Finding Revenue in Retention
by Mark Pincus - March 2, 2009 at 3:20pm

Mark Pincus is the Founder and CEO of Zynga, one of the leading social game companies on Facebook. Zynga builds some of the top applications, including Texas HoldEm Poker, Mafia Wars, and YoVille. We’ve asked him to post on the Facebook developer blog today about how Zynga is building a sustainable business on Facebook Platform.

If you have suggestions you would like to share, please contribute them on the Developer Forum here or submit them to us privately here, categorized as "monetization tips."

Facebook has been an amazing platform for us. Not only are we able to build deep communities within our games on Facebook, we’ve been able to drive revenue off of that activity. In our view, the key is creating experiences that gamers are willing to pay for—that may not sound profound, but many developers overlook it when building apps.

At Zynga, our top priorities are reach (the number of users who try our apps) and retention (the number of users who repeatedly use our apps). Revenue is a third priority, but only if it doesn’t interfere with reach and retention. Our goal is to bring the fun into the powerful social experience that Facebook has enabled to as many people as possible. In pursuit of that goal, we’ve discovered a few things that have helped us monetize more effectively. Here are the two most important:

1. Focus on Retention – Keep Them Wanting More. We find that users who come back frequently are often the ones who are willing to pay. If your app doesn’t draw people back again and again, it will never earn any money. Fun game play is a core element, and we are constantly working on ways to provide users with the most entertaining experience possible. Another important part of this model is allowing users to interact with the bulk of your product for free. The free-to-play model works well on Facebook, and consists of providing games to users for free, and if they choose, they can upgrade elements of the games for a small fee.

We also use the Facebook communication channels (notifications and feed stories) to encourage players to come back. We find that notifications that are socially relevant get the highest click-through rates. For example, we will send notifications to players engaged with the game when one of their friends beats their high score in our word game Scramble.

In practice, a small portion of hardcore users will generate most of your income. Facebook can help you reach millions of users for free, but only you can keep them coming back, and give them an experience worth paying for.

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p>2. Have a Mixed Revenue Stream. At Zynga, our revenues are evenly split (33/33/33) among banner advertising, direct user pay, and CPA offers. We think it’s important to not rely on banner advertising alone. In fact, we consider banner ad revenue to be “gravy” above our core product.

We focus on providing experiences people are willing to pay for. For example, users who play Zynga’s Texas HoldEm Poker are willing to pay for poker chips, and Mafia Wars players often pay for reward points, because these purchases enhance the game experience. CPA offers (where users receive credit for filling out surveys, for example) are another option, and a great way for users who don’t have the money to spend to interact with the game at its full potential.

To summarize, build something people are willing to pay for, keep them around so they will pay for it, and give them as many ways to pay as possible.