Zynga is losing its special status as a preferred game developer on Facebook, following a decision to revise the terms of their high-profile alliance, raising the possibility that Facebook --much the larger of the two partners -- may find its relationship with the casual gaming company a bit tiresome.
According to Bloomberg, the revised terms of the agreement between Facebook and Zynga will make it easier for Zynga to pursue partnerships with other sites, for example by doing away with the requirement that players log in to Facebook to access Zynga and use Facebook credits to pay for virtual goods. Meanwhile Facebook execs including Mark Zuckerberg and Sean Ryan, the social behemoth’s director of game partnerships, recently met with other game developers to discuss potential partnerships. Facebook also has the option of developing its own games, although Bloomberg reports there are currently no plans to do so.
Long story short, Zynga may now face increased competition from other casual game makers on Facebook, which is far and away its largest source of traffic. While the new terms of their alliance supposedly offer Zynga opportunities for outside growth, the truth is that the company has struggled to establish a user base independent of Facebook -- and will likely find this even more difficult to achieve as its hit machine, which previously drew huge numbers of players with games like Farmville, seems to being experiencing technical difficulties.
Investors certainly seem to be taking a negative view of the impact on Zynga’s long-term prospects: following the announcement Zynga’s shares have declined 7.6% to $2.42. That’s a far cry from its IPO price of $10 in December 2011.