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How the 'Zynga Effect' impacted gaming investors

Investors and venture capitalists aren't as interested in online gaming due to the negative reputation of mobile gaming company Zynga, or the resulting "Zynga Effect," IDG Ventures managing director Phil Sanderson recently told SiliconBeat.

According to Sanderson, investors have avoided online gaming after Zynga "overpromised and under-delivered."

"We will see a few billion-dollar gaming companies produced in the next five years, and we've already seen a few over the last five (Gree, DeNA, Supercell, Gungho, etc.)," Sanderson said. "Here's the dirty little secret in venture today: gaming was a $62 billion industry in 2012, not including hardware, yet less than a handful of VCs do more than three game deals per year."

Zynga's reputation as a mobile company is hardly a positive one — in October, EA Labels president Frank Gibeau told The New York Times the company "blew it" in becoming a mobile business. Over the last year, the company has become a revolving door for executive departures, including company co-founder Justin Waldron.

Former Xbox executive Don Mattrick was appointed as Zynga's new CEO in July. For more on how Mattrick plans to turn the company around, read our interview.

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