Facebook: We're not getting into the game business
Shares of Zynga, already down below $3, fall further after the company reached a new deal that lets Facebook build its own game. But Facebook says it has no intention to do so.
Zynga just can't catch a break.
After the stock market closed today, the teetering game maker revealed that it amended its contract with Facebook -- the company on which Zynga was entirely built -- and the details are already spooking Wall Street. In after-hours trading, shares of Zynga are down more than 12 percent to around $2.30.
The concern? A line at the bottom of the SEC doc that says that Facebook will soon be free to develop its own games that could compete with Zynga -- something that was prohibited under the original agreement:
In addition, effective on March 31, 2013, certain provisions related to web and mobile growth targets and schedules will no longer be applicable and Facebook will no longer be prohibited from developing its own games. Further, Zynga's right to cross-promote between games on the Facebook web site will be governed by Facebook's standard terms of service.
Facebook, however, said in a statement that the social network has no intention of getting into Zynga's business, which will come as a relief to the many game-makers thriving on Facebook: "We're not in the business of building games and we have no plans to do so," the statement said. "We're focused on being the platform where games and apps are built."
Wall Street at this points assumes the worst when it comes to Zynga. The stock has cratered, and a slew of top executives has fled as founder and CEO Mark Pincus tries to focus -- and even save -- the company.
Even so, there are other parts ofthat could hurt Zynga. Under the terms, Zynga will soon no longer be able to use Facebook to "cross-promote" its games. What that means, according to Faceboook, is that when a player on Zynga.com shares what they're doing on a given game so that it shows up on their Facebook Timeline, the post will no longer link back to Zynga.com, which could dampen traffic.