Vostu: Brazil's 'Zynga' bought Facebook users faster than its games could repay

Vostu was Brazil's largest social-gaming company, founded in 2007 by three Harvard classmates — Daniel Kafie, Mario Schlosser and Joshua Kushner — with studios in São Paulo and Buenos Aires and management in New York. Its titles, built first on Orkut and then Facebook, reached about 20 million monthly players by late 2010. In November 2010 it raised US$30m led by Tiger Management with Accel, Intel Capital and General Catalyst joining — roughly 10% of the company for a ~US$300m valuation.

The model was to grow by buying users: the company spent heavily, in an 'ROI-negative' way, on marketing and user acquisition on the Facebook platform, expecting in-game microtransactions to cover the cost later. At the end of 2011 it had about 580 employees, and it claimed 25% of all internet-connected Brazilians played its games.

The storm hit from mid-2011. Zynga sued Vostu in a California court for copying its games — alleging copied designs, business model and even copied bugs — and Vostu settled in December 2011 with a payment and forced changes to four titles. Meanwhile Orkut's decline pushed Brazilian users onto Facebook, Zynga's home turf, and Facebook then curbed the viral channels games had relied on. Zynga's weak post-IPO performance deflated gaming valuations across the industry.

The company shrank fast: layoffs in February 2012, then about 100 more by March 2013, leaving 50–70 employees — roughly a tenth of peak. Both founders left their roles in early 2012. The company went into sale talks 'for either the whole company or a fraction of it' as its Facebook audience collapsed to about 2.3 million monthly users.