Zynga, Inc. stocks fall 12% after contract revision with Facebook, Inc.
Photo credit: Kotaku.com
Zynga Inc. suffered a devastating loss when their shares fell 12 percent in after-hours trading on Nov. 29. This drop in shares occurred soon after Zynga and Facebook Inc., revised their agreements, changing their relationship status to “It’s complicated.”
With games that ranged from “FarmVille” to “Words with Friends,” Zynga has created large variety of popular games that have exploded on the Facebook network. Now, through the newly revised contract, Zynga and Facebook will be almost completely independent of one another, according to The Washington Post.
This will mean that Zynga is no longer required to have Facebook advertisements in their game play and will no longer make Facebook their exclusive social networking site.
Michael Patcher, an analyst at Wedbush Securities, told Wall Street Journal Market Beat blogger, Steven Russolillo, that, “Zynga now has an incentive to expand the reach of its most popular social games beyond Facebook and Zynga.com and be able to offer additional payment options, likely resulting in additional payers who are not Facebook users.”
The original agreement, which was filed in 2010, also prohibited Facebook from making it’s own games. With the current revisions, by March 2013 Facebook will be able to create and develop their own games. However, according to the Market Beat blog, Facebook has no current intentions of developing their own games.
While the numbers may not be showing the glass half-full for Zynga, both Zynga and the analysts feel that this move will, in the end, be extremely beneficial for the company to grow and expand to other media platforms.