Why Rich Levandov Invested Early in Zynga, and Why It Took Off—Lessons Every Entrepreneur Should Consider

its success. That was Pincus’s deep understanding of how to gain customers using social media tactics and theories. Says Levandov, “I think it was the first scientific social media company that understood viral marketing.”

Zynga’s first product was Texas HoldEm Poker. Levandov says if you downloaded the app, it prompted you to invite others to play with you. “So if your friends were on Facebook, which they were, you could start up a table in, like seconds. And there you were, playing poker with your friends.”

All the game designs were such that people were constantly incented to invite their friends to join them—or they might just post on their wall that they were playing this game. “Friends inviting friends is what led to the massive viral growth,” says Levandov.

On top of that, says Levandov, “Every game was constantly tested and measured.” Was it too hard, or too easy to play? Could you move up to more advanced levels as you mastered the level you were on? What about the color schemes? It turned out, he says, that traffic goes way up with a certain cloudy blue color scheme.

Then there are the virtual goods. Having a bunch of friends at the poker table with you facilitated chatting. So Zynga began experimenting with virtual goods—you could buy a friend a drink, for instance. Or, Zynga might give you 2,500 chips for showing up, but you could buy more if you lost those. In FarmVille, you might want to make your virtual farming more productive and make your friends envious. “And that’ll happen faster if you feel like buying a tractor,” says Levandov. “And, of course, if you buy a tractor, you’ll have to buy gas for your tractor.”

Now, Zynga has a big branding and revenue-generating presence in the real world. Go into a variety of retail stores and you can buy pre-paid Zynga game cards. And in May, Zynga announced a major deal with one of those stores, 7-Eleven, to create FarmVille, YoVille, and Mafia Wars-branded items on a variety of items from Big Gulp cups to bottles of water to fruits and vegetables.

The bottom line is that Zynga has been seeking to master three core principles: reach, engagement, and monetization. Reach means to get a lot of people playing. Engagement is about making the games really fun and challenging (but not too hard), and social. Then, he says, “If they’re loving it, they’ll monetize. They’ll spend money on things that are important to them.”

Author: Robert Buderi

Bob is Xconomy's founder and chairman. He is one of the country's foremost journalists covering business and technology. As a noted author and magazine editor, he is a sought-after commentator on innovation and global competitiveness. Before taking his most recent position as a research fellow in MIT's Center for International Studies, Bob served as Editor in Chief of MIT's Technology Review, then a 10-times-a-year publication with a circulation of 315,000. Bob led the magazine to numerous editorial and design awards and oversaw its expansion into three foreign editions, electronic newsletters, and highly successful conferences. As BusinessWeek's technology editor, he shared in the 1992 National Magazine Award for The Quality Imperative. Bob is the author of four books about technology and innovation. Naval Innovation for the 21st Century (2013) is a post-Cold War account of the Office of Naval Research. Guanxi (2006) focuses on Microsoft's Beijing research lab as a metaphor for global competitiveness. Engines of Tomorrow (2000) describes the evolution of corporate research. The Invention That Changed the World (1996) covered a secret lab at MIT during WWII. Bob served on the Council on Competitiveness-sponsored National Innovation Initiative and is an advisor to the Draper Prize Nominating Committee. He has been a regular guest of CNBC's Strategy Session and has spoken about innovation at many venues, including the Business Council, Amazon, eBay, Google, IBM, and Microsoft.