Today, Zynga’s stock kind of went into a tailspin downwards. Zynga, in case you’re not aware, is famous for building software that used to consist of games you could play specifically on Facebook. Then they went public, making lots of money and continued to try to make games (sometimes in Facebook and sometimes outside of it). At the time of their IPO, all I could think to myself was “this is a company that doesn’t really make anything that’s profitable.” Their profit comes from trying to get people to pay for virtual goods IN A FREE ONLINE GAME. While pay for play works in some venues, like MMO’s like City of Heroes and Lord of the Rings Online, people didn’t go to Zynga because they were interested in playing a specific game. Zynga, on the other hand, tries to interest people in their site and THEN trying to get them to play some of their games. And then if that works, they try to get them to pay money for the game they’re already getting for free.
Does anyone see a problem here?
Well, their stock is continuing to go down, mainly because their “hits” are very old, and they’ve never really done anything to convince potential customers that they have something just as good. Farmville was their famous property, and even though I played it at the time, I never invested a dime in the game, and after I grew bored with it, I stopped playing it and anything else Zynga had to offer.
Facebook, however, has been interlinked with Zynga since the beginning. Facebook gets a bit of profit from anything that Zynga makes from its transactions.
Which means I should probably talk about Facebook, too. This is another online company that has absolutely no value whatseover. Basically, it’s value is to get people to sign on and then tell other people who are signed on what they’re doing. Facebook offers nothing other than being the park bench where people are sitting.
When Facebook went public, it was already feared that there was no real revenue stream available from the company. All it really did was advertise, and it doesn’t do it very well. In its early days, I paid for an ad to sell one of my books on their site, and the results were horribly bad. I never paid for the service again. Instead, I got much better returns from places like Goodreads.com. Facebook, as people have started to realize, has a customer base that shows up, looks at traffic and then goes away. Some stay online forever, but they NEVER press any of the buttons that take them to the ads. In other words, Facebook has absolutely no revenue stream whatsoever when it comes to advertisements. The only way they could make money is to charge people for using the service, but once they did that, their service would become a graveyard.
This is the problem with companies that sell imaginary goods. Some, like Lord of the Rings Online, which actually offers something tangible (a lot of fun and a strong customer base that has remained with them for years, first as paying customers), Facebook and Zynga offer nothing really tangible. Zynga doesn’t even offer very good games. They’re casual games, which means that they’re meant to be played as you’re doing something else. Think of their games as almost an afterthought. Whereas, Lord of the Rings Online is a game meant to be played with your full attention.
Facebook, as well, offers nothing but a place for people to report their happenings. If you’re not a celebrity, chances are pretty good that not a lot of people (aside from really close friends and maybe family) really care. Even Google Plus, which does appeal mainly to following celebrities, isn’t all that popular, no matter how much Google wishes that weren’t so.
Facebook has a few days until its reckoning emerges. You see, they have to reveal to stockholders just how well they’re doing. I suspect they’re not doing well. With Zynga’s loss reported today, it’s only a matter of time before we hear that Facebook isn’t doing any better. And then their stock is going to go down really fast.
It’s unfortunate, but then we’re dealing with companies that have no actual value, other than perceived value and fantasies of being more than they really are. I like to think that their value is comparable to my ability to date Jessica Alba. Sure, it’s very possible it might happen, but she’s really an imaginary good (a really, really GOOD good), but the reality of my dating her is pretty dismal. That’s how I see Facebook and Zynga. Slowly, I’m noticing more and more people are starting to feel the same way.