It seems Zynga is eager to explore the other world besides Facebook, as it renegotiated its partnership agreement with Facebook, according to which Facebook will treat Zynga like any other developer. This agreement is set to expire on May 13, 2015. The move is largely being considered as an effect of Zynga’s constantly dropping share price and market valuation, which is worrying Zynga’s management and investors both.
While Zynga got traction from the market at a $10 share price at the time of IPO, which went high upto $16 in March when Facebook launched its own IPO. However, due to recent blow-ups that got the share price tumbled down to $2.29. In Q3, the company reported a loss that bowled up the whole situation for Zynga.
So, what are the main ingredients of the new arrangements and who are actually losing? Here are the positive and negative aspects of the Facebook and Zynga deal can be:
- Zynga can now freely exploit the benefits by creating its own game portal. In this sail, it can keep a more profit margin in terms of games published on Zynga.com, rather than paying 30% to Facebook.
- The biggest news in terms of disadvantage for Zynga is already started as stocks down to 10% after this Facebook deal amendment; will shares make up for Zynga in coming days is an ambiguity.
- Zynga will no longer have to display Facebook ads on its site, use Facebook credits in its games, or develop only for the Facebook platform. In substitute, Zynga will not be able to use Facebook to cross-promote its games, which means if someone is playing Farmville 2 on Facebook, they can no longer see ads encouraging players to try Zynga Poker on Zynga.com in substitute for Farmville 2 credits.
- The new terms also mean Zynga can’t use e-mails from Facebook to promote Zynga.com. Also, Zynga won’t be able to publish game updates to Facebook that link to Zynga website, Game updates published in profile walls have to link back to a Facebook game.
- Zynga was almost entirely dependent on Facebook for its revenue last year, and even in the last quarter, it received 80 percent of its revenue from Facebook.
- The agreement also reveals that Zynga-made games should also be available on Facebook but not necessarily for mobile games and games developed by others for the Zynga platform. Does this also pave the way to assume that Zynga may now concentrate on mobile games or release games of other developers in order to reduce its dependency on Facebook?
Interestingly, Facebook is not completely reliant on Zynga, but surely investors’ confidence may suffer as the stocks of Facebook are also unstable after this deal and those who rely on Facebook mostly for games may not stick to the Facebook platform only. According to the new deal, Zynga is less tied to Facebook, and one of the reasons could be the users themselves, as the most popular games by Zynga saw a downfall and lost millions of users. Also, the reduction in gaming by Facebook users reflects the fluidity of social media usage.
Zynga has explicitly said that they give less importance to retaining players but are more focused on attracting new ones, as it’s a free bird now to fly to the new platforms. Will it make up to attract new players, or will this agreement leaves Zynga to repent is a mystery.
As Facebook is a platform where apps and games are built but it should not be a big deal for Facebook to get another Zynga.
