$$$

You've got to wonder what employee happy hours are like in the legendarily intense environs of Zynga. (We're gonna guess testy.) A couple days ago, the company announced the departure of New York GM Dan Porter, and former employees are already dishing to Fast Company. A lot of former Zynga staffers, it seems, are ready to trash talk the OMGPOP acquisition, which cost Zynga a $95.5 million write-down.

One former employee complained to Fast Company, "They bought it at the peak [of Draw Something], and people got tired of the gameplay quickly and the usership dropped. We got the timing wrong."

A former "long-time" product manager said Zynga timed the acquisition wrong and overpaid (double ouch):

 "It was a knee-jerk reaction to something the executive team saw as a threat to the company. If you look at OMGPOP's portfolio of failed games, the fact that they hit on this winning game was an accident. People got bored of playing Draw Something after about two weeks. Zynga closed the acquisition and announced it when their numbers peaked. That's almost comical."

It wasn't all criticism, though. See, one former GM delivered this backhanded compliment:

"I knew the OMGPOP guys--they were really talented, and really good at making games," says a former Zynga general manager. "What they were bad at was making money, and they were struggling for a long time."

In fact, it sounds like some of these guys aren't mad at OMGPOP, so much as they're disgusted with Zynga's bungling: "The acqui-hire doesn't make sense, and I think Zynga's acquisitions are retarded, actually," one former product manager told Fast Company.

Not to put any pressure on the upcoming game show or the celebrity-focused Draw Something 2, but this sob story could really use a happy ending.

Mr. Porter and Ghostface Killah (Photo: Twitter)

Dan Porter, the former CEO of New York-based gaming company OMGPOP which was purchased by Zynga in March of last year, has left the company, according to a release obtained by Betabeat.

Zynga confirmed to Betabeat that the decision was mutual and unrelated to the expiration of any “golden handcuff” clause in his contract keeping him at the company after the acquisition. Mr. Porter had been working on developing the sequel to Draw Something for the past year and felt it was in good enough shape to make the transition. Zynga launched Draw Something 2 in Sweden last week. The company picked Sweden to release the sequel--a celebrity-focused social network of sorts that emphasizes showcasing drawings over gaming--because Sweden was the first country where the first version hit no. 1 in the App Store.

"Developing and launching games is a team effort, and we’re proud of the great work the Zynga New York team has done with Draw Something 2," Zynga COO David Ko said. "We thank Dan Porter for his efforts in making the Draw Something franchise a success and wish him well in his future endeavors."

Until today, Mr. Porter served as the VP of general management at Zynga's New York office. He'll be replaced by VP of Mobile Sean Uberoi Kelly. This past December, CEO Mark Pincus was named the fourth worst CEO in part because of "a big exodus of top executive talent," as well as the $95.5 million write-down on its acquisition of OMGPOP.

Mr. Porter’s independent streak has bristled against Zynga’s corporate policies in the past. His public criticisms, such as calling Zynga out for copying competitors, have on occasion warranted a retraction. Zynga HQ’s willingness to blame poor performances on the OMGPOP write-down and dwindling engagement with the game likely didn’t help.

But Zynga New York has been on a hot streak of late, as we reported last week. What’s the Phrase--a new game from the New York office that borrows from “Wheel of Fortune” the same way Words with Friends borrows from Scrabble--hit no. 1 in Apple’s App Store without much promotion. It's currently no. 6 in top free apps overall and no. 4 in top free games.

On March 21st, Mr. Porter tweeted “One year,” indicating the one-year anniversary of his time at Zynga.

https://twitter.com/tfadp/status/314841925268172800

This is a breaking story. We have reached out to Mr. Porter and will update the post when we hear back. 

Mr. Pincus (Photo: Wikipedia)

After two big blows in succession--downgraded earnings forecasts, followed by 5 percent layoffs and the end of its studios in Boston, Japan, and the UK--Zynga's third quarter earnings report exceeded the Street's "rock bottom expectations." That might explain why after hours trading is currently up 13.6 percent.

