When Zynga and Facebook broke up last week, ending a once mutually beneficial partnership that had since gone sour, the conventional wisdom would have seemed to be that Facebook was getting the benefit of ending the relationship. To put it simply, Facebook is the largest social network in the world, with one billion members. Zynga was once the most powerful social gaming company, but had sunk so low that it had to lower its entire outlook for 2012. Zynga, it seemed, clearly needed Facebook more than Facebook needed Zynga, right?
Perhaps not, as Zynga may have already begun to bounce back by signing a deal with cloud-based television company Synacor, a development reported by AllThingsD Tuesday.
With the deal, Zynga will be able to bring its games to Synacor’s 45 cable, satellite and telecom companies, starting in 2013. Synacor’s customers will be able to offer Zynga games from their homepages, as well as offer Zynga’s game currency as part of their bundle packages.
While terms of the deal, including how customers will be able to access the games, and how much Zynga currency will be offered, are still being hammered out.
Synacor offers a cloud-based platform, which enables cable, satellite, telecom and consumer electronics companies to deliver entertainment services and apps, including television episodes and movies from their subscription packages, to their customers on multiple devices. Synacor also offers bundles of online subscriptions, focused on areas such as music, games, education, and sports, as well as an e-mail solution.
With this partnership, not only was Zynga able to essentially replace Facebook as the platform that it uses to promote its games, but it will now be in a good position to open itself up to a new, and sizable, audience. Synacor has 45 customers, which include Verizon, CenturyLink, Broadstripe, Charter and US Cable. They deliver Synacor to over 24 million high-speed Internet households. The company sees over 78 million average monthly search queries, had 75 content partnerships and sees nearly 4 billion average monthly ad impressions.
Synacor’s other content partners include Lego, ESPN 3, CNN, Fox Sports, MLB.com, and FoxNews.
This is Zynga's second partership this year, after teaming up with American Express in May to create a new platform called Serve, which allowed FarmVille users to sign up for a pre-paid debit card that would earn them Zynga currency by purchasing real world items.
Facebook and Zynga
In October, Zynga released a statement saying that it was lowering its outlook based on disappointing preliminary third-quarter results. Due to Zynga’s weak performance, JP Morgan analyst Doug Anmuth has lowered his estimates for Facebook’s payments revenue in 2013 to $582 million from $797 million, based on how much of its revenue would be coming from Zynga.
It was just the latest step in the declining relationship between the two companies, which had seen its once mutually beneficially partnership crumble as Zynga’s games became less popular, and the company became more dependant on Facebook for revenue, even as the amount of revenue Facebook was getting from Zynga was declining.
In the first quarter of this year, 15% of Facebook’s total revenue was brought in from Zynga. Of that revenue, around 11% came from the 30% in transaction revenue Facebook takes from Zynga for virtual goods, in addition to direct advertising bought by Zynga. The other 4% came from advertising that was done on Zynga games.
That number was down from 19% the previous quarter, where 12% of Facebook’s revenue came directly from Zynga and 7% came from the revenue generated by ads.
Then, finally, last week Zynga and Facebook filed documents with the SEC to loosen the relationship between the two companies.
According to the documents, Zynga will no longer be obligated to display Facebook ads, or use Facebook credits in its games on its own platform. Any games offered on its platform, or other platforms, will still have to be offered on Facebook too, though there are some exceptions regarding real-money gambling games, mobile games and games launched in China or Japan.
Facebook will be able to develop its own games, and Zynga’s ability to cross promote between games will be limited by Facebook’s standards of service.
Cross-promotion means putting ads for Zynga in Zynga games on Facebook’s platform. Zynga also will not be able to use e-mail addresses obtained by Facebook to promote its games.
Zynga could not be reached for comment.