Zynga, Suckerfish of the Internet

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The Internet as an Aquarium. Photo: Simon_sees

When I was a kid, and my parents took me to the aquarium, I made a bee line for the shark tank, thrilled that all that stood in the way of my violent demise was a six-inch piece of bullet-proof glass. One day, while I was chilling at the shark tank, I noticed something on the back of one of the sharks: a remora, a suckerfish that had hitched a ride just behind the dorsal fin of one of my swimming merchants of death.

The suckerfish is the moocher of the sea. The shark doesn't get any benefit from the suckerfish but the suckerfish gets a ride, protection and leftovers. In other words, the suckerfish gets a free lunch.

Yesterday, when I heard about Zynga announcing plans to lay off 18 percent of its work force, shuttering its offices in New York, Dallas and Los Angeles, I thought about the suckerfish.

Zynga is the suckerfish. It's a perfectly good company creating mindless games -- yes, Words With Friends is mindless -- for casual gamers who come across them on social media platforms. In Zynga's case, it decided to hitch itself to Facebook -- the shark.

Zynga hitching a ride on Facebook. Photo: sharkinformation.org

For several years, Facebook was a big, healthy shark with razor sharp teeth acquiring users as fast as it could sign them up. Zynga would sap those users of nutrients -- cash -- by signing them up for games like Mafia Wars or FarmVille in which they had the opportunity to "buy" digital rewards. For a time, everyone was happy, the shark, the suckerfish, even the prey who were getting sapped purchasing code for an online chicken coop. And, unlike the suckerfish, Zynga did give something back to Facebook, accounting for 12 percent of the site's revenue in 2011.

But then, Facebook slowed down. Users began leaving the site, turning to other social media sites like Tumblr or Twitter. Realizing this, in 2011 Zynga tried to create its own social media site, Project Z. But, as any amateur marine biologist knows, a suckerfish just can't make it on its own, it needs a host.

Zynga (ZNGA) share price. Source: Bloomberg

Zynga's mistake, though, wasn't hitching itself to the wrong shark, or even that it decided to be a suckerfish. Zynga failed to adapt to the changing conditions around it. Social media users and platforms evolved as Zynga, and its games, stagnated. In this sense, and to stretch the metaphor to the breaking point, Zynga never learned to swim on its own or catch its own prey, it relied almost exclusively on Facebook for its revenue source.

The best example of an evolved suckerfish is Instagram. Even though Facebook acquired the company last year, Instagram, the photo sharing site, set up as a cross-platform model so if traffic on one site decreased, it could just make up volume from another. The company also set up its own web and mobile interfaces that could be accessed directly.

The lesson here for other social media dependent companies is to make sure you can fend for yourself when your host platform stagnates, and don't miss your chance to catch another shark when yours slows down.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Alex Bruns at abruns@bloomberg.net