Social Gaming: Facebook and Zynga Change Agreement, Draw Concerns
By Rob Scott
December 3, 2012
December 3, 2012
- Facebook and social-gaming company Zynga have renegotiated the terms of their 2010 agreement.
- “In a bid to become less reliant on Facebook, Zynga disclosed in a filing on Thursday that it has amended the terms of its relationship with the world’s largest social network so that it can now host its Web games outside of Facebook’s platform,” reports the Wall Street Journal.
- “The new agreement also leaves the door open for Facebook to produce its own games and become a direct competitor to Zynga,” notes the article.
- Under the new deal, Zynga will not be required to show Facebook ads on its game pages or to use Facebook credits for in-game payments. The game maker “can now seek other partners and offer games on its own portal, Zynga.com, without linking users to the Facebook platform.”
- The news quickly led to a 12 percent plunge in Zynga’s stock to $2.30 in after-hours trading, while Facebook’s stock was relatively flat. Since its IPO in December 2011, Zynga’s shares have declined 74 percent, notes Businessweek in a related report.
- Both companies quickly responded with statements explaining that the spirit of the partnership remains intact. “Our amended agreement with Facebook continues our long and successful partnership while also allowing us the flexibility to ensure the universal availability of our products and services,” stated Zynga chief revenue officer Barry Cottle.
- “Zynga last year derived more than 90 percent of its revenue from Facebook. Meanwhile, Zynga made up about 12 percent of Facebook’s sales in 2011,” notes WSJ. “More recently, as Facebook’s gaming environment has grown more competitive, Zynga has struggled. In its most recently reported quarter, San Francisco-based Zynga posted a $52.7 million loss.”
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