What the Facebook-Zynga Split Means for Game Developers
BY Eric Markowitz
Facebook and Zynga will now go their own ways, leveling the playing field for start-up game developers.
For game developers, Facebook and Zynga's breakup last week was much-welcomed news: Now that the two company's official relationship has been severed (and Zynga will be free to develop its own gaming platform on Zynga.com), the social network will also no longer play favorites--giving other independent game developers a fair shake at the exposure and growth the Facebook platform can offer.
"It's extremely favorable from a business-metrics standpoint for Zynga, but in terms of Facebook being an open platform--it's a win for developers," says Will Harbin, CEO of Kixeye, a San Francisco-based game developer with 320 employees.
Zynga is by far the most popular game developer on Facebook, and the company makes the majority of its revenue from virtual goods sold on Facebook. According to statistics from AppData.com, which tracks the gaming industry, Zynga currently enjoys some 300 million monthly active users on Facebook's platform. The next most popular developer, King.com, has about 60 million.
"We have streamlined our terms with Zynga so that Zynga.com's use of Facebook Platform is governed by the same policies as the rest of the ecosystem," Facebook said in a statement.
PJ McNealy, the CEO of Digital World Research, which tracks the gaming industry, told Reuters that the split was perhaps months in the making.
"Zynga's favored-nation status is gone but it seems like it's been slipping away for a while now," he said. "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."
Some were quick to point out that the new terms also opened the possibility that Facebook may begin developing its own games, which could be disastrous for smaller gaming companies trying to get noticed. But as of now, third-party game developers can build games on Facebook's platform, and Facebook does not create its own games.
A Facebook spokeperson told AllThingsD last week that speculation over a Facebook foray into gaming wasn't on the table, saying, "We're not in the business of building games and we have no plans to do so."
After all, it doesn't need to. According to Drew Hoskins, a software development engineer at Facebook, the developer "ecosystem" can sustain Facebook's revenue growth from games.
"Generally, when you are the basis for a platform, you don't want to scare away investment in your platform developers by competing with them...There is a vibrant ecosystem of game developers, headed by Zynga, who do a good job making successful social games already, and Facebook gets a cut of what those developers make, so there is currently no need for Facebook to step in and make games itself, either strategically or monetarily," Hoskins recently explained via Quora.
But for Facebook to continue growth in its gaming revenue, it needs to branch out. According to company documents, Zynga contributed about 15 percent of Facebook's revenue in the first quarter of 2012, compared to 19 percent in the same quarter of 2011.
Riccardo Zacconi, the CEO of King.com, believes gamers are becoming more interested in trying games of other developers, which is only a positive for the industry. "Where players once only played Zynga games, they now have more options and are trying games by other developers," he told Polygon.com.