The latter’s shares fell more than six percent after the announcement on Friday, one of the series of setbacks for the maker of the vaunted Farmville game. Zynga recently announced the closing of its Boston studio as well as decrease in revenue.
The severance of ties means that Zynga in no longer bound to use Facebook as its primary platform for its games, and that players of Zynga will no longer be required to log-in using Facebook. The social networking giant will not be required to use promotions to keep the traffic targets of Zynga.
The relationship of the two companies was critical for Mark Zuckerberg, who said that Zynga’s Mark Pincus showed him how to better handle a startup company as well as to “power through and get to where he wants to go”.
Zynga, the name of a bulldog of Pincus, contributes about 15% of Facebook’s total revenue in recent quarters. On the other hand, Zynga generated 80 percent of its revenue by using Facebook as its main platform at the same period.
In an apparent show of lesser dependence on its other, both companies revealed in regulatory findings that their 2010 deal would be overhauled so that Zynga will not have a priviledged status over its competitors wanting to reach the 1 billion users of Facebook.
The news, revealed after Thursday’s trading, sent Zynga’s shares to almost 6 percent in New York the following day. Facebook shares went up 2.5 percent on Friday.
Last October, Zynga announced that it was closing its Boston studio, which would also be followed by closures of its studios in Japan and Britain. Last July, Zynga executives revealed to analysts that the company’s revenue dipped during the second quarter following Facebook’s policy to change its algorithm, diverting fewer gamers away from Zynga games.
PJ McNealy, the chief executive of Digital World Research, said that the said change in Facebook’s algorithm seemed to have helped propel games of Zynga’s competitors like KixEye and Electronic Arts.
“Zynga’s favoured nation status is gone but it seems like it’s been slipping away for a while now,” he told Reuters.
There was plenty of speculation Zynga was getting referrals within the Facebook community that other gaming companies weren’t getting which helped drive web traffic to Zynga games,” he added.
The new move also means that Facebook can now start developing its own games although it has not yet announced its intention to do so.
Category: Tech News