Zynga had predicted a net loss of $90 to $105 million for the third quarter, but only reported a net loss of $52.7 million. The company attributed part of that loss on a $95.5 million impairment charge on its acquisition of OMGPOP, the New York City-based makers of Draw Something. Zynga also said that a 28 percent sequential decrease in monthly unique payers (MUPs) from the second quarter (4.1 million) to the third quarter (3 million) as "largely driven by Draw Something."

However, it's worth noting that AppData shows monthly active users (not payers) for Draw Something as 10.2 million. As Zynga's chief mobile officer David Ko noted this summer, sites like AppData only measure usage via Facebook integration, which he called, "[just] a portion of the actual number." And if anyone can figure out how to turn users into payers, it's American Idol's Ryan Seacrest, who just happens to be executive producing a TV pilot based on Draw Something. So stay tuned?

On an earnings call about this afternoon, CEO Mark Pincus began by saying, "The last several months have obviously been challenging for us," before going on to outline a plan to fix that. Besides yesterday's steep cutbacks and layoffs--the company is also sunsetting 13 games--Zynga plans to remain "well positioned to capitalize on social gaming," by refocusing on mobile. He attributed some of Zynga's setbacks on "faster than expected player adoption of mobile smartphone and tablets." A familiar refrain to anyone who heard Facebook's first earnings call too.

Zynga may have an easier time adjusting to mobile than Zuck, though. The company says it owns three of the top five most popular mobile games and that, "In the past year, we’ve generated a large audience and a business that represents 20 percent of our bookings." The company is also reorganizing its game teams to "unite" web and mobile development. Additionally, it will be work on developing more "high-engagement games," like Zynga Poker.

Speaking of just how engaging gambling can be, along with its earnings report, Zynga sent out a press release this afternoon announcing an exclusive partnership with the online gaming company bwin.party. "If you say it out loud, it sounds like 'boring party," observed Betabeat star intern Myles Tanzer. The deal, however, should prove anything but. Through the partnership, Zynga plans to offer so-called "real money games" in the UK, where gambling laws are less dire than the U.S.

Nearly every question during the earnings call attempted to get more details about the partnership out of Mr. Pincus and and CFO Dave Wehner, who declined again and again to offer specifics beyond the fact that it would "offer real money online Poker and Casino games in the UK market," in the first half of 2013.

A question from CITI regarding whether this was a merely a "brand licensing deal" or would actually involve more lucrative "game development and integration," was also left unanswered. However, Zynga did emphasize that this deal was specific to the UK. Considering that bwin.party, which is incorporated, licensed, and regulated in Gibraltar, but also has licenses in France, Italy, Spain and Denmark, that may mean Zynga is exploring other partnership options for real money gambling overseas. And bwin.party's loss might be Betable's gain!

Zynga Partners With bwin.party to Launch Real Money Games in the UK

SAN FRANCISCO, Oct. 24, 2012 (GLOBE NEWSWIRE) -- Zynga (Nasdaq:ZNGA), the world's leading provider of social game services, and bwin.party, the leading international real money gaming operator, today announced an exclusive partnership to offer real money online Poker and Casino games in the UK market. Zynga's UK-based RMG service and bwin.party will launch RMG products including Poker and a full suite of 180 Casino games in the first half of 2013, which include table games such as slots, roulette and blackjack.

"Bringing together Zynga's expertise in social gaming with the top international real money gaming operator is the best way to create the highest quality gaming experiences for our players in the UK," said Barry Cottle, Executive Vice President, Corporate and Business Development, Zynga. "Partnering with an established leader like bwin.party is a strategic and prudent way for us to enter a key RMG market while giving local players the real money games they've been asking us for."

"Today's announcement is another example of our success in leveraging our assets through strategic blue-chip partners," said Jim Ryan and Norbert Teufelberger, Co-CEOs of bwin.party. "Zynga is the world's leader in social games with hundreds of millions of active players worldwide and a significant player base in the UK. We are delighted to have been selected as their chosen partner for this important step in their evolution, and hope to expand our relationship into other products and markets."

