Zynga's troubles show need for diverse economy 

Two pieces of news last week about San Francisco-based companies demonstrated why city officials should not base too many decisions solely upon what is in the best interests of The City's booming technology sector.

The first was the announcement of massive layoffs at Zynga, a social-game developer headquartered in the South of Market. The company laid off 520 workers — an 18 percent reduction of its staff — and shuttered offices in Dallas, Los Angeles and New York.

Ironically, that sad news came less than a week after Zynga was touted in San Francisco's new city and county budget as being one of the tech leaders that have helped the local economy recover from the depths of the Great Recession. A clear-eyed look at Zynga's situation shows that its revenues have been in decline, and its cost structure strongly suggested that layoffs would be necessary.

Zynga's revenues for the first quarter of 2013 were down almost 18 percent over the comparable period in 2012. Many of the company's troubles have been blamed upon the extent to which its games are intertwined with Facebook, which is increasingly diversifying its focus from desktop computers toward the world of mobile computing.

On the other hand, one day after Zynga's news, Salesforce.com announced a $2.5 billion acquisition of the company ExactTarget, making that the company's largest purchase to date. Salesforce.com is moving to acquire companies that will add to the suite of tools it can offer existing customers like Toyota.

The lesson, in short, is that the tech sector is neither a monolith nor a stable platform upon which any city should base its economy. The technology industry encompasses far too many disparate types of companies to make sweeping proclamations about the health of the industry.

The disparity between those companies that succeed in the long term and those that are destined to stumble or fall makes monomaniacal drum-beating about the tech sector a dangerous dance. That is especially the case in the Bay Area, since everyone here should be well-aware of the extent to which technology firms are subject to a boom-and-bust cycle.

Just as Zynga and Facebook are learning not to over-rely upon any single computing platform, city government must learn not to over-rely upon any one economic sector. City government should foster an environment in which all business can thrive, whether they are tech startups or mom-and-pop service providers, large biotech firms or any of the myriad companies that support travel and tourism — which remains The City's largest industry.

Financial planners urge their clients to diversify their holdings, and our city's leaders should take the same advice to heart. In the long run, a diversification of industries will help San Francisco, and it will also help create jobs for people of all backgrounds and education levels.

City officials are right to extend a welcoming hand to the technology industry. But they also shouldn't bet the "FarmVille" primarily upon the fortunes of a single sector.

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