Facebook Is Leaving Zynga Behind
There was a time when you couldn’t talk about Facebook (NASDAQ: FB ) without bringing up Zynga (NASDAQ: ZNGA ) , particularly in the context of its gaming platform and growing payments business. The two have begun to distance themselves from each other in recent times, though, as the honeymoon glow has been in the process of fading for years. Given the asymmetrical nature of their relationship, that’s not entirely surprising.
Two years ago, 93% of Zynga’s total revenue was being generated on Facebook’s desktop platform, and the social network’s cut of all those virtual tractors, along with direct ads that Zynga purchases, accounted for 13% of Facebook’s top line. Those respective figures have now fallen to “just” 76% and 7%.
Source: SEC filings.
Since Zynga recently fell below the 10% threshold, Facebook doesn’t even mention the game maker in its SEC filings anymore. Its last disclosure was for the fourth quarter.
It’s also true that Facebook’s average payments revenue per user has stagnated, even though the segment’s total revenue continues to climb, albeit at a slower pace than before. Worldwide payments ARPU now stands at $0.20, in line with 2011 levels.
Sources: SEC filings and author’s calculations.
There had also been a report last year from IHS iSuppli that believed Facebook’s gaming user base had hit a ceiling, in part because casual gamers were quickly shifting to mobile platforms (where Facebook doesn’t get a cut). More recently, Facebook is even making some moves to become a game publisher like Zynga.
With all of this in mind, investors might not think that Facebook’s gaming platform is all that significant to the social networks future, but Facebook gaming exec Sean Ryan tells CNET that’s not the case.
Beyond direct payments revenue, Facebook also enjoys ad sales to game developers looking to get into desktop and mobile News Feeds to reach users. For Facebook’s large user base of casual gamers, which is now 250 million strong, games are another way to increase their engagement with the site, spending more time on Facebook and reinforcing the core advertising business even more. The figures that Facebook reports directly for its payments business are just part of the bigger picture. As Zynga continues to struggle, Facebook’s gaming platform is doing just fine.
Facebook is one of the five giants that shape our digital lives in more ways than you can imagine. As the war for consumer mindshare continues to escalate, the social network will find it running into the other four players in an increasing number of battlegrounds. Learn more about this fight among the titans of tech by clicking here now.