Zynga and governance

Some crazy stuff has been going on over at social gaming star Zynga lately. Techcrunch has had a field day reporting on how much of their revenues come from questionable scam ads placed in their games. According to TC, 1/3 of Zynga's estimated $ 250M in revenues come from ad placements, many of which are questionable in nature.

For many in the industry, Zynga has been an absolute star up till now. They have a ridiculous investor list including the who's who of angels and VCs. Marc Pincus the CEO is a smart mofo. And they have shown us how to monetize virtual goods.

What I'm wondering in all of this is - where is the board governance and controls that would have prevented or reduced their exposure to this revenue stream? With $ 39M in funding and an absolutely tier 1 investor and board roster, I would have expected better. Did the board know about this revenue source? Or was it a surprise to them?

If there's one truism on the net (in public in general for that matter), it's that there are no secrets. Eventually everything gets out. So, if the board knew they were placing scammy ads, then they had to know eventually this would get out. If they did not, then I ask - why.

Now, I don't think a board's role is to catch or audit these types of issues. That is too much work. But it's totally appropriate for the board to set the moral tone for a company. What can the company do? What can it not? These policy decisions or corporate values should come from the top.

I am curious to see what will happen next. Pincus has certainly been very forthcoming with information and access since this all leaked. But, people have almost infinite choice on where they spend their time online. I certainly hope this episode will not have caused permanent damage to the company. Will people just leave because they no longer trust Zynga and its games? Time will tell...

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