Facebook, Zynga: We get along! Pinky swear!
Amid rumors that their negotiations were going further and further downhill, the social network and the game manufacturer have put out a press release to announce that they've promised to work together for five whole years.
The mood over at Farmville is less "Animal Farm" and more "Charlotte's Web"--or that's what the big tech companies involved would like us all to think.
In what may be the culmination of one of the past year's silliest Silicon Valley high-stakes playground games--or, perhaps more appropriately, barnyard games--social gaming giant Zynga and social network Facebook have put out a press release to announce that they are not, in fact, feuding. Actually, they've reached an agreement! For five whole years! In the name of all that is good and right in the world, I really hope people aren't as fanatically obsessed with Farmville and Mafia Wars in five years!
So here are the specifics, if you can call them specifics: "Facebook and Zynga announced today that they have entered into a five-year strategic relationship that increases their shared commitment to social gaming on Facebook and expands use of Facebook Credits in Zynga's games. The agreement provides a solid foundation for both companies to continue to work together to provide millions of people with a compelling user experience for social games."
No terms of the deal were disclosed, but this is an announcement weighted with backstory and backstabbing. Facebook, obviously, is huge, and one of the reasons that Facebook is so huge is that its developer platform gave people all sorts of new reasons to join and spend time there. One of the biggest companies to emerge on Facebook's platform was Zynga, which now has around 230 million monthly active users (Facebook has about 400 million).
But Facebook has repeatedly made changes to its developer platform that arguably haven't been in the best interest of companies like Zynga, the most recent of which is its Facebook Credits virtual currency. Downplayed in Facebook's last slew of developer-related announcements, Credits take a 30 percent cut of transaction revenues, and while they haven't been mandatory for app developers thus far (they haven't even launched in full) rumor has it that they will be.
Earlier this month, reports started to surface in TechCrunch that Zynga was so fed up that it was going to launch its own game network, called "Zynga Live," potentially preparing for a move off of Facebook altogether if it was forced to cough up the 30 percent cut of revenues. So if that happened, Facebook could start losing traffic from foaming-at-the-mouth Farmville players (Is the first item you receive a virtual raccoon? Does he bite you?) who spend hours on the site to tend to their "crops." Zynga would be fighting an uphill battle to replicate the expertly crafted social-networking channels that have made Facebook such an ideal platform for social games.
Plus, there is heaps of money at stake: Facebook's once-tepid revenues have been boosted by advertising dollars from companies like Zynga that want to increase their user base and advertise their Facebook presence. Zynga more or less mints money right now, thanks in part to the fact that people will actually pay for virtual tractors, or at least fill out offers and surveys in order to do so. Botching their relationship could be a big hit to either or both companies.
EVERYBODY PANIC!!
Tuesday's announcement gives some new insight into what must have been happening. There was something that smelled very strategic about the "sources close to the matter" whispering dirt to the press regarding Zynga's dissatisfaction with Facebook and hence making the boardroom disagreements public. But the official word is that everything's totally fine, and that the liaisons between the two companies should, in fact, be classified as a "long-term relationship."
I guess we've got five years to see which company wears the (virtual) pants in this one.