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Facebook Needs Space, Says Their Relationship With Zynga ‘May Fail’

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Posted on August 1, 2012 AT 01:34pm

As Zynga continues its sudden financial crash, Facebook is now publicly addressing the fact that the social gaming network’s revenue woes are hurting both companies. However, the situation is actually much more complicated.

TechCrunch reports that although Zynga’s revenues made up 14 percent of Facebook’s revenue in 2012, it’s a sharp drop from the 19 percent that they were pulling in 2011.

There’s plenty of blame to go around for it, though.

While Facebook is putting Zynga on notice for internal financial problems (their shrinking stock market value, a publicly worsening business reputation, and pending insider trading lawsuits), Zynga is shooting back that Facebook is shutting them out. Specifically, Facebook’s latest redesign has apparently lessened the focus on gaming content, which hurts their sales even more:

The decline in Zynga’s came as Facebook grew ad and other payments revenue in the quarter. But it also came as Zynga failed to meet analyst expectations in the second quarter. Zynga blamed Facebook in part, noting that the social network began emphasizing new games in its news feed and other channels, which led to a 15 percent decline for existing games.

As a result, Facebook has said in their recent Form Q-10 report that they could potentially be facing a reality where they have to sever ties with Zynga altogether. As the social gaming company moves more and more of their muscle behind the vastly more attractive mobile gaming market, it’s leaving Facebook in the cold with no benefit.

Zynga has recently launched games on its own website. While we began displaying ads and Sponsored Stories on Zynga.com in the second quarter of 2012, we do not currently generate meaningful revenue from these ads. We may fail to maintain good relations with Zynga or Zynga may decide to reduce or cease its investments in games on the Facebook Platform. In addition, if we are no longer able to display ads and Sponsored Stories on Zynga.com or if the use of Zynga games on our Platform declines for other reasons, our financial results may be adversely affected.

Considering the shift in the winds, it might be best for both groups if Zynga and Facebook go their separate ways. Each of them can go out and do new things, lose a bit of weight, and be stronger people after the break-up.

Source: TechCrunch

McKinley Noble, Contributing Editor
McKinley Noble has been writing about video games for seven years as a blogger and journalist, with each job adding to his painstakingly alphabetized collection of retro gaming memorabilia. When not cracking jokes about the gaming industry, he's a talking encyclopedia when it comes to mixed martial arts and anything MMA related. Follow him on Twitter: @KenTheGreat1. Meet the rest of the crew.

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