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Reports Raise Concern Over Zynga's Future

Reports Raise Concern Over Zynga's Future

November 28, 2011 | By Kyle Orland

A pair of recent media reports are raising concerns about Zynga's ability to handle disgruntled employees and maintain player growth as the company approaches a highly anticipated stock IPO.

A Sunday New York Times piece cites a number of anonymous sources in and around the company to paint a picture of employees that are treated more commodities -- with a heavy focus on return on investment -- rather than creative professionals.

Complaints include long hours, aggressive deadlines and demotions for failure to meet constantly measured performance metrics. Anecdotal reports suggest recruiters are looking to poach many dissatisfied Zynga employees once their stock options become liquid.

The company's internal culture has also led to problems with potential acquisitions, according to the report, with casual leader Popcap refusing a buyout offer in part due to the company's "fierce internal competition."

The report also suggests Angry Birds maker Rovio walked away from acquisition talks with Zynga this summer despite a $2.25 billion offer from the social gaming giant.

Meanwhile, a BusinessWeek report notes that Zynga's heavily promoted launch of its first direct sequel, Mafia Wars 2, has fallen relatively flat with players, dropping from a high of 2.5 million monthly users after its October launch to a current mark of 900,000.

In-game item sales for the new titles are coming in well below expectations, according to anonymous sources at Zynga, and analysts note that the increasing cost of marketing a game and acquiring new players has put a strain on Zynga's profits, despite increasing revenue.

Zynga declined to comment on both reports, citing SEC requirements surrounding the "quiet period" before an IPO.

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