Can Fledgling Zynga Fly Without Facebook?
It's official: Zynga (NAS: ZNGA) will be testing its wings on its new beta platform, which premiers on Zynga.com later this month. In a move widely viewed as reducing its dependence on mammoth social media site Facebook, the new site will provide a space for gamers to play games such as CityVille, Zynga Poker, and others on a platform other than Facebook. And that's not all: Zynga also plans to invite other online-game developers to share space on Zynga.com. But will the revamped website take flight?
Don't think this means that Zynga will soon have no need for Facebook. The two sites are closely interwoven, and many current activities associated with playing Zynga's games on Facebook will continue, at least for the foreseeable future. For instance, players will use their Facebook login on Zynga.com, and Facebook credits will still be necessary to buy goods on the site.
So what exactly is the purpose of the new platform? Most probably, it represents the first step toward self-reliance. As BusinessWeek notes, the platform was constructed nearly two years ago when contract talks with Facebook became heated. Although the two entities settled up and made nice with a five-year contract, the platform was essentially ready to go when the time was right. Since then, Zynga went public, with its success hampered by investors' doubts about the company's heavy reliance on Facebook. The latter also depends upon Zynga, from which 12% of its revenue is derived.
Zynga.com is an adjunct to Facebook, not a substitute, and it brings its own features to the table. The site will offer a matching service, called "zFriends," which will bring together like-minded gamers more quickly and efficiently than the current friending process on Facebook. Initially, only a handful of games will be available on the site, but more will become available as time goes by. The biggest advantage that the new website offers is that it will be a haven for serious players, without all the distractions of Facebook. Getting that silo or water treatment plant built will be faster and easier than it could ever be while playing on Facebook.
Although Zynga is careful to note that Facebook is still its main source of customers, the step toward independence is clear. CEO Mark Pincus has been working on this project for some time, having invested heavily to wean Zynga off servers previously leased from Internet giant Amazon.com (NAS: AMZN) and onto its own zCloud infrastructure. Over the same period of time, the company has been steadily ramping up its game app offerings for Apple's (NAS: AAPL) iPhone, thereby increasing its visibility on the popular mobile device.
There seems to be no doubt that the new platform will succeed, and Pincus seems more than happy to give it time. Investors certainly see the move as progress toward independence, evidenced by the rise in Zynga's stock value since its announcement. It is interesting that Pincus should choose this point in time -- shortly before a Facebook IPO and ahead of the debut of online gambling -- to make this move. He is smart to go easy on Facebook, balancing the news with frequent nods to the social site's importance. It may have taken two years to finally be launched, but I wouldn't be surprised if, two years from now, Zynga.com becomes its own popular destination.
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At the time this article was published Fool contributorAmanda Alixowns no shares in the companies mentioned above. The Motley Fool owns shares of Apple and Amazon.com. Motley Fool newsletter services have recommended buying shares of Apple and Amazon.com. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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