Analysis: Zynga to Launch Own Game Platform after Facebook Credit Fight

What's Next In Payments®
3:49 PM EDT October 12th, 2011

CityVille and FarmVille developer Zynga announced Tuesday that it will be developing an independent game platform. It’s a move, MarketWatch’s John Shinai speculates, designed to recoup revenue after the company was coerced into using Facebook Credits as currency for its games offered on the popular social networking site.  

“It means Chief Executive Mark Pincus recognizes how important it is to wean the company off its overdependence on Facebook,” Shinai writes. “Further reasons why can be found in Zynga’s most recent financial disclosures filed with U.S. securities regulators, in advance of the company’s pending IPO. The numbers in the filing show just how much instant damage Facebook did to Zynga’s bottom line simply by forcing Zynga players over to the Facebook Credits payment system.”

After an estimated $1 billion public offering, Zynga last month revealed to have growth decline 95% during its June quarter, according to Gamastura. (More details)

The company admitted Thursday in an SEC filing that year-on-year profits went from $27.2 million to $1.3 million and the $1 billion public offering is said to be delayed due to “rocky stock markets.”

“Facebook Credits takes a 30% cut of all sales of Zynga’s in-game virtual goods. Before the switch, Zynga was sharing between 2% and 10% of those sales with other electronic-payment services, according to the filing,” continues Shinai.

Click here to read his full analysis.

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