Zynga's Founder Retakes the CEO Position: Why Mattrick Is Out

Zynga's Founder Retakes the CEO Position: Why Mattrick Is Out

Former Xbox boss Don Mattrick is out after only two years.

This is one of the odder executive changes in recent memory. Don Mattrick, former Xbox head at Microsoft, is no longer the CEO at Zynga, ending a short two year stint at the company. His replacement? Zynga founder and former CEO Mark Pincus.

"I am writing to you today to share some significant news. Don is departing the company and I am returning to Zynga as CEO effective immediately," said Pincus in an employee memo obtained by Re/code. "I want to thank Don for his incredible efforts and leadership. He has laid groundwork that will benefit our players and company into the future. Don joined us at a very important time in our evolution. In less than two years under his guidance, our teams have worked hard to better serve our mobile players and deliver world class quality and value to our consumers. Now that we are a mobile first company, it's time to renew our focus on our vision to make play and social games a mass market activity."

"After two years in the business cyclotron, I now have your power, Mattrick! You are no longer needed."

"When I joined the company in July 2013, Mark and I shared a vision of building a meaningful company that redefines entertainment in an increasingly mobile world," said Mattrick in an adjoining statement. "I am proud of the progress we have made together. I believe the timing is now right for me to leave as CEO and let Mark lead the company into its next chapter given his passion for the founding vision and his ability to couple our mobile progress with Zynga's unique strengths. As a company, Zynga is in a stronger position today to serve mobile consumers and take advantage of the unprecedented growth opportunity across our industry."

Mattrick joined Zynga in July 2013, hoping to revive the flagging company and help it realize its full potential. Zynga was built on the success of social games like Farmville and Zynga Poker, but not every subsequent game was a hit and the company simply grew too fast. The problem seemed to be that while Pincus was right fit for a startup, he wasn't the guy to build a sustainable business. Mattrick was the fix. He essentially cleaned house, installing a corporate structure and executive team that could execute on his vision. Mattrick decided to move the company from a declining social focus into a mobile-first developer and publisher. With Mattrick taking over the CEO role, Pincus moved into the chief product officer role, before leaving that role and day-to-day operations in April of last year.

One problem is Mattrick's tenure hasn't been cheap. He was behind the $527 million acquisition CSR Racing and Clumsy Ninja developer NationalMotion. The new executive team included big names - former DeNA West CEO Clive Downie as chief operating officer, Relic Entertainment founder Alex Garden as head of Zynga Studios, Hollywood visual artist Henry LaBounta as chief visual officer, former Clorox marketer Jennifer Nuckles as chief marketing officer, and Best Buy senior vice president of corporate finance David Lee as chief financial officer - who probably didn't come cheap. Mattrick himself was a big ticket purchase, with a $5 million signing bonus, annual salary of $1 million, and $40 million in stock options. That's a big shift over Pincus' $1 annual take, a salary the incoming CEO is returning to.

Farmville 2 wasn't the success Zynga needed.

For all the money spent, Zynga didn't see a rise of revenue in return. Zynga still has around $1 billion in cash and mobile has become a larger part of the company with mobile bookings (when customers spend money in Software as a Service businesses) growing from 25 percent in July 2013 to 60 percent in the fourth quarter of 2014, but losses increased under Mattrick. Zynga recorded a net loss of $225.9 million for 2014, versus losses of $36.9 million the previous year. Investors probably weren't all that happy.

It doesn't help that the mobile sector has gotten very crowded in the past few years. There's been a number of company-defining hits in the market, including King's Candy Crush Saga, Supercell's Clash of Clans, and Machine Zone's recent Game of War. Zynga has mobile versions of Words With Friends and Zynga Poker, but no solid hits yet. Farmville 2: Country Escape for Android and iOS underperformed expectations and a number of Zynga's major mobile titles are still coming this year. NaturalMotion has the premium action strategy title Dawn of Titans on the table, while Zynga is releasing military strategy game Empires & Allies and a Farmville Match-3 game called Farmville: Harvest Swap. Zynga is betting on these three titles leading the 6-10 planned mobile games for 2015.

"It's been two years and we are still not winning as a company on the level we had hoped and think we can be. We need to move fast and we need to act a little bit more as a startup, by focusing more on entrepreneuring and speed than on structure and management," Pincus told Re/code.

Dawn of Titans is Zynga's next shot at greatness.

"We realized we needed to accelerate these moves to differentiate our games," he added in an interview with GamesBeat. "Zynga has hit a lot of goals in terms of product quality and becoming a mobile-first company. That's flipped from where it was a couple of years ago. I think there is a realization and frustration from Don and me and the board that we could do better. At a minimum, you should see results show up in consumer value and audience size and engagement."

The first casualty of Pincus' new tenure will be Zynga China, which is shutting down completely. Mattrick's executive team is staying onboard for the foreseeable future.

There's still room left for Zynga in the mobile market. According to research firm Newzoo, the mobile market will grow to $30.3 billion in 2015, which would put it just ahead of current console market estimates of $26.4 billion. The research firm is further predicting that number to balloon to $40 billion in 2017. SuperData Research pegged mobile game revenue at $21 billion last year, with $11.3 billion of that being in Asia alone. That's why you're seeing moves like Nintendo's partnership with DeNA or Square Enix's push to make premium mobile games. SuperData predicts that Western growth will be slower than other worldwide markets, which means Zynga has an uphill battle ahead of it, especially with the loss of Zynga China.

Regardless, Zynga has a new boss that's the same as the old boss. Pincus will take Mattrick's infrastructure and try to improve the fortunes of the company he founded. Guess we'll see where he is in two years' time.

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Mike Williams

Reviews Editor

M.H. Williams is new to the journalism game, but he's been a gamer since the NES first graced American shores. Third-person action-adventure games are his personal poison: Uncharted, Infamous, and Assassin's Creed just to name a few. If you see him around a convention, he's not hard to spot: Black guy, glasses, and a tie.

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