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TheStreet Open House

Zynga COO Departure Is Red Flag

NEW YORK ( TheStreet) -- Mark Pincus has been around for a long time. He was working on Wall Street in the late 90s. He saw the dot-com bubble grow and then burst.

He's also been a Silicon Valley insider for over a decade. He has been growing Zynga (ZNGA) as its founder for five years now and was an early investor in Facebook (FB).

So what happened to cause Zynga COO John Schappert, a former top executive from Electronic Arts (EA), to quit the company after less than 18 months?

Observers heralded his arrival as a sign that Zynga was the hot new company in gaming and that it had figured out to successfully mix social networking with gaming. Electronic Arts was portrayed as yesterday's news.

It was obvious obvious that something was going on last week when news emerged that Zynga had stripped product reporting duties from Schappert.

When Zynga released financial results to analysts a couple of weeks ago, along with news that it was cutting its guidance for the remainder of 2012, its shares plummeted 40%.

Clearly, Pincus blamed Schappert in part for the results, and it appears that Schappert decided he'd had enough of the new-fangled way of doing gaming at Zynga.

If this was an isolated incident at Zynga, you could brush it aside and say that perhaps Pincus just did a bad job of hiring Schappert. It must have been a "bad fit" between Schappert and the Zynga culture. No harm, no foul.

However, other high-profile executives have left Zynga not long after being hired. The most notable one prior to Schappert was Owen Van Natta, who had worked under Jeff Bezos at Amazon.com (AMZN) before joining Facebook in its early days and rising to become Zuckerberg's No. 2 executive before he left.

After leaving Facebook, Van Natta was courted agressively for several plum jobs, including a position at Microsoft (MSFT). However, he chose to wait and eventually landed at Zynga as the company was gearing up for its IPO.

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