Zynga and the Perils of Becoming a Platform
I will give Zynga (ZNGA) this much: The company has some serious stones for setting up Zynga.com as a place for its own games and those of third parties to live outside Facebook. You can’t really blame it for doing so. After all, too much dependence on someone else’s social network—whether it be for users, revenue, or both—is never a good thing. But being a platform provider and an aggregator of entertainment options is a hard business that’s not to be taken lightly.
The launch of Zynga.com is more than a bit of a reversal for the casual-gaming company. After all, Zynga exists today only because it tapped into Facebook’s app platform and rode the wave of social sharing to success. That is not necessarily a bad thing. Zynga has simply been better at social than anyone else in terms of getting users to share and convince their friends to sign up, gaining rewards all the while.
Prior to Thursday’s announcement of the new site, Zynga and Facebook had a symbiotic relationship in which, like the Nile crocodile and the Egyptian plover bird, each party helped the other out. Nearly all of Zynga’s revenues have come from Facebook and about 12 percent of all Facebook revenue has come from Zynga.
That might have been a fine relationship to have when Zynga was a scrappy little startup. Now that it’s a publicly traded company, its reliance on Facebook is a huge risk factor for investors. So it makes sense that Zynga would want to have a little more control over where and how users access its games—and a little more independence from Facebook.
But I question how many casual gamers recognize that Zynga makes FarmVille, Words With Friends, and Mafia Wars—and how many, knowing this, will take time out of their Facebook gaming sessions to go to some other site to play those games instead. Games will still be linked to a user’s Facebook profile. Zynga is just giving people the option to play on Zynga.com. But it’s notoriously difficult to create a platform and a destination site and to aggregate an audience, even one that is already using your product.
A lot will depend on how much actual value the Zynga.com platform will provide to consumers. Facebook works because (surprise) people spend more time on Facebook than pretty much any other site on the Internet—as much as seven hours a week, according to a recent study.
As time has gone on, there is evidence that it has become more and more difficult for game developers to stand out from the crowd on Facebook. Last month, IHS iSuppli reported that the percentage of all Facebook monthly active users visiting games on the site has dropped from 50 percent to about 25 percent. With a growing amount of content being shared, it has become harder for gaming companies to attract new users on the social network.
Will Zynga.com help reverse the trend? Can it get more people playing its games and others by providing an alternative place for casual gamers to congregate? Zynga is talking up the site as a place where users can quickly and easily find other friends who are active on the platform. The flip side is that it might become a place where only gamers congregate, which would mean the addressable audience for new games will be much smaller than the more heavily populated platform that Facebook has.
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