Will Zynga Be Done In By Data?

When it comes to negative publicity, Groupon (Nasdaq:GRPN) has certainly gotten its share.� Yet the company was able to recently pull off an IPO that raised $700 million.� Unfortunately, its performance since then has been scary, with the stock off a grueling 41%.

What might this portend for social gaming company Zynga?� For the most part, the company has been mostly under the radar — until the last couple weeks.� The Wall Street Journal recently ran a piece about Zynga�s practices with stock grants.� Allegedly, the company was thinking of clawing backsome of these lucrative arrangements from employees so as to lessen the overall dilution.

And this week, there was another stinging profile in The New York Times that came to the conclusion that Zynga�s CEO, Mark Pincus, has created a brutal culturethat could ultimately harm the company.

Apparently, he has a reputation of being a tough-minded manager.� As a result, various employees have complained about the long work hours and intense pressures.

But shouldn�t this be expected in any company that is trail-blazing a new market? If anything, top employees probably like pressure-cooked environments.

Instead, the real issue for Zynga may be something entirely different.� The company has an intense focus on data analytics.� Pincus got an MBA at Harvard and a degree in economics from Wharton, so he loves fancy spreadsheets.

Zynga�s prospectus has various references to this number-crunching approach.� Example:� �Our proprietary analytics and expertise in high volume data processing have enabled us to create leading franchises, frequently update and enhance our games, increase engagement by our players and generate greater sales of virtual goods.�

Does this really sound like a game company?� It feels more like a machine.

This could be a big problem.� Let�s face it, creativity is at the core of any entertainment operator � as well as some old-fashioned luck.� As for analytics, it should really be used to tweak things after the launch of a title.

Then how did Zynga get so successful?� Part of the reason is that the company was spot-on to focus on using Facebook as a platform.� It also helped that it used creative techniques to allow users to contact their friends about games.� In addition, Zynga has been aggressive with acquisitions.

Yet these advantages may be fleeting.� Electronic Arts (Nasdaq:ERTS) is already getting traction, such as with its �Social Sims� title.� The company was also able to purchase Popcap, even though Zynga apparently offered more money for the company (roughly $950 million).

More troubling, Zynga�s momentum seems to be fading.� According to its latest S-1 filing, daily active users have slumped to 54 million users in the third quarter from 62 million in the first quarter.

Along with the recent plunge in social stocks � like Groupon�and LinkedIn (NYSE:LNKD) � it could be tough to get investors excited about a Zynga IPO, which is expected to hit the markets within the next couple weeks.