Mark Pincus Steps Down From All Operational Roles at Zynga(recode.net)
recode.net
Mark Pincus Steps Down From All Operational Roles at Zynga
http://recode.net/2014/04/23/mark-pincus-steps-down-from-all-operational-roles-at-zynga-ultimately-a-ship-is-better-with-one-captain/
40 comments
I've read quite a few articles about that incident but I still don't get it. One said that it was people who had been promoted then demoted but kept their stock? Here it says they 'negotiated' to keep some stock? Isn't that what a vesting schedule is for?
In the worst case scenario it appears that Pincus and the board saw the writing on the wall that their earnings would (and did) drop after the ipo. Rather than make drastic changes or pursue new strategies rather than farmville clones (which, to be fair, while profitable, apparently have a shelf-life of around 5 years, after which the audience got tired of them and left), they decided to focus on avoiding a bad story. Their priority became stopping a google chef story from happening at the same time their earnings failed to meet expectations.
That still doesn't explain it, however. Google chef and microsoft secretarey becoming millionares is a story. Sub-par engineer/business analyst/game designer becomes millionare after ipo is not. Looking at the small number of people affected and assuming they didn't clawback much more than half the stock, there's no way they got much more than 50m back.
Then the only explanation becomes that they REALLY wanted to give the stock to attract new talent. "Come work for stock we clawed back from the last guy who already vested" is the least appealing job offer I've heard of that doesn't involve poisonous snakes.
Then the only explanation becomes that they were vindictive and did not want someone to profit a lot when they thought they contributed a little and in reality probably did a medium-quality job. Looking at some rants on quora, it seems like they spend a lot of money on a lot of unnecessary things and are just looking to scapegoat at this point.
I still don't really understand, though, and that bothers me.
In the worst case scenario it appears that Pincus and the board saw the writing on the wall that their earnings would (and did) drop after the ipo. Rather than make drastic changes or pursue new strategies rather than farmville clones (which, to be fair, while profitable, apparently have a shelf-life of around 5 years, after which the audience got tired of them and left), they decided to focus on avoiding a bad story. Their priority became stopping a google chef story from happening at the same time their earnings failed to meet expectations.
That still doesn't explain it, however. Google chef and microsoft secretarey becoming millionares is a story. Sub-par engineer/business analyst/game designer becomes millionare after ipo is not. Looking at the small number of people affected and assuming they didn't clawback much more than half the stock, there's no way they got much more than 50m back.
Then the only explanation becomes that they REALLY wanted to give the stock to attract new talent. "Come work for stock we clawed back from the last guy who already vested" is the least appealing job offer I've heard of that doesn't involve poisonous snakes.
Then the only explanation becomes that they were vindictive and did not want someone to profit a lot when they thought they contributed a little and in reality probably did a medium-quality job. Looking at some rants on quora, it seems like they spend a lot of money on a lot of unnecessary things and are just looking to scapegoat at this point.
I still don't really understand, though, and that bothers me.
What I think is a bit ugly about a stock claw back, at least in theory, is that the employee accepts a position with a lot of work and low pay, and takes the risk that the stock will be worthless. Later, when the stock is known to be valuable there is the threat that someone will decide you are no longer "worth" your options. Who is going to reduce your options for a worthless stock? It seems like a one way street.
You make several good points, I would add:
I've seen the inner workings of a few situations (not Mark's though) - all I can say, as a general statement, is that one person is rarely responsible for all a company's problems (especially a company as large as Zynga). It is easy to pin something on a CEO, but you also have to realize that a CEO typically reports to VCs and VCs report to the bottom line on their portfolios. In turn, only a few people report to the CEO and there can be a lot of mismanagement that is out of the CEO's governance.
Again, this is a general statement - I can't say anything more about Mark's situation without having been there.
Well, now I guess he has all the money he needs and does not have to report to anyone - whatever he does next should be the true judge of character :)
I've seen the inner workings of a few situations (not Mark's though) - all I can say, as a general statement, is that one person is rarely responsible for all a company's problems (especially a company as large as Zynga). It is easy to pin something on a CEO, but you also have to realize that a CEO typically reports to VCs and VCs report to the bottom line on their portfolios. In turn, only a few people report to the CEO and there can be a lot of mismanagement that is out of the CEO's governance.
Again, this is a general statement - I can't say anything more about Mark's situation without having been there.
Well, now I guess he has all the money he needs and does not have to report to anyone - whatever he does next should be the true judge of character :)
Zynga is a perfect case study for everything that is wrong with the modern VC funded, Wall Street bailed-out pyramid scheme known as a "startup".
The smart folks have realized that going public is where the money is at. And you don't need to produce value to go public, you just need to get Wall St. to be your evangelist and convince ignorant investors that your company's shares will be worth more than their IPO price at some uncertain point in the future. Does this sound familiar to anyone else? Yes indeed, its the same old "Penny Stock" scheme that common folk fall for (see: Wolf of Wall St.). This well oiled money printing machine evolved out of the Dot Com boom, wherein it existed in a functional but crude state. It has since been perfected.
