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8 Things You Didn't Know about Facebook and Zynga [Update]

An amended S-1 filing for Zynga's eventual IPO offers details of its relationship to Facebook. There's plenty of interesting stuff there in the open, but some partially redacted sections hint at why Zynga is so dependent on Facebook as a channel to get to its market -- and why Facebook doesn't deploy its own games.

Although Zynga, in theory, is like other developers that use Facebook as an application platform, the company is far too popular and important to fit under a one-size-fits-all agreement. In the amended S-1 filing are two addendums to the developer part of Facebook's statement of rights and responsibilities.

The first addendum either states or suggests that:

  • Zynga can choose whether or not to display Facebook ads on its game pages. The pages that don't run ads incur a monthly charge up to some undisclosed maximum for all the Zynga pages.
  • Zynga gets some cut of the revenue from Facebook ads that run on its game pages. That means a possibly significant portion of revenue comes from ads and not virtual goods, and it complicates the breakout of revenue and cost of revenue in Zynga's financials. [Update: Facebook told All Things Digital that it has no agreements with developers to share revenue from ads that appear on Facebook. However, it did confirm that Zynga could take a share by running Facebook ads on its own sites, as I mention in the next point.]
  • Zynga can apparently display Facebook ads on game-related forums and other web pages that Zynga or its affiliates own and operate, suggesting that Facebook may have ad revenue sources outside of its own social network.
  • The current arrangements with Facebook last only until sometime in 2015.
The second addendum has another interesting set of minor revelations:
  • Facebook demanded a weekly target growth schedule for monthly unique users.
  • Zynga had to give Facebook both platform and game title exclusivity, although the most important details are missing. That helps explain why the company remains so dependent on Facebook.
  • Facebook is prohibited from deploying its own games.
  • All Zynga users must have valid Facebook accounts, apparently whether or not they play one of the games covered by the agreement.
Scarce detail where you might like it most, but there's pretty clear evidence that Facebook and Zynga have a more regimented and symbiotic relationship than was previous obvious. Facebook has some serious restraints that keep some of Zynga's games -- presumably the most popular -â€" only on its social network. And Zynga has Facebook's hands tied in running its own games.


Image: Zynga