Zynga is now officially launching its own web site for social games, and the move has got investors buying its stock. Shares are up nearly 10 percent as of market closing today towards $15 or 50 percent of the $10 price it went public at back in December. Why? The obvious reason is that the move is a way for Zynga to lessen its reliance on Facebook.
But Zynga is still using Facebook exclusively as its identity service and payments system, so it's not true to say that it's lessening anything right now. That is, except for two things: publisher payments and ads.
The new site, Zynga.com, will include a range of social communication channels and friend suggestions based on what games people play and how they play them. It is opening up all of this to third party developers, too, plus access to Zynga's hundreds of millions of users. But, they'll have to pay. Facebook is already taking a 30 percent cut of all virtual goods payments in the platform, because Zynga is using Facebook Credits to power payments.
Zynga is still able to make money here, however. Chief operating officer John Schappert tells me that the company is also working out publisher deals with developers come on board. That is, it appears to be negotiating an additional cut from them, on top of the Credits fee.
But let's back up to Credits Zynga has to use them because of an exclusive five-year deal that Facebook made it sign back in 2009. Part of the terms required that Zynga use Credits in anything it did on the web outside of Facebook. This basically turns Zynga into an early evangelist for Facebook Credits, in the event that the social network wants to expand the currency off of Facebook.com
The terms provided something else, too. They allowed Zynga to run its own canvas ads on its properties, as I detailed on Inside Social Games last July. On Facebook, Facebook owns all the ad inventory.
You don't see ads on Zynga.com right now, but Zynga could plug all of its advertisers the people who are running branded virtual goods campaigns and offers in its existing games on these sites as well. Or any other ad content for that matter, like ads that other developers could pay for within Zynga.com in order to reach users. And that could turn into a quality new revenue stream.
Zynga was founded in July 2007 by Mark Pincus and is named for his late American Bulldog, Zinga. Loyal and spirited, Zinga's name is a nod to a legendary African warrior queen. The early supporting founding team included Eric Schiermeyer, Michael Luxton, Justin Waldron, Kyle Stewart, Scott Dale, John Doerr, Steve Schoettler, Kevin Hagan, and Andrew Trader. Zynga's mission is connecting the world through games. Everyday millions of people interact with their friends and express their unique personalities through our...