Zynga: Facebook App or Game Incubation Center?
Me being busy doesn’t make the world go any slower! (damn) – Zynga launched their zTag recently, and it is apparently, the precursor to their move away from Facebook.To give a brief introduction before we delve deeper, Zynga is a very famous online gaming company, and they recently raised (speculative) 250MM to 500 MM USD at an awesome valuation. They are one of the largest games on Facebook, and they use Facebook as a platform to deploy their games. (Their games run on Facebook servers). Needless to say, Zynga became very popular with Farmville and Cityville, and they’ve launched a spate of games which are very popular in the community.
Facebook played a crucial role in Zynga becoming viral and achieving the phenomenal growth in their users. (I used to get friend invites from strangers just to play Farmville!) – Zynga has a free to play model, but users can buy virtual stuff with Facebook credits. (which you can earn in many ways, including paying real money!)
The issue started when Facebook started charging 30% of Zynga’s revenue for using their platform. Needless to say, Zynga was not very pleased! (30% is a large chunk!)
However, Zynga has grown a lot from the time they were launched, and big enough to flex their own muscles. Now, Zynga is planning to launch their own live network away from Facebook, speculatively called (Zynga Live). zTag is the starting point of this transition.
They cannot pull away totally from Facebook. They have a platform where they can play away from Facebook and can continue from where they left on Facebook and vice versa. Zynga does not need to pay Facebook if their users play on their platform instead of Facebook. Zynga insists that they still use Facebook to authorize the accounts.
So, is it good / bad for Zynga to create a platform, in parallel and away from Facebook? Can’t say! Farmville and other games of Zynga grew virally; thanks to Facebook. But, a lot of people use Facebook to play such social games. So, do they have an incentive to move away from Facebook just to play games? Zynga might have to work on this aspect. (10% discount to buy virtual stuff in Zynga platform than on Facebook?). What happens if Facebook decides to reduce their cut? Does it make it easier for Zynga to stay on only Facebook?