Zynga’s Struggles Are Good for Silicon Valley

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I've written about a lot of deeply unpopular companies, but few have inspired the kind of schadenfreude I heard when I wrote recently about FarmVille maker Zynga's botched acquisition of OMGPop, the New York–based company that created Draw Something. Following the story's publication, I heard an outpouring of hatred for Zynga from tech workers, who decried the company as a villain whose impending demise couldn't come soon enough.

So, it should not inspire much sympathy in Silicon Valley today that Zynga is reportedly laying off 520 employees, or roughly a fifth of its workforce, and closing its New York and L.A. offices in order to cut costs.

The reason Silicon Valley hates Zynga is simple: At a time when tech founders are hell-bent on proving that they are tackling big problems, Zynga fully encapsulated the most common criticisms of the tech sector — that it's focused on small, silly innovations; that its companies are valued at billions of dollars despite selling only virtual time-wasters. It's a company that had a $7 billion IPO and grew at an astounding rate despite selling nothing more real or tangible than purple cows and FarmVille tractors. If the rest of Silicon Valley was trying to work on moon shots, Zynga was monetizing the lowest common denominator.

But the party appears to be coming to an end. Zynga is refashioning itself as a mobile-first company, but it just parted ways with Dan Porter, the OMGPop CEO who had made the most successful mobile game in Zynga's repertoire. It has lowered its guidance, effectively preparing investors for disappointment, and its stock price is down 40-plus percent in the past year.

"None of us ever expected to face a day like today, especially when so much of our culture has been about growth," CEO Mark Pincus wrote in a somber employee memo today.

The decline of Zynga is bad news for its newly out-of-work employees, but it will be a cleansing force for the rest of Silicon Valley, which will no longer have to hear the company used as a counterexample when they're extolling the world-changing powers of tech. As the chaff is separated from the wheat, it's not surprising that the wheat is feeling a little smug.