Zynga's real money UK poker customers will join the bwin.party dotcom player liquidity pool — getting the benefits of playing on the largest regulated poker network. Zynga's UK-based RMG service will be powered by the established operating platform, software, and related support of bwin.party.

In addition to the full suite of Casino and Poker games, Zynga's UK-based RMG service will also leverage the company's world renowned entertainment brand, FarmVille, to offer local players the first-ever, online FarmVille-branded real money slots game.

Zynga's UK-based RMG service will operate under bwin.party's Gibraltar gaming license.

The Zynga Inc. logo and bwin.party logo are available at https://zynga.box.com/s/ulp051ta7l5mzusfg2r7

About Zynga

Zynga Inc. is the world's leading provider of social game services with 311 million monthly active users playing its games, which include Zynga Poker, Words With Friends, Scramble With Friends, Gems With Friends, Draw Something, FarmVille2, ChefVille, CityVille, Bubble Safari and Ruby Blast.Zynga's games are available on a number of global platforms, including Facebook, Zynga.com, Google+, Tencent, Apple iOS, and Google Android.Zynga is headquartered in San Francisco, California.

About bwin.party

bwin.party digital entertainment plc (LSE:BPTY) is a global online gaming company, formed from the merger of bwin Interactive Entertainment AG andPartyGaming Plc on 31 March 2011. Incorporated, licensed and regulated in Gibraltar, the Group also has licences in France, Italy, Spain and Denmark. With offices in Europe, India, Israel and the US, the Group generated total pro forma revenue of €816.0m and pro forma Clean EBITDA of €199.3m in 2011. bwin.party commands leading market positions in each of its four key product verticals: online sports betting, poker, casino and bingo with some of the world's biggest online gaming brands including bwin, PartyPoker, PartyCasino and Foxy Bingo. The Group's scale, technology and strong portfolio of games collectively differentiate its customer offer from those of its competitors. bwin.party is a constituent member of the FTSE 250 Index and the FTSE4Good Index Series, which identifies companies that meet globally recognised corporate responsibility standards. For more information about bwin.party, please click here.

(Photo: Insider Monkey)

Social gaming company Zynga has endured a rough couple of months. After its acquisition of the NYC-based company OMGPOP--producers of the fad-friendly game Draw Something--Zynga has experienced a downward spiral. Earlier this month, it reported an estimated net loss of $90 million to $105 million for its third quarter, sending its already-low stock price into a tailspin. Now, The Next Web reports that the company has laid off 100 staffers from its Austin headquarters, and may even be shuttering its Boston office altogether.

Writes The Next Web:

We’ve heard from a former employee at Zynga who tells us that the layoffs did happen in the company’s Austin office. Additionally, TheVille will be discontinued. More than 100 employees were let go and ordered to turn in their computers, phones, and badges — many of whom have been working at the company for more than two years.

Employees affected by this change were given two hours to vacate the office. It appears that those affected were from two different game divisions: theville and bingo.

Gamasutra reports that it has received first-hand confirmation that Zynga is shuttering the Austin office altogether. [Update: Gamasutra says they may have incorrectly reported the full closure of the Austin office. "We can confirm that over 100 people are out of work in Austin, but we can not confirm whether the studio is remaining open in some capacity, nor if Zynga's QA office in Austin has been affected."]

Gamasutra also reports it has heard unconfirmed rumors that Zynga also intends to shut down its Boston and Chicago offices. A Twitter user reported to Gamasutra that one of his friends was laid off from the Boston office, and posted the following to his Facebook: "Zynga Boston is no more. Shocking and not awesome."

A source confirmed to The Verge that there have been layoffs in Austin, Boston and Chicago today.

[Update 4:05 PM: Techcrunch reports that it has confirmed Zynga has shuttered its Boston office and laid off 2/3rds of its Austin employees. "One former employee said the Boston office was almost ready to release a product that Zynga management was enthusiastic about. But the need to trim the company through severe layoffs meant that product couldn’t be seen through to launch."]

