The Newest Social Addiction

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Any Facebook (NASDAQ: FB) addict knows what is Farmville and what is Zynga Poker. The company behind these hugely successful games, Zynga (NASDAQ: ZNGA) now is aiming at widening its service offering area by going beyond just games. The master game-maker is planning to come out with its own gamers’ social networking site “Zynga with Friends.” So, how will this affect the social networking space? Let’s dig into that.

The Need
Zynga wants to bring all gamers together and provide them with a unified experience through a better connected platform. This new platform will allow interactive gaming through real-time game sharing, thus making it possible for multiple players to participate in the same game and compete with each other simultaneously. The gamers will be constantly connected to each other through Zynga’s profile page and chat facility even if they are using different devices to play.

Questions in My Mind
Both Zynga and Facebook shared, and actually still share a symbiotic relation when it comes to growing. Facebook’s huge user base helped Zynga spread across the virtual gaming world and Zynga’s cool and addictive games helped Facebook in maintaining user’s interest in the site as well as added to the top line. In the first quarter, Facebook’s 15% revenue came from the fees it received from the game-maker. As an automatic reaction to Zynga’s plans, two obvious questions come to my mind. First, will this move affect the relation between Zynga and Facebook? Second, how far does Zynga’s dependence on Facebook shrink with this move?

Well, it seems Mark Zuckerberg is cool with the idea of Zynga entering the social networking space. The company thinks it is interesting to see how Zynga plans to grow across the web and mobile platforms. Even Zynga officials feel there are no concerns when it comes to their relationship with Facebook as their plans will not pose as threats for the latter. In fact, Zynga had made it very clear to Facebook from the very beginning of their association that they will branch out to things like this.

Coming to my second question, it seems even with this move, Zynga’s dependence on Facebook cannot end totally. Surely it will shrink to an extent, but not enough to make Facebook lose its importance within Zynga's operations. Zynga will take time to make its offering popular and til then Facebook will continue to be an important part of their survival and growth strategy.

Zynga will need Facebook big time even in making its new platform popular. The strategy is: gamers will play online games on Facebook but not just with their Facebook friends, but also with other gamers who are in the Zynga with Friends network. Gamers will have their own list of friends and will get access to them on games from companies who use Zynga’s gaming platform. The philosophy behind all of this is to allow gamers find the best gaming partners anywhere they play. In addition, the company also has plans to partner other developers to develop online and mobile games by giving them Zynga’s programming tools. The company has recently entered into a partnership with Majesco Entertainment (NASDAQ: COOL), thus making Majesco's Mini Putt Park game available to the Zynga platform. The game, which allows the players to create a customized golf course, is already available on Facebook and is doing well. All these efforts brought together will help create what the company calls the “Zynga Ecosystem.”

The Path Ahead!
The company is pretty optimistic about the outcome of its plans. They expect the platform to have about 290 million users with around 2.8 billion interactions daily. However, management is still silent about the launch date of “Zynga with Friends.” Zynga is also all set to launch two sequels. The first is the sequel of its very popular Farmville – “Farmville 2,” and the second is a smartphone game “Matching with Friends” which follows the line of “Word with Friends.”  However, one final question which is on everyone’s mind is how much potential does the online gaming space still hold? The concept of games across social platforms is becoming stale. So, how much benefit Zynga can reap from this slowly saturating space is what interests me. 


analyse360degree has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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