How Zynga is doing 100 MM in revenue and how we can help you do it

Rumors are going around of Zynga supposedly doing something around 100MM in revenue this year–that’s huge. Whether or not the rumor is entirely true is beside the point – something is definitely going on. Zynga is making a lot of money and it’s not through brand advertising which past application/widget companies used as their primary path towards profitability.

So how are they doing it? Really simple: they really understand their funnel and they understand arbitrage.

Zynga one year ago

Let’s take a step back in time to about a year ago when OpenSocial was all the rage and I was silly enough to pursue it. When the MySpace platform released, developers frantically raced in hopes that it would be as much of a gold mine as Facebook was. However that was not the case for more than 90% of the developers except of course for a few players like Zynga.

Zynga was rising to the top, along with a few others, and the way they did it was massively spending money on MySpace advertising that MySpace was happy to give away. People at the time thought it insane that companies were spending a million dollars for 2 million installs or whatever the going rate was. In fact, a few CEOs I’ve talked to at fairly well known “widget” companies stated “If their goal is to 10x their valuation by spending 1 million dollars, then it makes sense” and another regretted not doing it themselves a year later. Zynga managed to create an arbitrage scheme that allowed them to spend massive amounts of money on advertising – even to this day – because the amount of money they make funneling in users is more than the cost of acquisition.

Rinse and repeat and you have millions of users playing your games. It turns out games make a lot of money and they make substantiating advertising for the game very lucrative. Also, gamer retention is super high in comparison to the trivial one time hit applications like “Hug me.”

Update: Zynga and other companies like it, do not solely use funnel analysis to measure their arbitrage scheme. There’s many more things involved but I would argue funnel analysis is one of the largest and most important components of it.

How can you do it?

This is what we’re here for: today we’re announcing the release of our funnel analysis tool to help give you a similar advantage. Funnel analysis can help you figure out your conversion rate and then also optimize your drop off rates at each step. We’ve heard everyone’s gripes with Google’s and we’re here to deliver a real funnel analysis tool. If you’re not sure how funnel analysis works, please read our Introduction to Funnel Analysis.

Mixpanel will let you track each step in a funnel in a single line of code. It’s dead simple:

mpmetrics.track_funnel("Your Funnel", 1, "Goal"); // Where 1 is the step in the funnel.

We’ve even written a guide to help you get started immediately. The reason you want to use our funnel is because it’s entirely REST based, you can use any language to ping the data to us. Also, we make segmentation a breeze – you can add properties like “gender” or an “ad-campaign” and see what percentage of those users make it to the next step:

mpmetrics.track_funnel("Your Funnel", 1, "Goal", {"gender" : "male", "ad-campaign" : "pepsi"});

The best use of our funnel are in cases like Zynga’s games or any business that will let you arbitrage and substantiate ad spending. Whether this is good for you in the long-run depends, sometimes it is and other times it isn’t and in that case you’ll have to track what your visitor retention is like.

Even if you’re not planning on spending money on ads, funnel analysis can help companies detect steps in their flow that have the highest drop off rates.