Michael Katz

Michael Katz
Contributor since: 2013
They're still bleeding cash and spending more than they're making. As for balance sheet manipulation, it's what magicians call 'slight of hand'.
As the clock ticks down to Zynga’s earnings call later today, there has been much speculation about the flurry of patents that Zynga has locked down over the past year. But do these patents really give a solid security blanket to the company developing the product behind the patent or do they just stand in the way of innovation?
Will Zynga really pursue any and every new innovation of technology with an underlying claim of copyright?
In August last year, it was reported in the Wall Street Journal that Walker Digital filed around 30 suits targeting hundreds of companies. This was done after Jay Walker, owner of Walker Digital had not received the asking price for his portfolio of patents. Among the companies targeted were Zynga, Google and Amazon. It was also reported that the case was dismissed four days after re-assigning 33 of those patents to Zynga, even though the actual patent referred to in the lawsuit was not re-assigned to Zynga. The term used for enforcing patents for profit is “patent trolling”. Surely Zynga will not become a patent trolling business. The details of the Walker Digital patent reassignment have never become public knowledge.
Google, Dell, Facebook, Redhat, Zynga, Homeaway, Intuit and Rackspace filed an amicus brief against Alice Corporation at the end of 2012. This was done based on the notion that the patents filed by Alice Corp were too vague. Additionally, the brief contained language which ensured future patents be written in very specific language concerning the actual idea behind the patent. The brief quotes “Abstract patents are a plague in the high tech sector”.
The brief then continues by distinguishing all of the patents filed by Zynga, Google, Facebook etc. from the patent that they are attempting to tear apart by claiming that to make a valid case for a patent , the patent need to contain the following elements:
• Add steps that are conventional or obvious
• Add non-specific steps that don’t limit the claim’s scope
• Limit ideas to only to a particular technological environment, like a computer
• Add insufficient information to a claim and don’t specify a specific machine an idea is performed on
Last Friday saw the US Patent Office issue a preliminary notice overturning the famous ‘Steve Jobs’ patent, describing multi touch on-screen technology. Although not the final outcome as Apple has two months to appeal, it marks a huge turnaround in the world of patent law.
So, back to the original question of the 50 plus patents currently filed by Zynga. Are they actually worth a dime or will future loopholes always be found in the interest of innovation?
Great answer. I'm certainly not counting FB out by any means. Just stating that mobile ads revenue will come under scrutiny for performance. I believe that FB are in a position where brands would actually pay for their pages. This may entitle them to some kind of 'premium' page service, but I think Brands are definitely at a stage where they're understanding social media a little better and seeing the positive effect for customer service and would therefore pay for what has been up until now, a free service.
$285 was from game revenue - the rest was advertising. Based on information on appdata.com, I think it's safe to assume that the games generating the revenue are Farmville 2, CoasterVille, Texas Holdem, Bubble Safari and ChefVille.
Thanks for the feedback :)
Great questions that you've raised. In my opinion they're counting on their conversion strategy of their existing database. One other thing that I should have also added, the Zynga players who would actually play for real, are probably already doing so elsewhere. So, back to your excellent point - why would they choose Zynga for real money poker? Party Poker who now make up the Party in the Bwin name have a huge existing market share of the poker market. There is also Poker Stars, iPoker and PKR. These companies have been fighting for market share for years. Zynga HAVE to make one helluva game in order to really gain proper traction in this market.
It's a great opportunity and I would love to see it work out. I just don't see the odds in their favor.
I have been wrong in the past and I have no doubt that I will be wrong again in the future. But to watch life as a spectator with no input, is to have never lived.
BTW - foolish is basing opinions with no factual substance. My writing is based on facts and my opinions are the result of an analytical conclusion.
Thank you for your comment.
Wise words my friend ;)
I don't disagree with the points that you've made. Apart from the last one :)
BTW - do you know how many real money transactions for virtual currency currently take place on mobile devices?
2013 is the year for mobile - as for FB mobile - I hope that they're able to supply all advertisers with ROI for their mobile advertising dollars and not just cater to mobile game developers looking for installs.
Thank you. After three years and seven million chips on Zynga poker, I too have never spent a cent. I have spent money on real money games. It's just different.
Let's take this point by point shall we.
1. I think everyone is aware that it's January 31st and that the announcement stated first half of 2013. 'Still no news' doesn't indicate or even assume that they are at all behind schedule. It just means 'no news'. As for the landing page on zyngapluspoker.co.uk - this also signifies very little. So they own a domain and have an email capture. About half hour of work, plus an extra hour for the page design. Did you register? I did. A while ago. Still haven't heard anything from them. I guess they're not relying on email marketing to keep their leads warm.
2. The Nokia deal. On the face of it (no pun intended) it's a great deal. Did you know the games began rolling out six months ago? Hasn't seemed to have made an iota of difference so far. How many apps are on your smartphone that are from the manufacturer? I know there's a ton on mine that I haven't even touched. You can lead a horse to water but you can't make it drink.
I'm pleased you mentioned the Nokia deal though. While we're on the subject let's look at the actual games that are being rolled out. Texas Holdem and Draw Something. At this point I have to disclose that I love Zynga's Texas Holdem. Even had seven million chips at one point. Been playing it for about three years now. NEVER spent a dime on it. Draw Something - I have to admit, I tried it to see what all the buzz was about. Hated it. It would appear that most other people did too. Shame that the guys at Zynga didn't hold off just a tad longer before throwing $180 million into it. Ouch!
3. Making mention of undisclosed deals such as the Walker Digital deal is not proving anything. So Zynga have patents. What's your point? Any revenue figures from these patents that you'd care to share?
4. They have 35 million poker players according to your final comment. Have you any idea how they can monetize them? It would appear Zynga don't either.
It's true that they have been very successful from their portfolio of games. They have also had insanely high costs, which they have tried to cut down. The bottom line is that they're bleeding money.
It's a case of pure economics. When your expenses are more than your income, you will finally be left with nothing.
Changing their model to real money gaming makes perfect sense. But it really is a make or break for Zynga. Everyone has the right to an opinion. Mine is based on odds. I give Zynga a 48% chance of recovery based on everything running smoothly with the real money gaming joint venture.
Thanks for the comment. In case it wasn't clear enough in the article, for FB everything is dependent upon its ability to serve ads. However, apart from mobile applications, I don't believe that the ROI for other areas of the consumer marketing will meet requirements with Facebook mobile ads. To add to that, the final paragraph shows that direct sales have not been generated on Facebook, hence the closure of Payvment. In short, the shares may go up after this earnings call, but long term revenue projections from advertising, in my opinion, will not be enough to sustain Facebook in the future.