So, what is a start-up? Is it a vehicle to solve a problem? Or a marketing-based ponzi scheme designed to pump and dump stock after stock in IPOs, making the "investors" unfathomably wealthy at the expense of common folk through zero-sum wealth transfers?
This is the real question Sam Altman and PG have to answer. Because it seems to me for every Elon Musk, there are hundreds of Mark Pincus clones, just itching to ride the next wave all the way to the bank.
The smart folks have realized that going public is where the money is at. And you don't need to produce value to go public, you just need to get Wall St. to be your evangelist and convince ignorant investors that your company's shares will be worth more than their IPO price at some uncertain point in the future. Does this sound familiar to anyone else? Yes indeed, its the same old "Penny Stock" scheme that common folk fall for (see: Wolf of Wall St.). This well oiled money printing machine evolved out of the Dot Com boom, wherein it existed in a functional but crude state. It has since been perfected.
So, what is a start-up? Is it a vehicle to solve a problem? Or a marketing-based ponzi scheme designed to pump and dump stock after stock in IPOs, making the "investors" unfathomably wealthy at the expense of common folk through zero-sum wealth transfers?
This is the real question Sam Altman and PG have to answer. Because it seems to me for every Elon Musk, there are hundreds of Mark Pincus clones, just itching to ride the next wave all the way to the bank.
I definitely think there is a lot of pump and dump action going on in the software startup world, but then again a huge amount of software engineers are guilty of riding this money wave by association. It might be an artificial economy, which is morally bankrupt, but I can't help but think at times that anything that keeps the blood pumping is good for the overall economy (could very well be wrong there).
Of course, once I go down that rabbit hole I have to start patting government contractors on the back for circulating money at the expense of taxpayers. I guess the overall question is: is an artificial economy better than a stagnant economy?
Of course, once I go down that rabbit hole I have to start patting government contractors on the back for circulating money at the expense of taxpayers. I guess the overall question is: is an artificial economy better than a stagnant economy?
Some interesting thoughts on that by Steve Randy Waldman [1]. In this snippet, he's asking whether bubbles promote useful innovation:
He went so far as to suggest that agency problems in
the delegated investment process, specifically the inability
of career-minded fund managers to stay away from bubbles
regardless of any personal reservations, make an important
contribution to innovation. Steven Fazzari (whose work on
inequality this blog has featured before) described research
showing that R&D expenditures of young firms are constrained
by external finance and increase in bubblicious periods.
Ramana Nanda investigated whether investments made at the
top of bubbles were poor, and found that they were not. They
were just riskier. Firms funded by venture capitalists in
heat were unusually likely to crash and burn, sure, but they
were also unusually likely to succeed spectacularly.
Thanks, interesting :)
There's maybe some truth to what you're claiming, but I think you're describing something overly-nefarious. Startups are inherently risky for their investors. They're going to try to market themselves well to cover up that risk. That seems like the entirety of it.
People played the heck out of Farmville, and I'm certain Zynga has had other successes. It's not like they don't produce some value.
EDIT: I guess to elaborate, what I need to hear from you is evidence of deception before I can accept your claim.
People played the heck out of Farmville, and I'm certain Zynga has had other successes. It's not like they don't produce some value.
EDIT: I guess to elaborate, what I need to hear from you is evidence of deception before I can accept your claim.
Zynga showed very little ability to reproduce their success in Farmville. Meanwhile Facebook had changed their policies making Zynga's viral growth more difficult to obtain for their next games, and they hadn't proven any success in mobile. So, for those that understood the market Zynga hadn't proven a sustainable business model. However, the Wall Street drumbeat was quite a different story.
In my opinion Zynga didn't need the cash that the IPO offered to re-invest in their business, it was simply a vehicle to cash out investors.
So, evidence of deception? All I can provide is that as a solid investment opportunity Zynga was anything but, as a well sold story that wall street spun, perhaps so.
In my opinion Zynga didn't need the cash that the IPO offered to re-invest in their business, it was simply a vehicle to cash out investors.
So, evidence of deception? All I can provide is that as a solid investment opportunity Zynga was anything but, as a well sold story that wall street spun, perhaps so.
> Meanwhile Facebook had changed their policies making Zynga's viral growth more difficult to obtain for their next games
Don't forget that this viral growth was achieved through unethical methods. [1] In the fall of 2009 a number of articles appeared calling out the unethical behavior which changed the climate and forced Facebook to alter its policy:
[2] http://techcrunch.com/2009/10/31/scamville-the-social-gaming...
[3] http://techcrunch.com/2009/11/02/scamville-zynga-says-13-of-...
[4] http://techcrunch.com/2009/11/06/zynga-scamville-mark-pinkus...
Don't forget that this viral growth was achieved through unethical methods. [1] In the fall of 2009 a number of articles appeared calling out the unethical behavior which changed the climate and forced Facebook to alter its policy:
Scamville: The Social Gaming Ecosystem Of Hell [2]
Scamville: Zynga Says 1/3 Of Revenue Comes From Lead Gen And Other Offers [3]
Zynga CEO Mark Pincus: "I Did Every Horrible Thing In The Book Just To Get Revenues" [4]
[2] http://techcrunch.com/2009/10/31/scamville-the-social-gaming...
