Case Study: Zynga Wins with Business Intelligence ?( read a case which i uploaded and answer each questions~! please) no plagiarism~!?
1.??? It is said that Zynga is “an analytics company masquerading as a games company.? Discuss the implications of this statement.
2.??? What role does business intelligence play in Zynga’s business model?
3.??? Give examples of three kinds of decisions supported by business intelligence at Zynga.
4.??? How much of a competitive advantage does business intelligence provide for Zynga? Explain.
5.??? What problems can business intelligence solve for Zynga? What problems cannot it solve?
Zynga Wins with Business Intelligence CASE STUDY
The world?s fastest growing gaming company doesn?t boast top?of?the?line graphics, heart?pounding
action, or masterful storytelling. It doesn?t make games for the Playstation, Xbox, or Wii. The company in
question is Zynga, and if you have a Facebook account, odds are you?re already well aware of its most
popular games. Zynga?s explosive growth illustrates the potential of social gaming and the ability of social
networks to provide critical data about a company?s customers. Founded in 2007 by Mark Pincus and a
group of other entrepreneurs, Zynga is the leading developer of social network games, such as CityVille,
Texas HoldEm Poker, and FarmVille. These games, along with Zynga?s Empires & Allies game, are the
four most frequently used applications on Facebook. Zynga?s games have over 290 million monthly active
users and 65 million daily players whose gaming keystrokes and clicks generate 3 terabytes of data every
day. Since its inception, Zynga has put a priority on data analytics to guide the management of its games
and the business decisions of the company. The company relies heavily on its data to improve user
retention and to increase collaboration among its gamers. In the words of Ken Rudin, chief of data analytics
at Zynga, to be useful, data must be ?actionable??it has to be information that allows Zynga to make
noticeable improvements to its games. Generating and storing game data is only half of the battle. Zynga
also uses two analytics teams? a reporting team and analytics team?to work with the data and make
concrete recommendations for business improvements based on that data. There are three key metrics that
drive the economics of social gaming: churn rates, the viral coefficient, and revenue per user. Churn, which
we discuss in Chapter 9, is the loss rate of game players. Social gaming can have an extraordinarily high
churn rate, about 50 percent per month on average. That means that half the new players signing up for a
game today will be gone in a month. The viral coefficient is a measure of the effectiveness of existing game
players for drawing new players, an important capability for social network platforms. For example, if 100
Farmville users are likely to cause 5 of their friends to sign up in a given month, that would result in a viral
coefficient of 1.05. Expected revenue per user is an estimate of the lifetime revenue that a game player will
generate, based on an estimate of monthly revenue per user and the churn rate. For instance, if the average
monthly revenue is $5 per user and the churn rate is 50 percent, the expected revenue can be estimated as
$5 the first month + $2.50 the second month + $1.25 the third month, and so forth, or approximately $20.
The first wave of social gaming applications on Facebook tried to increase the viral coefficient with Wall
postings advertising in?game actions by players. This approach created too much ?Wall spam,? or game?
related postings that made it difficult for social network users to identify posts by friends. Facebook and
other social networking platforms then demanded that gaming firms reduce their Wall spam. As a result,
Zynga turned to social graph analysis. For social games, the ?social graph,? or relationships between
friends, is somewhat different from that of the social networking platform itself. For example, in Zynga?s
Mafia Wars game, players might have two types of friendsthose who actively play the game and a more
passive group that signed on to help expand a friend?s Mafia organization and then leave the game or play
very infrequently. Players don?t always interact the same way with these two groups, with gifts and offers
of help more frequent within the active group. Guiding game players to communicate appropriately with
these different types of relationships helps increase revenue and virality while reducing churn. A social
gaming company such as Zynga will thus try to improve the player experience to make every aspect of the
game more profitable. Technology from Vertica Systems, an analytic database management company,
helps solve this problem. Vertica?s Massively Parallel Processing (MPP) architecture enables customers to
deploy its analytics platform using industry standard hardware or cloud solutions as building blocks called
?nodes.? Users can build clusters consisting of 1, 10, or 100 or more nodes, putting thousands of
processors, terabytes of computer memory, and petabytes of disk storage to work as a single parallel
A small start?up company can deploy Vertica on a single node, adding new nodes as needed. Vertica?s data
warehouse is columnar, which means that data are stored in columns instead of rows. This allows Zynga?s
data to be more tightly compressed, at a rate of 10 to 1 (10 terabytes of data become 1 terabyte of
compressed data). Vertica?s data warehouse is able to work with this compressed data, which improves
performance by reducing processor demands, memory, and disk input/output at processing time.
Traditional database management systems can?t work with compressed data. As a result, Zynga achieves
rates of performance that are 50 to 100 times faster than the data warehouses used by other companies.
