Zynga’s Dependence on Facebook May Concern Investors

Zynga's facebook reliance

Zynga Inc., top game publisher known for developing phenomenal games such as Mafia Wars and FarmVille, last week announced that the company is all set to raise a whopping $1 billion in an initial public offering.

However, some potential investors may be concerned about Zynga’s (over-)reliance on Facebook, as the games are entirely played within the social network’s ecosystem, and much of the company’s future is at the mercy of decisions made by Zuckerberg & co..

“Facebook is the primary distribution, marketing, promotion and payment platform for our games. We generate substantially all of our revenue and players through the Facebook platform and expect to continue to do so for the foreseeable future. Any deterioration in our relationship with Facebook would harm our business,” the company said in the risk factors section of its IPO filing.

Specific risks include: Facebook limiting the access of game developers, modification of terms of service, favorable treatment toward Zynga’s rivals and the possibility of Facebook building its own games.

Last year, the San Francisco-based company came close to declaring war over a change in Facebook’s policy involving Facebook Credits – the currency Zynga players use to buy virtual goods. Facebook currently gets 30% cut from virtual items sold on its platform through this system.