[3] http://techcrunch.com/2009/11/02/scamville-zynga-says-13-of-...
[4] http://techcrunch.com/2009/11/06/zynga-scamville-mark-pinkus...
That's a pretty fair view in my mind. Games companies are always troubled by sustainability, so I don't think Zynga's problems are unique - and that's a problem. Their stock would've only been worth buying if they had cracked sustainability, and their early success seemed a bit dressed up to act like they had.
Of all the problems the current system produces, a few bubbly start ups here and there is a drop in the bucket. Overpriced startups, at worst, consume a few billion. Megabanks like JPM and Goldman have received trillions in bailout cash.
I don't entirely disagree with your sentiment, but I think there is a fair distance between Zynga and its ilk and the unregulated penny stocks. Zynga has had trouble demonstrating much of a profitable plan, but every investment bears risk and I don't think investors should enter the market if they don't feel comfortable with the risk level. I avoided Zynga partially because I avoid tech debuts for the reasons you cite, but more importantly because I didn't trust the model. That said, I've been wrong on the market more than right.
Instead of just bashing Zynga and the fact that it went public and dumped a bunch of stock on the public, while insiders rolled away fat with cash...let's switch the discussion to something more interesting...
What would you do if you were given the helm of Zynga today? You had to save the company of 2000 remaining employees (just a guess). How do you generate another Number #1 Platinum Album in fickle market of online social gaming? Or is there another business angle you move in to? Would you sell the company to Facebook or Yahoo!?
What would you do if you were given the helm of Zynga today? You had to save the company of 2000 remaining employees (just a guess). How do you generate another Number #1 Platinum Album in fickle market of online social gaming? Or is there another business angle you move in to? Would you sell the company to Facebook or Yahoo!?
I would not try to sell the comapny to Yahoo or Facebook, I would sell it to Amazon. If Amazon isn't interested I would:
- Cut the employees from 2k to like 500 (That's just a guess. I don't know enough about their structure to say a real number)
- Milk their Facebook hits (and keep the staff to do so)
- License my IP (Farmville, Mafia Wars, Draw Something) to any PC, console or mobile developer that will not embarrass me.
- Take a few longshot bets on FTP PC or Mobile games. Not too many so I can stay focused, and not too expensive so I can keep trying.
- Cut the employees from 2k to like 500 (That's just a guess. I don't know enough about their structure to say a real number)
- Milk their Facebook hits (and keep the staff to do so)
- License my IP (Farmville, Mafia Wars, Draw Something) to any PC, console or mobile developer that will not embarrass me.
- Take a few longshot bets on FTP PC or Mobile games. Not too many so I can stay focused, and not too expensive so I can keep trying.
- Encourage employees to work on their own games during work hours. Zynga takes a small percentage ownership of the games and will distribute/market the games using every available resource at it's disposal.
Well, considering various 3-letter-agencies' interest in online games [1], I would guess... defense contracting?
[1] http://www.huffingtonpost.com/2013/12/09/nsa-world-of-warcra...
[1] http://www.huffingtonpost.com/2013/12/09/nsa-world-of-warcra...
This marks the end of an era for Zynga. It will be extremely interesting to see what they do from here... I'm bullish on the capabilities of the org if they can adopt the right high-level strategy.
Pets.com had a Super Bowl commercial. Zynga is just as likely to disappear without a trace.
After-hours ZNGA has reclaimed today's loss, so I take it Wall St. likes the news.
I wonder what he'll do next.
Probably find a popular company he likes and make a knock-off version on the cheap.
I laughed. I'd guess you were downvoted by either (a) someone with no sense of humor, or (b) someone who knows nothing about Zynga's history, or I suppose (c) a Zynga employee.
He now has all the time he needs to enjoy the half a billion he liquidated upon the Zynga IPO. Gotta hand it to a determined Machiavellian who is a master of his craft.
Just goes to show folks, its not what you know, but who you can exploit.
Just goes to show folks, its not what you know, but who you can exploit.
Good for him, he'll have more time to prepare his defense, because ultimately he will face justice for insider trading.
If you are going to make an allegation like that please at least provide something to back it up.
Thanks. The class action lawsuit was launched nearly 2 years ago and there hasn't been much public progress since then.
It's about time.
Announced during an Apple earnings call. Surprise surprise.
EDIT: same time as the earnings, not the actual call. But still.
EDIT: same time as the earnings, not the actual call. But still.
I'm not sure what your theory is here, his involvement with the company has been in decline for 10 months since he was replaced as CEO, and by all accounts I'm aware of, the last 10 months have been full of good changes for the company.
Pretty sure parent is saying that it was done during the Apple call in order to mitigate the PR onslaught.
In that case I am curious what makes cwe think it's bad PR rather than good PR, and also curious if there is some unstated reasoning, other than pure speculation, that makes cwe believe it to be timed intentionally.
Zynga has a history of timing their shady announcements like this, that's all.
I don't know about you guys, but the chef at my old company was pretty spectacular. If it were up to me and my company went public, it would be very important to me that all the early guys got big paydays.
[1] http://www.businessinsider.com/mark-pincus-to-zynga-employee...