Zynga Plans Promotions to Curb Facebook Need
Zynga Inc. (ZNGA), the online game site that sold shares to the public in December, plans to unveil a set of services designed to promote other developers and lessen its dependence on Facebook Inc. (FB), two people with knowledge of the matter said.
Through the publishing program, due to begin in March, other game developers will be able to advertise their wares in Zynga games and on a separate Web portal, said the people, who asked not to be identified because the plan has not been made public. Zynga will keep a portion of the sales generated from the games, the people said.
Zynga, the biggest developer of games played on Facebook, is seeking new sources of revenue after raising $1 billion in its initial public offering. By selling services to other developers, it may reduce its reliance on Facebook, which accounts for more than 90 percent of sales and takes a 30 percent cut of virtual goods sold in Zynga games.
Dani Dudeck, a spokeswoman for Zynga, said the company doesn’t comment on rumors or speculation.
Promoting apps made by other developers is likely to carry fewer risks than Zynga’s main business of developing games. The company’s profitability has been crimped as it spends more to create new blockbuster titles.
The plan for a new publishing platform in March is contingent upon talks with partners as well as internal development, the people said. The release could come later, they said.
Electronic Arts (EA)’ Footsteps
By becoming a publisher, Zynga emulates traditional console game companies such as Electronic Arts Inc (EA)., which distribute and promote games made by independent design studios in exchange for a cut of sales.
Joining Zynga’s network will not exempt developers from giving Facebook a cut of sales, a person with knowledge of the revenue agreement said. Because Facebook Credits are used by all developers selling virtual goods on the social network and games promoted by Zynga, participating developers will still pay Facebook a cut of sales, the person said.
Zynga, with more than 246 million users, operates six of the seven most popular games played on Facebook, according to website AppData.
“Hidden Chronicles,” released last month, has become Zynga’s third most popular game, with 30.7 million monthly users, according to research firm AppData. It ranks behind two more established games, “CityVille” and “Texas HoldEm Poker.”
During an event at the company’s San Francisco headquarters in October, Zynga debuted a new service, called Project Z, geared towards reducing its dependence on Facebook.
Project Z would be part of a larger corporate strategy, dubbed Zynga Direct, that is aimed at building “a direct relationship with consumers whether they are on the Web or mobile,” Chief Executive Officer Mark Pincus said at the event.
Earlier this week, Zynga’s shares had their biggest one-day drop since their Dec. 16 debut after an earnings report showed product-development costs are cutting into profitability.
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