On November 30th, Zynga and Facebook announced changes to their relationship. Zynga can now host its web games outside of Facebook - Zynga will be less reliant on Facebook. This might not be such a bad thing.
Zynga now has an incentive to expand the reach of its most popular social games beyond Facebook and Zynga.com and be able to offer additional payment options, likely resulting in additional payers who are not Facebook users.
Wall street did not like this at all, shares dropped 6% on Friday. Zynga shares recently fell to $2.46. The stock, which originally priced at $10 in December and peaked in early March at nearly $16, hit a record low of $2.09 earlier this month.The problem was not that Zynga was going to loose the Facebook relationship, but the potential for Facebook to compete against Zynga.
Facebook competing with Zynga is remote, while its competitive advantage is not online gaming Zynga is Facebook's biggest ad customer. The companies are changing the terms of their relationship, but not ending it. These changes will better allow Zynga to pursue its multi-platform goals. This might be a positive for both Zynga and Facebook.
Zynga is due for some good news, hopefully this will be a catalyst.
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