Revenue at any cost, and what the cost turned out to be

Mark Pincus said this in a talk to students at a Startup@Berkeley event in 2009, and it became widely known that November, when a recording surfaced in the middle of a controversy about Zynga’s games. In the same talk he described his early approach far more bluntly, saying he had done “every horrible thing in the book” to get revenue, including giving players game chips in exchange for installing a browser toolbar.

The controversy was about lead-generation offers. Players who wanted virtual currency could get it by signing up for third-party deals, some of which enrolled them in recurring mobile phone charges they had not understood. Critics called it a scam, and Zynga removed many of the offers.

The argument for Pincus’s approach is real. Revenue gives a young company choices. A startup that earns money can grow without raising at poor terms, survive a funding drought and prove to itself that people will pay. Zynga became profitable unusually early for a consumer internet company, and that independence shaped everything it did afterwards.

Revenue is also information. A company that charges early learns which customers value the product enough to pay, and that knowledge steers the product better than usage numbers alone. Zynga’s games were designed around what players bought, and the company grew fast partly because it measured that closely.

The weakness is in the word “anything”. Revenue from methods customers would object to if they understood them is borrowed against trust, and the loan comes due. For Zynga it came due as a public scandal, pressure from Facebook and a reputation that followed it for years. Some methods also carry legal risk that can outweigh everything they earned.

A better rule is to chase early revenue hard and choose methods that would survive being described on the front page. That still leaves room for a lot: charging from day one, selling before the product is finished and asking customers directly for money.