Open season for game developers
Just when it looked like things may be turning around for social gamer Zynga (ticker symbol: ZNGA), announcements came out camp Facebook and camp Zynga that change the terms of their longstanding alliance. In my opinion, that’s a major bummersville for Zynga as it opens the door for competitors to tap into the billion plus user base touted by Facebook.
Under the new terms, Zynga’s login access, payments and advertising requirements have been loosened dramatically. As most know by now, Zynga generates most of its revenue by selling virtual goods in games played on Facebook. Camp Zynga is trying to spin this as a positive, stating that this new and improved agreement gives Zynga the ability to pursue growth on other sites. However, it also removes the comfort zone with Facebook that has been intact since 2010. Many may recall that Facebook Chief Executive Officer Mark Zuckerberg and Zynga Chief Executive Officer Mark Pincus, forged the five-year pact.
Now it’s open season for other game developers. Will Harbin, Chief Executive Officer of game maker Kixeye Incorporated knows this first hand as the company’s Battle Pirates game is up and running on Facebook and is doing quite well. “Facebook is moving toward treating all developers as equal. They are doing their absolute best to be a fair and open platform. They don’t want to muddy the waters; they don’t want to play favorites.”
Zynga attempts to place a positive spin on this new development. In the press release, according to Barry Cottle (Chief Revenue Officer), “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.” Good luck with that one Barry. If you truly believe the company can do better without the safety net of a billion users, then you obviously see something that I don’t.
Shares of ZNGA closed Thursday’s session at $2.62 up $ .11 or about 4%. Trading volume hit 32.5 million – almost twice the normal trading volume. I don’t expect Friday to be very kind to ZNGA. I had seen after hour traded prints that were 15% below Thursday’s close.
The question that shareholders are pondering is whether this is another nail in Zynga’s coffin or will this force the company to propel itself out of the financial abyss that has consumed it.