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Zynga – Playing at a disadvantage?

Following the major announcement by Facebook and Zynga ending their exclusive partnership, what’s the future ahead for Zynga?

Both firms reported last Thursday in their U.S. Securities and Exchange Commission (SEC) filings that they agreed to amend their deal giving Zynga privileged status on Facebook.

Starting from March 31 next year, while Zynga’s games will be available still on Facebook, its use of Facebook data will be subject to Facebook’s standard terms and both no longer need to cross-promote each other’s sites. Facebook will also be free to develop its own games.

Visitors to Zynga’s gaming website will also no longer be able to tap into their network of Facebook friends or post messages about their gaming progress to Facebook.

According to a Reuters, Zynga’s stocks fell 12% in after-hours trading, while Facebook’s shares were off 5 cents at US$27.27, after the announcement. Also in recent quarters, fees from Zynga contributed 15% of Facebook’s total revenues while Zynga relies on Facebook for roughly 80% of its revenue, said Reuters.

Industry watchers are also saying this latest move will hurt Zynga far more than Facebook.

Arvind Sethumadhavan, regional practice leader, Asia Pacific, Social and ROI Analytics, Isobar said the move is in Facebook’s best interest as a developer agnostic approach will ensure their ecosystem is a thriving social hub for consumers.

“While it probably made some sense five years back to tie up with Zynga, with their current diversified regional growth and mobile access in particular – Facebook will need to look at gaming beyond web. This development is unlikely to have any negative impact on Facebook,” he said.

Zynga’s success now depends on how quickly and seamlessly it transitions after the Facebook deal.

“There is an inherent risk this would be challenging, this is reflected in the market sentiment to this announcement of FB shares rising by 2.5% and Zynga’s share plunging by 6.1%,” Sethumadhavan added.

Margery Lynn, regional social media director, Dentsu Mobius said this is clearly a blow for Zynga and a boon to other gaming companies.

“Being in Asia, it will be most exciting to see how our local players will benefit from a more level playing field on the platform,” she said.

Marketing also reached exclusive ad sales partner for Zynga in the region Komli Media. Co-founder Akshay Garg declined to comment in detail saying that there would be no change in the way business is done.

On Saturday last week, Zynga also announced the departures of vice president Roy Sehgal and general manager Steve Schreck amidst its stock-price decline, according to Bloomberg.

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