It's Official: The Zynga Exec Exodus Has Begun

Sometimes, all you gotta do is ask. Just last week in the wake of news that two high-level execs had left the company, I pondered, "Is this the beginning of an exec exodus at Zynga?" Those two departures included the COO that Zynga (Nasdaq: ZNGA) had poached just over a year ago from rival Electronic Arts (Nasdaq: EA), John Schappert.

With a few other reports out since then, we can now officially say that the exec exodus has begun.

The list grows
On Friday, Bloomberg reported that in addition to Schappert and Alan Patmore, responsible for CityVille, three other employees decided to call it quits. The head of Mafia Wars 2, Eric Bethke, left earlier this month. Following him out of the door included an exec in the company's important mobile division, Ya-Bing Chu, and a studio general manager, Jeremy Strauser. At the time, that brought the month-to-date tally up to five.

No. 6, come on down! Adding the second C-suite exec to our list is Mike Verdu, chief creative officer.

Sources: Bloomberg, Zynga.

Verdu outlined his decision in a company blog post, expressing his pride in his hand in building Zynga up over the past three years to become a household name in social and casual gaming. Interestingly, Verdu was also poached from EA back in 2009. He seemed nostalgic of joining during Zynga's earlier start-up days, saying it "reminded [him] of how much [he loves] being an entrepreneur."

That led to the tough decision to go and start a new company, especially considering that morale has been reportedly low of late, what with Zynga's cratering share price and all. In an exclusive interview with AllThingsD, Verdu said, "I personally don't want to add to the noise level. I think this will be a good thing for me and for Zynga. ... I'm concerned about how this might be viewed with what else is going on, but it's not a function of anything else going on at the company."

Verdu's unnamed company will importantly not be a competitor to Zynga. In fact, Zynga is helping to back the new startup. In a press statement, CEO Mark Pincus added that the company "will be on the ground floor with Mike on his next venture as an investor in his new startup." Zynga will also publish the new company's games on its platform.

So much for retention
I was able to dig up another interesting tidbit about Verdu from Zynga's prospectus in March. Zynga lent Verdu $800,000 in April 2010 as a "retention incentive," which was set to be forgiven over four years in equal amounts starting in April 2011. One installment of $200,000 was forgiven that year, and the outstanding principal balance was $600,000 at the end of 2011.

The prospectus was dated March, but presumably another installment was forgiven of April of this year, which would bring the balance down to $400,000. In all likelihood, he will now have to start paying back the remainder, but it looks like Verdu was able to pocket an extra $400,000 for staying onboard as long as he did.

This isn't working
If we take Verdu's statement at face value, and you could argue either way on whether you believe him, nothing is amiss at Zynga. However, within the context of deteriorating monetization, doubts over Zynga's creative abilities, and a growing list of executive departures, you can't help wondering whether something really is amiss at Zynga.

Zynga's reliance on Facebook (Nasdaq: FB) has been dropping like a rock as part of a planned move toward mobile platforms, making it about the worst time to start losing mobile execs or anyone whose title begins with "chief."

Pincus' attempts to boost morale and retention by granting everyone in the company stock options appears rather unsuccessful in light of the departures. After all, what good are options if they remain underwater?

For more on why Zynga will remain underwater, grab a copy of this new premium report all about the social game maker, written by yours truly. Sign up today and receive quarterly updates at no additional cost!