Under new deal, Zynga less tied to Facebook
The two companies amend their agreement. Zynga will no longer have to show Facebook ads, use Facebook credits, or release games exclusively on the Facebook platform.
Zynga and Facebook have amended their contract, which means Facebook will treat Zynga like every other developer, according to SEC documents filed today.
The amendment, which applies to an agreement set to expire on May 13, 2015, details the loosening of Facebook reigns in exchange for an important promotion tool. Neither company would say which side pushed for these changes initially.
Zynga will no longer have to, use Facebook credits in its games, or develop only for the Facebook platform, according to the documents. In exchange, Zynga won't be able to use Facebook to cross-promote its games.
Cross-promotion, as defined by the agreement, is the placement of Zynga.com ads within Zynga games played on Facebook's platform. For example, if someone is playing Farmville 2 on Facebook, there can no longer be an ad encouraging players to try Zynga Poker on Zynga.com in exchange for Farmville 2 credits. The new terms also mean Zynga can't use e-mails from Facebook to promote Zynga.com.
Losing the ability to cross promote, according to a new Facebook policy that will go into effect next week, also means Zynga won't be able to publish game updates to Facebook that link to Zynga's site. Game updates published in profile walls have to link back to a Facebook game. Zynga's original agreement would have allowed it to continue to do so.
Facebook issued a statement, saying it wants to treat Zynga like everybody else:
We have streamlined our terms with Zynga so that Zynga.com's use of Facebook Platform is governed by the same policies as the rest of the ecosystem. We will continue to work with Zynga, just as we do with developers of all sizes, to build great experiences for people playing social games through Facebook.
Zynga also issued a statement on the news, from Chief Revenue Officer Barry Cottle, saying the amendment lets the company go in another direction besides Facebook.
Zynga's mission is to connect the world through games. In order to do this, Zynga is focused on building enduring relationships with consumers across all platforms from Facebook and Zynga.com on the web to tablets and mobile. Our amended agreement with Facebook continues our long and successful partnership while also allowing us the flexibility to ensure the universal availability of our products and services.
It's a nod to the company's desire to establish itself as a gaming platform since, currently, it's largely dependent on Facebook for revenue.
Zynga was almost entirely reliant on Facebook for revenue last year, and while its lessened its reliance this year, it still received 80 percent of its revenue from Facebook in the last quarter. In contrast, contributions from Zynga to Facebook last quarter.
Zynga has been steadily moving away from game development, reducing resources in those areas and, instead, investing in partnerships with third-party developers. According to the agreement, any games Zynga produces for its site must also have a version on Facebook, but this excludes mobile games and games from other developers. Zynga can only reduce its dependence on Facebook by releasing these types of games.
Zynga's filing today also mentions that certain goals for Web and mobile growth will no longer apply and "Facebook will no longer be prohibited from developing its own games."
Facebook, which didn't mention this in its own SEC filing, said it has no intention of developing any games.
"We're not in the business of building games and we have no plans to do so. We're focused on being the platform where games and apps are built."
Update, 4:20 p.m. PT: Updated with more information from Zynga and clarification of Facebook cross-promotions. Update, 5:15 p.m. PT: Updated with more background.