The stock market likes the new Zynga CEO, but it’s wrong. Here is why

A lot has been made of Zynga (s Z) hiring Don Mattrick, the former Xbox boss, and replacing founder Mark Pincus as the chief executive officer on Monday. The stock market has been jubilant and the stock has jumped almost 20 percent in two days. The new-found enthusiasm for the stock belies the fact that Wall Street had lost all confidence in Pincus and his leadership. You see everyone falling over themselves applauding the company and Pincus for the move — completely losing sight of the fact that Zynga’s problems remain unchanged. And even more importantly, the company’s DNA is what will prevent the turnaround.
The glowing press releases not withstanding, Zynga isn’t any step closer to solving its number one challenge — mobile. The company’s business tactics, which worked dramatically well on the Facebook platform, don’t work as well on mobile. And frankly, what does Mattrick really know about mobile? For God’s sake, the guy ran Xbox for six years.
If anything, he has experience in working with the creative side of the gaming industry, but even there he isn’t completely in charge. Pincus is the chief product officer — you know, the division that actually makes games and content. So from that perspective, nothing really has changed.
Buzzfeed’s Matthew Lynley puts it well when he writes:

While that sounds good in theory, in practice Pincus has reputation for being a micro-manager unable to delegate responsibilities or empower his lieutenants. One of these sources said the fact that Pincus will hold the Chief Product Officer title could “seriously water down [Mattrick’s] power.”

Zynga CEO Marc Pincus

The DNA problem

The key issue is Zynga’s DNA as a company — and as I have said in the past, one can’t change DNA that easily.
From the very beginning Zynga has been a company optimized for short-term gains. It used the well-established pattern of super fast release, iterate, re-release to grow its games. That pattern of developing and releasing games works well on the web. Of course, that means sub-par creativity and leads to the short shelf life of a game. Of course, this resulted in a business logic — user acquisition channels, game development methods and technology stack — were optimized for one platform: Facebook. The company rewarded teams that build Facebook hits.
And why not? Given that Facebook is a platform built on short attention spans, it was really a match made in heaven. Zynga had a favorable relationship with Facebook that has frayed in recent times. It outspent, outhired and eventually outpaced everyone else on the market, and it did so by doing everything in its power to abuse the Facebook platform to sign up as many people and then bet on monetizing a fraction of that user base. Facebook needed the ad revenues so it turned a blind eye. (I remember those pointless and stupid game updates in my newsfeed and that is what really turned me off Facebook and Zynga.)
And while Zynga understands it needs to crack the mobile nut, it is like eating a pound of jalapeños. The company has to make money to appease Wall Street. The money still comes from web-oriented games. Mobile games take longer to develop and the company can’t apply its business logic to the mobile platforms.
Unlike Facebook, which badly needed Zynga’s ad spending, Google (s GOOG) and Apple (s AAPL) don’t much care for Pincus & Company — and more importantly, on mobile devices quality and creativity matter. Just look at some of the top names on mobile — they have spent a lot of time on those games and the reason they are succeeding? Well, they aren’t Zynga!
Zynga, by its very nature, is not a creative company. It is a company that sacrifices quality over speed. And if means that means copying others — so be it.

“I don’t fucking want innovation,” the ex-employee recalls Pincus saying. “You’re not smarter than your competitor. Just copy what they do and do it until you get their numbers.” [SF Weekly]
“We’re an analytics company masquerading as a games company” — Ken Rudin, VP of Analytics and Platform Technologies at Zynga [The Wall Street Journal]

You don’t go from thinking like that to becoming a creative business that nurtures creativity. Zynga is a very transactional company — much like, say, an investment banker. That culture of short-termism and anything-goes-to-grow is part of Zynga’s DNA.
It is so pervasive and embedded that unless Mattrick undertakes a company wide apheresis he is destined to fail. And with Pincus still as the chairman and chief product officer, you know nothing really has changed.