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Zynga Nosedives as Terms with Facebook were Revised (ZNGA, FB)

Shares of online social gaming service provider, Zynga Inc. (NASDAQ: ZNGA) plunged 12.60 percent in aftermarket hours on Thursday after the troubled company said in its regulatory filing  that its two year-old contract with Facebook (NASDAQ: FB) was revised; as a result,  hereafter, rules applicable to other game developers will also apply to Zynga.

Nevertheless, the biggest cause of concern is that the new term will not allow Zynga to drive away gamers from Facebook to  This rule is also applicable on other game makers since it prevents gamers from leaving Facebook-which in turn helps the social networking website to make higher revenue.

Besides, the new agreement also allows Facebook to design and develop its own games. However, when asked about whether Facebook was considering developing its own games, Company’s spokesman denied of having any such plans.

Speaking to a CNBC, the spokesman said, “We’re not in the business of building games and we have no plans to do so.”

Zynga believes that new terms will benefit the company since it is looking to broaden its own network— Lately, the company is not only trying to diversify away from Facebook but also developing games that can be played on mobile platforms. In addition, Zynga is no more required to display Facebook ads or use Facebook payments on Zynga credits.

Earlier, both these companies had a very mutually benefitting agreement. While Zynga served as Facebook’s largest non-ad revenue source, the sheer size of latter’s user base helped Zynga to attract many new gamers

Nevertheless, during the course, the popularity of these games started to fade even as critics questioned Zynga’s business model.

Zynga has already slashed its guidance on fiscal 2012 for two times and the Sstock is down 75% after it went public on last December.


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