1. Activision Blizzard (ATVI)
Life was easy when everyone was playing Guitar Hero. Facebook has reinvented the way game-hungry masses spend their time, logging into Facebook to tend to virtual farms, mafia campaigns, or item-finding experiences.
It's not a surprise that the traditional video game industry has been struggling for three years. Market leader Activision Blizzard doesn't even make Guitar Hero games anymore, and its World of Warcraft player count has been steadily declining over the past year. Call of Duty is still a growing franchise, but that can't last forever.
As traditional game companies are struggling, Zynga (ZNGA) -- which accounts for 18% of Facebook's revenue -- is thriving.
Diehard gamers are still firing up their consoles and are toting around their portable gaming systems. The problem is that mainstream gamers -- the casual players who didn't live and die by every franchise's latest release -- have moved on to casual and social diversions. They're free or nearly free, and the viral magic of Facebook connecting friends as players made it possible.