What was changed
Zynga started making social games on Facebook in 2007, just as the financial crisis hit. Its answer to shrinking disposable income was free-to-play: anyone could play FarmVille or Mafia Wars for nothing, while a small slice of players bought virtual goods.
The S-1 shows the result: revenue grew from $19.4 million in 2008 to $121.5 million in 2009, then nearly quintupled to $597.5 million in 2010, when the company earned $90.6 million of net income.
Bookings, the cash actually collected, hit $838.9 million in 2010 as average monthly users reached 217 million, making Zynga the dominant publisher on the Facebook platform.
What it achieved
Revenue grew from $19.4M in 2008 to $121.5M in 2009 and $597.5M in 2010; bookings reached $838.9M in 2010 and the company earned a $90.6M net profit in its third year.
Why it worked
Free access removed the price barrier when players were cutting spending; revenue came from a monetizing minority instead.
Facebook's platform gave Zynga instant distribution and social virality, compounding users without paid marketing.
Virtual goods had near-zero marginal cost, so each paying player's margin funded the next game.
What can be applied
When incomes shrink, free-to-play products that monetize a few users heavily can outperform paid products; betting early on one platform's audience can create a lead rivals cannot close.
Aftermath
Zynga filed to raise up to $1 billion in July 2011 on the strength of 2010's results. The Facebook dependence later became a weakness as the platform changed, and the company spent years pivoting to mobile.
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