Zynga also has a New York office and Betabeat is investigating whether or not employees there will also face layoffs. OMGPOP cofounder Dan Porter was announced as the VP and general manager of Zynga New York back in March. ”Maybe we can turn New York City into a hotbed of gaming activity as well,” Mr. Porter told us then.

As TechCrunch points out, TheVille--which is kind of like The Sims but lame?--has been hemorrhaging users, losing 33 percent of them in just one month.  In fact, in its third quarter results, Zynga blamed downgraded revenue forecasts on "reduced expectations" for games like The Ville. The company is also facing a lawsuit from EA games for violating copyright laws.

In keeping with its questionable ethics, employees appeared to have been notified of layoffs during Apple’s keynote event, when most tech outlets would be focused on Apple’s announcements.

UPDATE: As news of the layoffs continues to leak, anticipation for Zynga's third quarter earnings call scheduled for tomorrow afternoon is building. Like, oh, pretty much everyone, Sam Barberie, who has been crunching Zynga's daily active user numbers for Super Data Research, anticipates "bad news, especially with regard to their simulations games." Earlier this month, shortly after Zynga released its downgraded forecasts, Fortune's Dan Primack tweeted:

Zynga needs legalized online poker yesterday.

— danprimack (@danprimack) October 4, 2012

Mr. Barberie, who recently released a report on the company's future concurred, predicting a "definite move into the social casino games."

"Basically, that's sort of where the industry is heading as one of the remaining places to make money," he said. "They got rid of a bunch of people in the sim games and bingo to refocus on the real money games."

Poker games were mentioned during Zynga's last earnings call, with an expected release date next year. "[Zynga is] gaining users, but not maintaining them. If they're not maintaining their users, they're not going to turn those players in payers," via in-app purchases or advertising revenue, he said. "The thing about social casino is that it's gambling, which has a hook regardless of the medium that it's in."

Update 2:

A former Zynga employee told TechCrunch, "[CEO Mark] Pincus wants to be able to say that the company’s profitable but that’s harder as revenue goes down. They’re doing short-term things that don’t make any sense at all if you’re thinking about this being a stable company with $1.6 billion in cash in the bank."

Update 3:

A Zynga representative emailed Betabeat a copy of the internal memo from CEO Marc Pincus:

Team,

Earlier today we initiated a number of changes to streamline our operations, focus our resources on our most strategic opportunities, and invest in our future. We waited to share this news with all of you until we had first spoken with the groups impacted.

As part of these changes, we’ve had to make some tough decisions around products, teams and people.  I want to fill you in on what's happened and address any concerns you may have.

Here are the most important details.

We are sunsetting 13 older games and we’re also significantly reducing our investment in The Ville.

We are closing the Zynga Boston studio and proposing closures of the Zynga Japan and UK studios.  Additionally, we are reducing staffing levels in our Austin studio.  All of these represent terrific entrepreneurial teams, which make this decision so difficult.

In addition to these studios, we are also making a small number of partner team reductions.

In all, we will unfortunately be parting ways with approximately 5% of our full time workforce.  We don’t take these decisions lightly as we recognize the impact to our colleagues and friends who have been on this journey with us.  We appreciate their amazing contributions and will miss them.

This is the most painful part of an overall cost reduction plan that also includes significant cuts in spending on data hosting, advertising and outside services, primarily contractors.

These reductions, along with our ongoing efforts to implement more stringent budget and resource allocation around new games and partner projects, will improve our profitability and allow us to reinvest in great games and our Zynga network on web and mobile.
Zynga made social gaming and play a worldwide phenomenon, and we remain the industry leader.  Our success has come from our dedication to a simple and powerful proposition – that play is not just something people do to pass time, it’s a core need for every person and culture.

