airplane read a book when you can be on the
Internet.

CHARLIE ROSE: How else is the world changing? Who factors beyond
that are at play that we ought to understand because it’s your business to
understand those factors?

MARK PINCUS: Well, I think there is a social media revolution going
on right now. And I think that we are changing our media consumption
habits at a rate that we haven’t done even with the advent of the Internet.
And I think it’s going on right now.

I think that people regularly are consuming media while they’re at
work and while they’re doing other activities in a tab in their browser or
on their smart phone. And I think media will change. In order to thrive I
think media will figure out how to entertain me in several minute bites and
in ways that are more social.

So, more that my friend is talking about a “Charlie Rose Show,” and I
might trip over what I call a social bread crumb. So I might be more
likely to find your show in my news feed on Facebook or Twitter because a
friend is talking about it then going back to your Web site.

CHARLIE ROSE: Exactly. And so that’s one phenomenon happening. Give
me some others of how the landscape is changing.

MARK PINCUS: Well, I think that more and more people are starting
their web experience because of an SMS message or something they saw on a
Twitter home page or Facebook home page not necessarily starting at Google
or Yahoo!

CHARLIE ROSE: See, that’s a huge thing. To say that is a huge thing.

MARK PINCUS: I hope I’m right.

CHARLIE ROSE: No, but it’s amazing to me, rather than Googling for
something or finding it on Google, because of Twitter, because of Facebook,
because somebody mention something and that’s within your world of interest
and friendship, you are going to go look at it.

MARK PINCUS: Yes. I think you may get to a public web and a social
web, and you’ll use both. They will interact with each other.

CHARLIE ROSE: And define how the two would be different.

MARK PINCUS: The public web experience is what you have today. It is
going to a destination like Google or eBay or Amazon. And you don’t have
to be logged in. And you’re just going to book an air flight or whatever.

And the social web experience is a logged in experience where the Web
site that you are going to knows something about you.

CHARLIE ROSE: Where are we in terms of the digital revolution?

MARK PINCUS: I think we’re very early, 10 percent in. When I started
this company I woke up in 2007 and I was amazed that I could count the
number of major consumer net, Internet brands on one hand. And they were a
search engine, a garage sale site with eBay, classified listings, a portal.

It was amazing to me that there was only five or six.

CHARLIE ROSE: And today?

MARK PINCUS: Seven.

(LAUGHTER)

CHARLIE ROSE: But if you are starting out today, and if you were
looking for other things that you thought were exciting and had a huge
future, give us some indication wherever they are.

MARK PINCUS: Sure. I’m turned on by all of the things that we do in
high volume on the Internet today that could be recreated in social
context. So my wife has launched a private sale site for home decor items,
which I won’t plug. But it’s…

CHARLIE ROSE: A private sale…

MARK PINCUS: So in other words, you join her site, and every day they
show you deals that are limited time offers…

CHARLIE ROSE: Right.

MARK PINCUS: It’s an alternative way to shop.

Now, e-commerce could happen through a social lens. I could go to
either Facebook or a site that is socially enabled and I could find deals
on black Friday or whatever through what my friends have done. I could
find my travel through a social lens.

It’s not always obvious where it will be better, and that’s the
opportunity for entrepreneurs. But I think there’s a shift in people’s
habits. They’re spending time on socially enabled sites. They’re looking
for much quicker short form and sometimes mobile option for entertainment.

And I think that they’re going to instantiate new web services. So I
think there’s an opportunity to be my travel site.

CHARLIE ROSE: Are you in it for the money? Are you in it because of
some other reason?

MARK PINCUS: That’s a great question. I’m interested in creating
what both of our friend Bing Gordon calls “Internet treasure.” And I think
that we will be remembered in this point in history for the great consumer
branded Internet services that were created that enhance people’s lives,
like Amazon, like Google, like Facebook.

And as an entrepreneur, the opportunity to potentially create one of
those branded services is what turns me on and what I hope to one day do.

My friends who have had big financial pay outs where they sold their
company or are no longer at a successful company, they find themselves kind
of bored and lost, and they have to go through these kind of mid-life
crises every time.

And I think so many of us are really searching for our 20-year career.
And people said to me, Pincus, you’re a serial entrepreneur. You just love
starting company. I say, no, I don’t. It’s really hard. And I would love
to find a company I could be at for 20 years.

CHARLIE ROSE: A, congratulations. B, it’s fascinating to learn about
this. Ben Gordon did me a favor by telling me about you and what’s going
on with Zynga, and let’s keep in touch.

MARK PINCUS: Yes, thanks for everything me.

CHARLIE ROSE: Thank you.

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