Why Zynga Won’t be Launching EthicsVille Anytime Soon

This is a picture from MyFarm, a game that Zynga allegedly looked at the source code for and launched FarmVille one month later.

Everyone knows Zynga thanks to its breakout social games Farmville, Cityville, and Words with Friends.  Zynga is well known for taking a game element on the verge of becoming mega-hits and either copying the central elements with their own Zynga twist or outright acquiring the companies that make the games.  The latest example is Zynga’s purchase of the company behind Draw Something, OMGPOP, for over $200 million.  But what people may not know is that Zynga has been plagued by ethical and legal concerns that could easily lead to significant exposure.

The latest example of Zynga’s ethics came when the Wall Street Journal discussed how Zynga spent $1.37 million keeping their CEO, Mark Pincus, safe last year.  If that seems like a lot, it is.  That amount puts it in the top three amounts spent on CEO security according to management consulting Hay Group.  The only others that outspend Zynga are Lockheed Martin and Oracle.  Lockheed Martin has a market value of $29 billion and Oracle is worth $145 billion while Zynga is worth around $8 billion.  Not that the market value has an impact on real or perceived threats to CEO security, but it’s still an interesting look.

Also interesting are these stats:

  • Mark Zuckerberg received $700,000 in compensation related his security program.
  • Exxon Mobile (worth about $395 billion) spent about $200,000 on security for its CEO in 2010.
  • Google paid its CEO $268,000 for security expenses in 2010.

But maybe CEO security just costs more the first year of a big IPO (we’ll see with Facebook’s filings next year).  However, beyond the questionable amount Zynga spent on security is how it was spent.  Here’s what the WSJ said:

Zynga’s spending last year included nearly $1.2 million for “the purchase, installation and maintenance of home-security systems,” the filing stated. The spending also included more than $596,000 paid “to a company owned by Mr. Pincus which helps facilitate his security.”

Almost half of the money went to a company he owns?   That seems…odd.  Maybe that’s normal in CEO-security land, but Zynga isn’t your normal company.

Zynga has had its questionable ethics called out repeatedly over the years.  TechCrunch had a series of posts about how Pincus admitted to using scams to first make Zynga generate revenue.  Even Zynga’s first hit game, FarmVille, came with ethical and legal concerns when the company behind another farming game on Facebook sued Zynga, accusing Zynga of looking at the source code for MyFarm and then launching FarmVille one month later.  That lawsuit is still ongoing as of February, 2012.

TechCrunch also ran an article about the developers of Tiny Tower, a mild mobile gaming hit, took offense to Zynga copying their game after they refused to be acquired by Zynga.  While that kind of copying may or may not be illegal, it is interesting to note that Zynga has no problem suing other companies for copying Zynga’s games.  That company, Vostu, countersued and pointed out how Zynga itself merely copies other games already released.  The Zynga-Vostu lawsuits were settled a few monthslater.

Any or all of these items may have perfectly legitimate explanations.  And companies that quickly make billions of dollars are frequently the subject of litigation.  Sometimes those lawsuits even turn into Oscar-winning films.  But Zynga’s ethical dilemmas have a different feel from other new-money lawsuits and problems.  They could be minor annoyances, or they could speak to bigger issues at the core of the company.

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Filed under Copyright, Facebook, Social Gaming, Social Marketing, Social Measurement, Social Platforms

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