Zynga has been getting special treatment from Facebook thanks to an agreement struck over two years ago, but it looks as if many of those perks are going away.
On Thursday, both companies completed an amended agreement that takes away some of Zynga's (undisclosed) privileges, in exchange for a few freedoms that could help the companies eventually part ways.
According to a filing with the SEC, Zynga's use of Facebook will "be governed solely by Facebook's standard terms and conditions for game developers," as opposed to the perks (likely related to revenue share) that it was getting before.
In exchange, Zynga can now opt out of using Facebook's proprietary virtual currency system and ad network outside of the Facebook website: namely on Zynga's own network, Zynga.com.
The amendment also throws out a clause that prevented Facebook from producing its own games, though a representative tells Reuters that the company has "no plans to do so."
The original five-year agreement came at a time when a still-growing (and still privately-owned) Zynga was threatening to take its business elsewhere if Facebook didn't cave in to certain demands.
The move could be mutually beneficial to both companies: Zynga can cut its ties to Facebook, and Facebook can stop giving perks to a developer that isn't delivering as much revenue as some of its competitors. Zynga investors, however, aren't happy: shares are down nearly 14 percent in after hours trading.
That's peculiar. The stock isn't attractive because "Zynga is too intertwined with Facebook". But now that the shackles are off, the stock still goes down.
Being too intertwined with Facebook was a statement expressing concern that Facebook users are Zynga's primary source of revenue.
Losing the sweetheart deal now and having to pay more to Facebook is not good. I think Zynga would gladly wear those "shackles" another 5 years if they could.
In other words, although Zynga contributed ~15 to 20% of Facebooks revenues over the years, Facebook has been the source of nearly 100% of Zyngas revenue.
Zynga lost special Facebook support, and in exchange can use other currencies and ad providers. Even if people didn't like Zynga being so intertwined with Facebook, they are definitely not in a better place now. If you are really dependent on another company, and the other company just stops the special treatment, you are screwed, not saved.
Eh...I think we're just in the early stages of the shock/panic that comes with being independent. The only way for Zynga to prove it can stand on it's own two feet is by actually standing on it's own two feet. They need to break away from Facebook, they need to create their own platform, and they need to prove that they can attract users and make money doing it on their own.
I've always felt that without their own platform, there really isn't much going on for Zynga.
There will be some awkward moments here and there as they figure it all out, but this is a good thing. This is the ultimate test for Zynga, IMO. This is an opportunity for them to truly prove their legitimacy, if they have any!
Losing the sweetheart deal now and having to pay more to Facebook is not good. I think Zynga would gladly wear those "shackles" another 5 years if they could.
In other words, although Zynga contributed ~15 to 20% of Facebooks revenues over the years, Facebook has been the source of nearly 100% of Zyngas revenue.
So it makes perfect sense.
Zynga lost special Facebook support, and in exchange can use other currencies and ad providers. Even if people didn't like Zynga being so intertwined with Facebook, they are definitely not in a better place now. If you are really dependent on another company, and the other company just stops the special treatment, you are screwed, not saved.
I've always felt that without their own platform, there really isn't much going on for Zynga.
There will be some awkward moments here and there as they figure it all out, but this is a good thing. This is the ultimate test for Zynga, IMO. This is an opportunity for them to truly prove their legitimacy, if they have any!