Businesses that sell anything online can learn a thing or two from Zynga, the fast-growing social-gaming company that has managed to create real markets for virtual goods. The San Francisco startup is best known for FarmVille, FrontierVille, and Mafia Wars--casual games that don't require too much effort but encourage players to build up elaborate in-game identities over time. The company has raised about $300 million in investments from Google and Softbank, and some analysts expect revenue for 2010 to reach $500 million, mostly from players who pay for graphical products such as pink tractors or fighter helicopters. Technology Review recently spoke with CEO Mark Pincus about how Zynga does it.

TR: You weren't the first company to offer games via social networks. Many of the early social games fizzled out, especially as companies like Facebook adjusted the way their platforms worked. Zynga, on the other hand, reports more than 100 million users. What has given Zynga's games staying power?

MP: I think we were much more focused on social gaming from the beginning, and not social advertising or reach. We were really fundamentally interested in how to create game mechanics that can entertain people but give them new ways to connect and have more meaningful relationships with people that they're already trying to network with in one way or another on Facebook.

TR: What kinds of game mechanics did you find that really engaged people?

MP: We think that there are three pillars of a great social game. One is it allows you to play with your friends. Two is self-expression: we want to give you ways to say something about yourself to your friends by the choices you make, whether decorating or strategy. The third is we want to give you the sense that you're builiding equity in the game over time, like the way you're invested in a good book.

TR: Some of that investment is financial, right? Zynga makes money by selling "virtual goods," which are items within a game that can be used to decorate or speed up a process. What makes people spend money on these items?

MP: What happens is you start spending time playing a game, and if we do it well, you find that you care about it for any host of reasons. At some point, you may see that by spending some money you can save yourself a bunch of time. At some point, you may see that by spending some money you can get something that has status or changes your friends' view of you. You get to stand out from the crowd, differentiate yourself in some way. We first did that with poker, where we saw that the way the game is designed, you can play for a month and grind your way up to getting to a couple hundred thousand poker chips and then play with better players who have all got the higher-level tables. Or you can just pay money. Twenty dollars and you get to the higher-level table right away. So it seems like once people get engaged in a game, if they're spending a lot of time on it, then it's highly likely that some percent of them will be willing to spend money.