We will all be discussing these difficult changes more with our teams and as a company.  Tomorrow, Dave and I will be hosting a post-earnings webcast (details to follow) and next week we will be discussing our broader vision and strategy during our quarterly all-hands meeting.  I’m confident this puts us on the right path to deliver on the promise of social gaming and make Zynga into an internet treasure.

If you have any immediate questions, I hope you will talk directly with your manager, Colleen, or me.

I look forward to talking with you tomorrow.

Mark

If you have any information about the layoffs, please email tips@betabeat.com or drop us an anonymous tip from the top of our homepage.

The results say that Zynga expects a net loss between $90 million and $105 million for the third quarter. One reason for their lowered expectations? Zynga said it expects an $85 million and $95 million write-down on its purchase of New York City-based OMGPOP, the makers of Draw Something.

Considering the acquisition price, notes CNN, that makes half the deal's value go poof!

However, most of the blame, the company said, lies in "reduced expectations for certain web games including The Ville, and delays in launching several new games." Looks like (simulated) sex doesn't always sell.

With interest in the game quickly ebbing, the Wall Street Journal reports today that Zynga is attempting to justify the $183 million it spent to acquire Draw Something and its parent company OMGPOP by tacking on yet more ads to the flailing game. Because if there's one thing game players love, it's ads, obviously.

According to the Journal:

The San Francisco-based company on Thursday plans to announce an agreement with animation studio DreamWorks Animation SKG Inc. to place additional advertising in the game. Zynga believes it's the start of new revenue-generating possibilities that will justify the controversial acquisition.

DreamWorks has agreed to run banner ads and other promotions inside Draw Something for its upcoming film Madagascar 3, which we guess means pre-teens and their parents are the only ones still playing Draw Something.

We're seriously skeptical that implementing another annoying ad layer to the user experience is going to keep the game from hemorrhaging users, but may as well make money off the users you still have, right?

Meanwhile, we like to picture former OMGPOP CEO Dan Porter reading this article and breaking into a maniacal laugh while fanning himself with hundos.

TC Disrupt NYC 2012

After a Southern-inspired lunch of sloppy joes, potato salad and cornbread, the attendees of TechCrunch Disrupt NYC filtered into the auditorium of a spacious pier building on the West Side Highway for another set of panels. Jason Kincaid, formerly of TechCrunch, took the stage with Foursquare's Harry Heymann, OMGPOP's Jason Pearlman and Facebook's Serkan Piantino to discuss whether or not the East Coast is indeed the "best coast" for engineering.

"It's sort of a silly name," opened Mr. Kincaid, playing politely to both sides. "I think both coasts are very nice."

He then asked the panelists whether hiring engineers in New York is particularly hard due to the fact that many of them are drawn to the glitz and cashmoney of the finance sector.

"The ideal Foursquare employee really cares about product," said Mr. Heymann. "We sort of compete with finance in order to attract engineers but in finance there’s sort of a distinct audience. The kind of engineer that we really want to attract isn’t going to be interested in [money] in the first place."

Mr. Kincaid asked Mr. Piantino whether or not Facebook's IPO may have been a major reason engineers were keen to join his team.

"I think when people come to Facebook they are looking at long term," clarified Mr. Piantino. "Our shares vest over four years, so I think the IPO didn’t change much and they’re excited about the opportunity. They want to come and build things."

Mr. Kincaid asked whether or not the explosion of city-sponsored programs like CornellNYC help the companies's recruiting efforts.

"I think it has a huge impact," replied Mr. Heymann. "We did fullscale college recruiting for Foursquare for the first time this year, where we were trying to recruit a large number of grads....We gave them a choice [between San Francisco and New York] and a significant portion chose New York. There’s lots to do there, so being in New York has actually been a recruiting tool, and I expect that to only increase moving forward."

In response to a question about company culture, Mr. Pearlman elaborated on how OMGPOP's culture has shifted since it was acquired by Zynga.

"We’ve been able to still do our own thing and everyone’s been cool with that so far," he assured us. "I think a lot of the Zynga values of 'Be your own CEO'--that works to our benefit in that it’s up to us to continue to run our office the way we want to, to continue to let our engineers do what they want to do--being far away [from Zynga's HQ] kind of helps."

