Zynga Offers More of the Same

Hidden Chronicles, Zynga's (Nasdaq: ZNGA  ) first post-IPO game, has arrived and it appears the social-gaming leader is up to its usual tricks, but I'm not sure they're going to work this time.

This all feels so familiar
Hidden Chronicles is a departure from Zynga's FarmVille formula. Instead of asking gamers to develop their own patch of virtual real estate, Chronicles is a hidden-object game in which players stare at scenes worthy of an episode of Hoarders in search of random items. If the players find enough objects, they unlock the next scene. They can also challenge friends to see who can find the most items in 60 seconds.  

I would applaud Zynga for branching out from the usual formula, but the game mechanics and features are almost identical to those found in a game called Gardens of Time produced by Disney's (NYSE: DIS  ) Playdom.

This practice of borrowing extra liberally from other games without offering any real innovation is standard operating procedure for Zynga. It may have worked for the company in the past, but the social-gaming market is still in the early stages of development and the company is no longer the only big player. New competitors have begun to enter the market, like Disney and Electronic Arts. Both companies have the resources to compete with Zynga's marketing efforts and produce better games.

The difference in quality is already starting to show. Facebook recently released its list of the top 10 most popular games of 2011. It created the list by looking at the games on the site with more than 100,000 monthly users and ranking them based on which games received the most user recommendations. Although Zynga made a good showing with four titles in the top 10, its highest-ranking game, CityVille, only came in third. Gardens of Time came in first and EA's The Sims Social took second place.

You can also see the effect of the new competition in Zynga's active user count. The company still leads the pack, but it looks like that lead has begun to slowly erode. At the end of March, just before Gardens of Time launched, Zynga's monthly average declined from 236 million to 223 million. Meanwhile, bookings -- which measure how many virtual goods the company sells in a period -- have remained essentially flat for the past three quarters, and its revenue only grew last quarter because of an accounting trick.

Foolish takeaway
The competition will only get tougher from here on out. EA's acquisition of PopCap games earlier this summer is a sign that the company is serious about casual gaming, and I wouldn't be surprised if Disney decided after a while to let Playdom bring a few of its characters to social gaming. In order to restart its growth, Zynga will need to stop playing copycat and release a genuinely fresh title. I'm just not sure it knows how.

Social gaming is just one area of technology undergoing a disruptive change, and quite possibly the smallest. The mobile industry is primed for game-changing growth that will make the social-media industry look like a drop in the bucket. The Motley Fool recently compiled a research report that details three hidden winners of the iPhone, iPad, and Android revolution. And better yet, we made it completely free for our readers. If you're interested in learning about one of the hottest industries for years to come, click here to access your copy.

Motley Fool newsletter services have recommended buying shares of Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Fool contributor Patrick Martin owns no shares of any of the companies mentioned. You can follow him on twitter @TMFpcmart03. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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