Vertica software is also able to manipulate the database for social graph analysis, transposing all of an
individual user?s interactions with other users into a single row, and it can do this quickly. Relational
database platforms are unable to cope with the massive volume of data created by all the connections in a
social graph. Zynga?s social graph?related data are streamed in real time to a dedicated Vertica cluster
where the graph is generated daily. Every night, the models resulting from this graph are fed back into its
games for use the next day. Zynga runs as many as 130 experiments to tweak and adjust its games each day
and then observe how players react. Within minutes after releasing a new feature, Zynta is able to find out
whether millions of players liked it or not. On the basis of this new knowledge, Zynga may make as many
as 100 daily updates to its products. With this business intelligence solution, Zynga has been able to
improve the targeting of items such as gifts to effectively increase the level of interaction between active
players while minimizing spam to passive players. Zynga is now in a position to identify groups of users
with similar behavior or common paths for even more precise targeting of game?related promotions and
activities. Zynga?s revenue rose from $121 million in 2009 to $1.14 billion in 2011. Clearly, Zynga?s
methods are working. Traditional game?makers like Activision Blizzard and Electronic Arts are noting
Zynga?s growth and success and have moved towards a similar business model. For example, Electronic
Arts launched a free Facebook version of the classic game The Sims. The game now has 40 million active
monthly players and was Facebook?s fastest growing app for much of 2011. Zynga?s business model is to
offer free games geared towards a larger, more casual gaming audience, and to generate revenue by selling
virtual goods in game. The idea of virtual goods has been around for years, most notably in Second Life
and other virtual worlds, where users can buy apparel and accessories for their avatars. But Zynga?s
attention to detail and ability to glean important information from countless terabytes of data generated by
its users on a daily basis has set it apart. For example, product managers in Zynga?s FishVille Facebook
game discovered that players bought a certain type of fish in game, the translucent anglerfish, more
frequently than the rest. Zynga began offering fish similar to the anglerfish for about $3 apiece, and
FishVille players responded by buying many more fish than usual. Analytics have also shown that Zynga?s
gamers tend to buy more ingame goods when they are offered as limited edition items. Zynga sells
advertising, both in and around its games, but the vast majority of its revenue comes from its virtual goods
sales. Zynga also benefits from using Facebook as its gaming platform. When users install a Zynga
application, they allow Zynga access to all of their profile information, including their names, genders, and
lists of friends. Zynga then uses that information to determine what types of users are most likely to behave
in certain ways. Zynga particularly hopes to determine which types of users are most likely to become
?whales,? or big spenders that buy hundreds of dollars of virtual goods each month. Though only 5 percent
of Zynga?s active users contribute to corporate revenue, that subset of users is so dedicated that they
account for nearly all of the company?s earnings. Zynga?s games make heavy use of Facebook?s social
features. For example, in CityVille, users must find friends to fill fictional posts at their ?City Hall? to
successfully complete the structure. All of Zynga?s games have features like this, but Facebook hasn?t
always fully supported all of Zynga?s efforts. Zynga?s Facebook apps were formerly able to send messages
directly to Facebook members, but they disabled the feature after complaints that it was a form of spam.
Still, if your friends use Zynga?s Facebook apps, chances are you?ve seen advertisements encouraging you
to play as well in your News Feed. Zynga?s success has disrupted the video game industry. Traditional
video game companies begin with an idea for a game that they hope players will buy and enjoy, and then
make the game. Zynga begins with a game, but then studies data to determine how its players play, what
types of players are most active, and what virtual goods players buy.
Then, Zynga uses the data to get players to play longer, tell more friends, and buy even more goods. Not
everybody is thrilled with Zynga?s data?driven approach to making games. Many game industry veterans
believe Zynga?s games are overly simplistic and have many of the same game elements. The company has
also been the target of several lawsuits alleging that Zynga copied other companies? games. Even
developers within Zynga have sometimes bristled at the company?s prioritization of data analysis over
creativity in game design. Some question Zynga?s ability to prosper over the long term, saying it would be
difficult for the company to create new games to replace old ones whose novelty is fading. In 2011?2012,
the average amount of revenue from Zynga?s core users dropped 10 percent even though its overall number
of users expanded. Zynga?s business model also assumes Facebook will continue to operate in the same
manner and that customers will continue to expect the same quality of games. That may not always be the
case. In other words, Zynga?s games lack artistry. But Zynga readily admits that its target audience is the
segment of gamers that prefer casual games, and its goal is to make games that nearly anyone can play.
Gamers that want a game requiring high levels of skill or sophisticated graphics can get their fix elsewhere.
Zynga is using the measurability of Facebook activity to guide its game management, and this is helping
the company create a finely tailored user experience that hasn?t been seen before in gaming. To reduce its
reliance on Facebook, Zynga introduced its own independent gaming platform called Project Z in March
2012. The new platform enables customers to play some of Zynga?s popular titles from its Web site rather
than by accessing them through Facebook. A service called Zynga With Friends will match up players who
do not know one another and might not have Facebook profiles or might be playing the game on a mobile
application. That same month Zynga announced it had purchased OMGPop Inc., the maker of the popular
Draw Something mobile game, which asks players to make sketches illustrating words and have others
guess what they drew. Zynga?s management hopes that Draw Something will be part of a larger plan to
build a mobile gaming network based on a portfolio of mobile, casual, and social games across a variety of
social networks and platfoms. DreamWorks Animation will work with Zynga to place additional
advertising within the game, creating another new source of revenue. Will these efforts be enough to
sustain Zynga?s competitive advantage? Will Zynga?s business model hold up as more of the Internet goes
mobile? It?s still too early to tell, but you can bet that Zynga will be poring over the data to find out.
CASE STUDY QUESTIONS
1. It has been said that Zynga is ?an analytics company masquerading as a games
company.? Discuss the implications of this statement.
2. What role does business intelligence play in Zynga?s business model?
3. Give examples of three kinds of decisions supported by business intelligence at Zynga.
4. How much of a competitive advantage does business intelligence provide for Zynga?
5. What problems can business intelligence solve for Zynga? What problems can?t it