Mr. Kincaid wrapped with a question about why these companies chose to open New York offices in the first place.

"It's kind of an odd question because it implies that Dennis and Naveen got out a globe and picked a place," said Mr. Heymann. "They started the company where they lived and never had any intention or desire to live anywhere else. But over the past few years, the tech community in New York has increased two or three fold."

"Especially compared to the South Bay in terms of quality of life, there’s really no comparison," Mr. Heymann added.

Beside him, Mr. Piantino shifted uncomfortably. Perhaps the pom-pom shaking was getting to him, too.

"A lot of engineers move to San Francisco," argued Mr. Piantino.

"A Foursquare employee can stay and build things or he can go out to events," replied Mr. Heymann. "In the early days of Facebook I think it was like, ‘We may as well stay in and build some great products because there’s nothing to do in Palo Alto.’"

Draw Something's users are steadily declining. (appdata.com)

Less than a month ago we reported that Draw Something had ousted Angry Birds from the highly coveted top paid app spot, but it would appear that success was really Draw Something's plateau: just six weeks after Zynga acquired the New York-based app shop, its user numbers have dwindled considerably.

According to The Atlantic, which nabbed the stats from App Data, "the average number of users per day is now below where it was when Zynga acquired the game. (It's currently around 10 million, down from a peak of close to 15 million.)"

Draw Something's peak coincided almost perfectly with its acquisition, so that means the app has lost almost five million users in the last month. Ouch. Luckily for the OMGPOP team, they made off like bandits, but these stats are another blow to Zynga, whose stock price already dropped 50 percent since the beginning of March.

In truth, we're all too familiar with the decline of Draw Something. A month ago we were firing off angry texts when friends didn't automatically play us back, but a few weeks ago we deleted the app--because we were bored, and because we got tired of random people we hadn't talked to in years failing to guess our perfectly rendered drawings of Snooki.

OMGPOP CEO Dan Porter with Ghostface Killah. (Twitter)

MegaMillions isn’t the only game in town capable of inspiring a feeding frenzy. Not content merely to snap up OMGPOP at something like $180 million, Zynga is making it known they’ve still got IPO cash burning a hole in their corporate pockets. Merger chief Barry Cottle basically told Bloomberg that they are hungry, ready to move fast, and rich as hell:

"We have a significant amount of cash, we have no debt, and we have access to debt to be as aggressive as we need to be."

Well, okay, then!

Such a temptation will not be ignored, says analyst Michael Pachter:

"You are going to have a lot of developers swinging for the fences and trying to hit it fast and hope Zynga will give them a couple hundred million dollars."

Now, on a scale of one to Instagram, how many people just started coding with visions of buyouts dancing in their heads?

Path? That's hot. (flickr.com/pimkie_fotos)

The climate for Internet startups is heating up. Startups are closing rounds faster, getting popular more quickly, scoring higher valuations and getting acquired with increasing greediness. As local luminary and angel investor Chris Dixon notes, the preponderance of hockey stick growth among the top tier of startups is creating a heavy set of expectations that weighs upon the littler startups. These A-list startups are like the impossibly pretty cheerleaders or the improbably studly jocks who discourage the rest of the high school with their sheer existence. They're the "it" startups, and they can do no wrong. In other words: they're hot. 

10. Foursquare—hot like a new club in the Meatpacking District.

9. Facebook—like global warming, hot and inevitable.

8. Path—hot as ice.

7. Branch—hot like a hot-button issue.

6. Tumblr—hot like the tattooed boys and girls on the L train.

5. Dwolla—hot like $5 million burning a hole in your pocket.

4. Codecademy—hot like the fire of your desire to learn code.

3. OMGPOP—hot like the fever of heroin withdrawal.

2. Pinterest—hot like Stacy's mom.

1. Instagram—hot like a steamy black and white shot of Justin Bieber and Selena Gomez.

Who'd we miss?