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Seven questions on zynga’s speed

May 19, 2011

A report in Mashable yesterday stated that social-gaming leader Zynga had made 14 acquisitions in the past 12 months.

That kind of pace is quite extraordinary from what many consider to be a relatively small company- albeit with a potential market cap of $10 billion.

It makes you think:

1. Category leadership is so valuable- does this mean you can’t afford to let it slip or be threatened?

2. Is this how Zynga innovates- it buys it?

3. How do you decide who to buy? What are the criteria?

4. How do you get lawyers to work so fast?

5. How does Zynga keep its culture in fact?

6. How do they get the most out of these new companies?

7. Is company expansion on steroids- going to become the norm, or is  Zynga a rare beast?

However, perhaps more important than the 14 acquisitions and Zynga’s most crucial competitive advantage is the unique deal they have with Facebook.

As a recent article in Vanity Fair reported in their profile piece on Zynga founder, Mark Pincus.

” Pincus, who already felt that he was giving Facebook a lot of money as its primary advertiser (he reportedly spent an estimated $72 million last year), hit the roof and threatened to pull his games. But he knew Facebook held most of the cards—how else would he attract 250 million people to Zynga games? The two Marks sat down and hashed out a plan. “The reason that Facebook and Zynga were able to strike a deal is because Mark and Mark did it one-on-one,” says a source close to the companies. This allowed Facebook to show other vendors that Zynga, the big dog, had accepted their terms, and that the rest should follow suit. “Zynga truly has an insurmountable competitive advantage so long as they don’t anger Facebook,” says Pachter, the video-game analyst. “And I don’t think Zuckerberg is going to single them out—he really has a vision that he wants everyone to thrive.”

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