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Zynga, What Happened to Customer Service?

Stocks in this article: FB ZNGA YHOO GOOG

NEW YORK (TheStreet) -- While my closest interaction with Facebook (FB) games is turning down requests to play from long-lost friends from high school, Zynga's YoVille caught my attention recently. YoVille is a virtual world type of game where you have people, real estate and money. It's exactly the type of game social media sites like Facebook want because the users interact via chat in real time.

Up until recently, as I chronicled in Bitcoin and Poker: Zynga's Best Friends and Facebook and Zynga Increase Online Gambling Bet, I viewed Zynga as little more than a flash in the pan. A social Web site tethered to Facebook's generosity for survival. My opinion changed course 180 degrees when I happened across the news of Facebook offering real-money poker via Zynga this month. Instead of holding a short position, I'm now a shareholder, albeit small until after the next earnings report.

Poker and online gambling potentially change the entire landscape to such a degree that investors can almost ignore how poor the company's operations have been. "Almost" is the key word and brings us back to YoVille. 

This month Zynga announced the discontinuation of YoVille effective March 31. According to App Meter, YoVille enjoys over 400K monthly active users (MAU) and over 50K daily active users (DAU). If accurate, how can a company have 50K website visitors every day and reach the conclusion that it's a terrible idea to continue forward?

As someone who crunches numbers every day, I'm the first to admit a company needs to examine both revenue and expenses. I also comprehend Zynga wouldn't make such a move unless management believed it was the lessor of two evils, however, it appears the real failure is management and not the game, as I will explain.

YoVille operates under the "Freemium" model that allows anyone to join and play for free while Zynga tries to sell game enhancements to the users. Among the various premium enhancements include a VIP subscription for $17.99 a month. Under a Freemium model the game software is free to use. Some players have spent hundreds of dollars or more on a game they believed would continue.

According to some public customer complaints, some users were charged for their VIP subscription as late as the day before Zynga announced the closing. That doesn't seem like very good customer service, especially when refunds aren't offered.

According to Zynga's filings, few users break out the credit card to spend real money. OK, that's not a surprise, but maybe the exact model it's using isn't the correct one.

Why not attempt a trial period followed by a small monthly subscription fee? For example, allow new users to try out the game for 90 days, and if they want to continue, then charge $1.49 a month? If the game software already has the capability to charge users $17.99 a month, surely they have the capability to charge all users for a basic subscription service.

Since management already decided to throw YoVille into the virtual trashcan, what's there to lose? The decision to host YoVille doesn't have to be binary yet, especially when it's ideally suited to experiment with, relative to pulling the plug. Maybe more and or different types of ad marketing are the key. The point is that unless Zynga looks at the situation as an opportunity (50K users per day qualifies) instead of a resource drain, no one will ever know how many users are willing to buy a required subscription to this game.

There are Web sites that charge a subscription for services that were once free: The New York Times and Washington Post, for example.  

Even if it wasn't done before doesn't mean it can't work for YoVille because it hasn't been tried in this type of environment. With that said, I'm not sure or even believe this is the answer, but I am sure that the way Zynga is going about it is wrong from both a customer service and financial point of view. Writing off a franchise with 50,000 visitors a day, many of them paying, demonstrates a lack of leadership.

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