Should I stay or should I go?

In addition to being beneficial for Zynga, the gaming firm's rise also helped Facebook. After all, this was around the same time that Facebook was trying to figure out how it was going to make money. In February 2010, Facebook introduced Facebook Credits, a micropayment system that could be used to buy in-game items—and Facebook took a 30 percent cut of all revenue earned through Credits. Seeing that Zynga was the hottest thing on Facebook, it was easy to see why Facebook would want its relationship with Zynga to continue.

"There were points in time where Zynga was a significant portion of Facebook's revenue," Bethke said.

But the relationship between the two companies could be rocky. Zynga's "spam mechanism," as it came to be known, only worked because its messages were given the same priority as any other Facebook message. That lasted until March 1, 2010, when Facebook changed its policy. After that, Zynga's traffic fell precipitously. FarmVille usage soon dropped by 26 percent to 61 million monthly users, according to AppData.

While Facebook's move to limit Zynga's activity was certainly public, a series of behind-the-scenes talks began. And this, Bethke says, was a key moment in Zynga's short history. The question was whether Zynga should abandon Facebook entirely and concentrate its efforts on building Zynga.com as a direct platform for players or if it should just deal with Facebook's policy tweaks and put its fate in the social network's hands. The matter was complicated because Pincus himself was an angel investor in Facebook, retaining a 0.5 percent stake in the company (now worth over $400 million).

"I felt that the company would be a lot stronger if we actually pulled back a bit from Facebook and we had to catch our own fish," Bethke said. "There's a site called Zynga.com. We could keep [games] asynchronous, but if we were on our own, that would be our own user base. We would have to respect their e-mail [privacy] really well. We would have to take care of it so much more carefully. It was hotly debated in the company. We did the errand work to run our own site. It was a project and we had a lot invested in it. It was a romantic time to prepare for that possibility. It wasn't an easy decision."

The former Zynga manager said that he was called into a meeting between Pincus and Bing Gordon, a board member at Zynga and an investor at Kleiner Perkins.

"They asked me, in my opinion, should we leave or should we stay? I was touched and moved that they thought highly enough of my opinion," Bethke said. "I told them that we're going to learn more and learn faster without [Facebook]."

But this was a tough sell. Zynga had investors to please and 1,000 employees to pay—and Facebook had so far been key to its growth.

"The company was split—this is just my impression—but most of the guys who had built their own companies and had done their own stuff, we were almost universal, let's give it a shot," Bethke said. "We're sitting on a pile of money, we have great games, we have players that love our games. If we move out, they will come with us. That will be enough to build a business around. There are others that come from career company folks. They say that it had great revenues and was going public and it seemed to them irresponsible to change that. I think both viewpoints are valid."

Zynga had gone so far as to prep FarmVille.com, a standalone Web version of the game that didn't require Facebook at all. But in May 2010, Pincus eventually concluded that Zynga would stay with Facebook, bringing the two companies back from the brink of what was dubbed "nuclear war." The two firms signed a five-year deal where Zynga would broaden its use of Facebook Credits and where Zynga would pay Facebook 30 percent on each transaction fee for an in-game purchase.

What did Zynga get? As VentureBeat reported in its 2011 e-book:

But there was another agreement the companies didn't talk about. In that deal, Facebook promised to market its platform and grow its user base so that Zynga would always have fresh users for its games. For its part, Zynga agreed to make its games exclusive to Facebook as long as Facebook delivered certain user numbers to Zynga. No other companies were able to strike a similar deal.

Staying with Facebook meant that Zynga had to play by Facebook's rules, which got increasingly detailed. "So, for example, I misworded [an offer on Mafia Wars] and I got a request channel moratorium for 24 hours, and we would drop DAU by 10 to 15 percent," said Bethke. "It was up to Facebook to interpret their [Terms of Service] and to see if you violate the spirit of the letter. [There were rules about] the specific language around that pop-up, how you say it—what tense the verbs are in can get you in trouble with Facebook. That happened a lot in 2010. It didn't happen so much in 2009, because Facebook didn't care about spam."

Acquisition mission

Meanwhile, as Facebook and Zynga were sorting out their differences, Zynga went on a shopping spree, acquiring 11 companies in 11 months. The acquisitions were possible thanks to huge new cash infusions. In December 2009, Zynga received $180 million from a Russian venture capital firm called DST. In 2010, Softbank, the Japanese mobile giant, kicked in $150 million to fund Zynga Japan. With that new venture capital and existing money, the company acquired Serious Business in February 2010.

Zynga picked up a Chinese game startup called XPD Media and began opening satellite offices in various cities outside its San Francisco headquarters, including Los Angeles and Bangalore. On June 3, 2010, Zynga bought Challenge Games and renamed it Zynga Austin.

"It was crazy growth; they needed to expand," Andrew Busey, the founder and CEO of Challenge Games, told Ars. "The reason they acquired us and a lot of other CEOs, they were growing so fast they couldn't get enough people in San Francisco. Building games is hard—games have to be visually compelling, sound and art integrated, they have to be fun. It's a lot harder than other software products. I think they wanted to leverage teams that could do it quickly. I don't think they were fully prepared to integrate those teams fully. I don't think they had a development strategy for how to take games to market."

Bethke, the former general manager, said that as a Zynga IPO gradually came into sight, there was tremendous pressure to have steady revenues, shake the image that Zynga had lost its mojo, and "get Zynga mobile." As Bethke sees it, the problem was that it all happened without priorities.

"[Pincus is] obviously smart or he wouldn't have achieved what he had achieved," Bethke said. "He's so intense and he's not organized in what he thinks is important. Everything is important simultaneously. I got chided by the other GMs: 'Hey Eric, you're engaging with Mark too closely. We would get done faster if you would engage less.' What would be frustrating is that it would be difficult for Mark to prioritize. Is it important to do this, that? And he would say they're all important. Do you want it on time? Cheap? Successful? Which one do you want? [He would say,] 'I want it all.'"

But by adding new studios, new titles, and new players, Zynga seemed to be concentrating on short-term gains rather than longer-term planning. It's no coincidence that 2010 was Zynga's only profitable year to date—and its most ambitious in terms of acquisitions.

Zynga began releasing many new games, both those that were developed in-house (Treasure Isle, CityVille) and through acquisition (Words with Friends, Chess with Friends).

CityVille in particular immediately did well, surpassing FarmVille as the company's most popular game. It reached over 100 million monthly active users in just 43 days.

"[Zynga] was pioneering [social gaming]—no one had ever done it before. They were doing it the best, getting more people to play the games," Pyke, the former Zynga designer, told Ars. "They earned a crap-ton of money really, really fast. They went from being a startup to being a huge company crazy fast. Every quarterly meeting we would see a slideshow of companies we got... I feel like [it was] how child stars or pro athletes can go bankrupt: parties all the time and all of a sudden the money is gone."

The lean times came quickly. Busey, who served as the vice president and general manager of Zynga Austin from May 2010 until September 2011, said that by mid-2010 Zynga had reached a point where its traditional growth strategies were not working as they had.

"I think it was a surprise that it stopped as quickly as it stopped," he said. "There just weren't any new players. They got pretty close to saturation on Facebook. Once you have that, your growth is constrained by monetization. You can't go in and retune a game's monetization if it wasn't designed to do that.

"They were so focused on DAU versus revenue, and that hurt them," he added. "They portrayed the importance of DAU over everything else, when what really is [important] in the long-term situation is average revenue per daily active user (ARPDAU)."