Earlier today, Zynga announced that it was laying off 18 percent of its global workforce. After the news broke, I spoke to a source with knowledge of the company’s decision-making process to get more details about why Zynga made the cuts and what they mean for its future.
What they said won’t be revelatory if you have been following Zynga’s earnings reports or if you read today’s note from CEO Mark Pincus, but they did paint a picture of a company that wants to become leaner and more nimble while it’s also struggling to create more mobile hits.
In some cases, it seems that executives believed that they were “banking” team members. Only a small portion of a given studio was really needed to create a mobile game, but Zynga didn’t want to lose the other team members, so they were kept around on the assumption that the mobile business would grow. Eventually, however, executives decided this was happening in too many locations and was ultimately unsustainable.
My source compared the situation to older gaming companies making the shift to the web. Just as the growth of free-to-play social games has forced giants like EA to downsize, the shift to mobile is forcing the previous wave of social gaming companies to become smaller still.
Not that it’s just a few supposedly oversized studios that are being affected. I’m told that Zynga teams are being shrunk across the board. The company will also be spending less money on partnerships. And, as previously reported, the New York, San Francisco, and Dallas studios are being closed entirely.
Zynga is also trying to follow the lead of mobile gaming companies like Supercell and King.com. Apparently executives were impressed to see massive hits created by small teams and small workforces. The hope is that by restructuring the company, Zynga can replicate the success of some of its startup competitors.
The company has talked in the past about launching fewer games and franchises overall, and I’m told that’s still the plan — to focus on a smaller number of franchises and try to turn each of them into a big brand name.