Mojang AB, the company behind a game called Minecraft, has become extremely successful and profitable by focusing on cultivating and nurturing a healthy community. In 2012, the company returned profits of $90 million on $235 million of revenue. How do they do it? By out-caring the competition.
About the picture – that’s my three kids on their computers, where they can be found most evenings playing and hacking Minecraft.
Zynga is the viral game developer that destroyed the Facebook news feed with updates from your elderly relatives regarding the status of their virtual farm. Despite that, the company has been very successul financially, filing for an IPO and generating around $150 million in profit annually. Mojang AB is also a game developer, and last year brought in almost $100 million from its primary game offering, Minecraft. The difference: Zynga is a publicly held company with 3,000 employees, whereas Mojang AB has just 29 employees. Here is more from the Wall Street Journal:
This has proved very good business for Mojang, located on a side street in Stockholm. Last year the company made about $90 million in earnings before interest, taxes, depreciation and amortization on revenue of $235 million, according to people familiar with the matter and since confirmed by the company.
By comparison, Zynga is expected to bring in Ebitda in the range of $152 million to $162 million on revenue of $1.09 billion to $1.1 billion, according to its last earnings release. Minecraft started under the guidance of 33-year-old Markus Persson, who as a single developer began selling the game on the Internet.
Community Engagement vs. Community Estrangement
There are many differences between Zynga’s product offerings and Mojang’s Minecraft. Key to the success of both, however, is the dependence upon community.
Zynga’s Farmville (and other ‘ville games) rely upon viral distribution. As a player progresses through the game, their Facebook friends receive updates that function as advertising. This practice is moderately effective based on the principle of social proof – if so-and-so is using this product/service than I should consider it too.
The downside of Zynga’s approach is abundantly clear if you have had a Facebook account longer than about three years. Those updates of “Sally just fed her pig, why don’t you congratulate her” were annoying, sometimes confusing and ultimately took away from the Facebook experience. My wife had to “mute” some of her friends because of the incessant Farmville updates. Zynga latched onto another community (Facebook) and instead of adding value, significantly took away value from that community.
On the other hand, Minecraft has developed its own community, which is incredibly diverse and rich. My son began playing Minecraft about two years ago. He learned about the game watching a YouTube video created by a player. Within a few weeks, he was building his own levels. Within a few months, he was hacking the game through the installation and configuration of modifications developed and shared freely by other players. His sisters play Minecraft now, as do his cousins and many of his friends. Everything he knows about Minecraft comes from the contributions of the incredibly large and helpful community.
What’s the Point?
There is a reason that 29 employees developing Minecraft can generate similar profits to Zynga’s 3,000 employees. When I told my son about the article in the Journal and asked him his impression, at 11 years old his response was, “It’s because Notch really cares.” The original developer behind Minecraft, Markus “Notch” Persson, really does care. The values that he has as a developer are echoed and amplified throughout the community. Zynga’s values are also echoed and amplified throughout the community – until somebody’s friend gets muted…
In business, as well as in other parts of life, it is a lot easier to be successful when you focus on adding value to the community. You can still be successful by taking away from the community, but you’ll have to work much harder. In this case, Zynga works 100 times harder than Mojang to achieve the same levels of profit.
I’m slowly working my way through a fascinating book called Gamestorming: A Playbook for Innovators, Rulebreakers, and Changemakers. This book shows ways that aspects of gaming can be applied to businesses and organizations for affecting positive change. The word that you often hear/see used in reference to concepts like this is gamification, which I predict will be added to Merriam-Webster within the next couple years.