November 30, 2012 12:19 am

Facebook moves to looser union with Zynga

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The marriage of convenience between Facebook and Zynga, the largest social networking and social gaming groups, took another step towards separation on Thursday, with an update to their partnership deal giving greater flexibility for both to pursue potentially competitive goals.

Under a series of amendments to the five-year deal struck in 2010, from next March Zynga will be free to ditch Facebook’s login and payments services in its mobile apps and on its own website.

Zynga will be treated more like any other game developer on Facebook; for instance it will no longer be able to use players’ emails and other data for ads to drive traffic to its own site.

While Facebook will be able to develop games of its own, the company said it would not. “We’re not in the business of building games and we have no plans to do so,” Facebook said. “We’re focused on being the platform where games and apps are built.”

Zynga’s shares, which have rallied 13 per cent to $2.62 so far this week after losing more than 70 per cent of their value in 2012, took another lurch downwards in after-hours trading, falling 10 per cent.

Facebook, which rose 3.6 per cent to $27.32 during the day on Thursday, was broadly unchanged in the after-market. Last year, the social network received around 12 per cent of revenues from its share of advertising and payments in Zynga’s games, such as Empires & Allies.

Barry Cottle, chief revenue officer at Zynga, said the company wanted to build “enduring relationships” with gamers across “all platforms”.

“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,” he said.

Facebook, on the other hand, has been trying to diversify its gaming business away from being primarily dependent on Zynga. One of the terms of the new agreement removes a preferential policy that allowed the gaming company to refer Facebook users to its own site.

Facebook said it would continue to work with Zynga. “We have streamlined our terms with Zynga so that Zynga.com’s use of Facebook Platform is governed by the same policies as the rest of the ecosystem,” it said.

Zynga is still required to use Facebook Credits for players wishing to buy in-game items, such as tractors in FarmVille 2, when its games are running on the social network’s “Canvas” platform. The two companies’ agreement, which secures preferential commercial terms for Zynga within Facebook, remains unchanged.

But before Thursday’s changes, Zynga had to run advertisements supplied by Facebook and use its credits on Zynga.com, which it launched in March to reduce its dependence on the social network.

From March 31, Zynga will be able to create a social network or virtual currency of its own, which it was previously barred from doing, and can launch new games on its own site before bringing them to Facebook.

Mark Pincus, Zynga’s chief executive, has suffered a series of high-ranking staff departures in recent months, as he tries to reposition his company towards smartphone and tablet platforms, where new rivals such as Supercell have had greater success using FarmVille-style free-to-play games.

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