Social games, by nature, thrive off social interaction and multiplayer gameplay. The more people are playing, the more attractive the game is. Zynga’s Words With Friends and the aforementioned Draw Something are entirely dependent upon multiplayer gaming — if your friends won’t play, you likely won’t play either.
By contrast, mobile games are just games developed for smartphones and tablets. Given the increasing popularity of these devices, games specifically developed for them have exploded in popularity — and some of them are quite profitable.
Plants vs Zombies is one of the most successful mobile games ever. EA bought the company that made the game — PopCap — for nearly $1 billion in 2011. And though EA has backed away from social gaming, it remains committed to the mobile space.
The sequel to Plants vs Zombies is set to be released later this summer on iOS, with an Android release to follow. As it has no direct social aspect — and thus does not rely on fads — it will likely end up benefitting EA far more than Draw Something benefitted Zynga.
Activision has stayed away
has stayed away from social gaming, avoiding the trend entirely in recent years. It’s been to Activision’s credit — the company has been one of the best performing video game stocks in the last five years, and one of the only ones to pay a dividend.
Activision Blizzard, Inc. (NASDAQ:ATVI)’s CEO, Bobby Kotick, has criticized the app store model and had said in the past that his company has no intention to get into social gaming. This led to some criticism, but given the current precarious state of social gaming, Kotick seems to have gotten the last laugh.
In the long-run, Activision Blizzard, Inc. (NASDAQ:ATVI)’s decision to avoid mobile gaming might be a mistake — particularly as Google and Apple appear poised to enter the console market. But Activision investors can take solace in the fact that management has the discipline to stick with a proven business model.
Investing in Zynga
Mattrick is a great hire — he’s an industry veteran with a proven track record. Yet, Mattrick alone does not change Zynga’s story. In fact, given his lack of gambling expertise, it might actually weaken the case for Zynga’s stock.
Social gaming as a business model remains unproven. Industry leaders like EA have backed away from the space, while Activision has thus far avoided it entirely. Until Mattrick puts forward a reasonable turnaround strategy, investors should not get caught up in the Zynga hype.
Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Don Mattrick Doesn’t Make Zynga a Buy originally appeared on Fool.com is written by Salvatore “Sam” Mattera.
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