Facebook is reducing its reliance on Zynga, with the social gaming company accounting for 14% of Facebook’s revenues in the first six months of 2012, down from 19% in 2011, according to a SEC filing. Zynga generates money for Facebook via payments made in its games through the social network. Facebook also receives revenue from Zynga through direct advertising by Zynga on the social network and third-party advertisers on Zynga apps, as well as through ads that Facebook itself serves on Zynga’s titles. Payments and direct advertising on Zynga’s social gaming apps accounted for 10% of Facebook’s revenue in the first half of the year, down from 12% for the full year 2012. Meanwhile, display ad revenues served by Facebook were down from 7% to 4% over the same period. The news will be a boost to Facebook, with the numbers suggesting that Facebook is diversifying beyond Zynga to new revenue sources.
Worryingly for Zynga, the figures show that the revenue it makes from Facebook is up only marginally, despite strong growth at the social network. Facebook’s revenue in the first six months of this year was USD2.242bn, up by more than a third from USD1.626bn in the same period in 2011. But Zynga’s contribution to that increased by just 1.6% year on year to USD313.9m. While this doesn’t show exactly how much revenue Zynga is generating via Facebook, it serves as a proxy for its performance as Zynga typically makes money whenever Facebook does.
The figures highlight the struggles Zynga faces as it attempts to build on its successful start in the online gaming space. The firm has, in the past, made almost all of its money via Facebook and the social network accounts for the majority of its users and traffic. But the firm has seen growth in those users and revenue slow in recent months as the social gaming market matures and competition heats up. Zynga has also fallen foul of changes in the way games are marketed on Facebook, with the social network emphasising new games in users news feed, leading to a decline in traffic to existing games. Zynga fell to a USD22.8m loss in its most recent quarter, with revenues coming in below expectations and the firm cutting its full-year outlook. It is expanding beyond Facebook with a move into mobile gaming and its launching its own gaming network, Zynga.com. But this has so far had little impact on its business.
For Facebook, a reduced dependency on Zynga is a good thing. It mentioned Zynga’s slowing growth as a possible risk in the SEC filing, and this is highlighted in growth in its payments revenue, which slowed to just 6% in Q2. Mobile also continues to pose a problem, especially as the number of users accessing the social network via smartphones and tablets continues to rise. More than a 10th of its active user base, or 102m people, accessed Facebook solely via mobile in June, up 23% quarter over quarter, meaning that monetising mobile is becoming increasingly important.
The filing also reveals that Facebook bought six companies in the first-half of the year, spending a total of USD24m on four of these – Tagtile, Glancee, Lightbox and Karma – as it continues its policy of buying new startups for their staff. This figure does not include costs such as salaries, stock grants or bonuses given to the startups as part of their decision to join Facebook. It also bought Instagram and Face.com for larger sums and spent USD663m on patents and IP, including patents from Microsoft and IBM.
|01 Aug 12 - TechCrunch|
|01 Aug 12 - TechCrunch UK|
|23 May 13|
|23 May 13|
|16 May 13|
|16 May 13|
|14 May 13|