Yesterday’s announcement that it is effectively becoming a platform may be the most important yet in the short history of social gaming juggernaut Zynga.
Although it’s a billion dollar company, Zynga owes much of its success to another platform – Facebook.
The company’s dealings with Facebook haven’t always been easy. When Facebook decided to force developers to monetise virtual currency using its credits system, a move some lawyers believe may be illegal, it appeared that Facebook and Zynga were set for a very rocky relationship. But today, perhaps more out of necessity than anything else, Facebook and Zynga seem to get along fine.
Even so, Zynga’s move to become a platform shows that it hasn’t forgotten how dependent it currently is on Facebook. The company’s investors recognise that as well; shares of ZNGA rose more nearly 10% on the company’s announcement.
One of the most interesting pieces of Zynga’s announcement: the fact that it wasn’t just moving away from Facebook but will also open up its platform to third parties that want to distribute their games through Zynga.com.
If Zynga is able to out-platform Facebook and build the ultimate destination of social games on the web, it could be huge. Few details on how the company will work with third party developers have been made available, but you can be sure Zynga will be taking a piece of all of the virtual currency action on Zynga.com (just like Facebook). On paper, that could conceivably produce a new billion-dollar revenue stream for the company.
There are a few major challenges, but the biggest problem may be one of trust: Zynga will have to convince other developers that it’s a worthy partner.
That’s because Zynga’s history is scarred by allegations that it “copies” games developed by others, using its marketing muscle and financial resources to make its copycat games more successful than the originals. The company hasn’t exactly denied the allegations outright, and to be fair to Zynga, taking cues from the market isn’t a bad strategy, even if it’s one that lends itself to criticism.
With this in mind, third parties contemplating a Zynga partnership will need to consider whether it makes sense to put their games onto the company’s platform. After all, Zynga could, for instance, use the analytics derived from game play on Zynga.com to identify games worth copying in-house. In other words, game developers will need to weigh the pros and cons of using a platform owned by a direct competitor.
Facebook, of course, is an easier partner to measure up. Sure, plenty of game developers aren’t thrilled that they have to give Facebook 30% of their virtual currency revenue, but they also don’t have to worry that Facebook is going to compete with them directly because Facebook isn’t a developer of social games.
From this perspective, now that Zynga wants other game developers to help it build its business, it may learn the hard way that in the game of business, you can succeed with an unscrupulous reputation only when you’re sure the people who think you’re unscrupulous will never have anything meaningful to offer you.