Facebook Inc (FB) Wants to Become Zynga Inc (ZNGA)

Considering Zynga Inc (NASDAQ:ZNGA)‘s expeditious fall from grace, it’s hard to imagine any company looking on enviously — especially one that has a unique insight to Zynga’s business: Facebook Inc (NASDAQ:FB).

For years, Facebook Inc (NASDAQ:FB) and Zynga Inc (NASDAQ:ZNGA) have been two peas in a social pod. Last quarter, 76% of Zynga’s bookings were generated through Facebook. Last fiscal year, Zynga comprised 9% of Facebook’s total revenue. The social network noted that Zynga’s contribution to its payments business continues to fall, and Zynga Inc (NASDAQ:ZNGA) wan’t mentioned in the most recent 10-Q as a 10% customer.

Facebook Inc. (FB)

As part of Zynga Inc (NASDAQ:ZNGA)’s turnaround efforts — before yesterday’s announcement that Don Mattrick would be leaving Microsoft Corporation (NASDAQ:MSFT) to become Zynga CEO — Zynga Inc (NASDAQ:ZNGA) had begun to explore game publishing as a way to diversify away from casual gaming toward the “mid-core” segment. The company tapped developer Phosphor Games to release Horn last year, which earned strong reviews and climbed the charts.

TechCrunch is reporting that Facebook Inc (NASDAQ:FB) may be looking to also enter the game publishing business now. The company is supposedly partnering with smaller independent developers, cutting distribution deals with ads in exchange for a percentage of sales. Facebook is more concerned with distribution and isn’t influencing the content of the games, which other publishers tend to do.

Facebook Inc (NASDAQ:FB)’s gaming platform, which drives the vast majority of its payments revenue, was once soaring but has cooled over the past couple of years. Instead, users are shifting to mobile gaming platforms where Facebook Inc (NASDAQ:FB) doesn’t get a cut.

Source: SEC filings.

Some of the growth has been a function of Facebook’s growing user base. Isolating average revenue per user within the payments segment, the payments business has regressed further in this respect with payments ARPU actually lower than it was in late 2011.

Source: SEC filings and author’s calculations.

The North American market is where Facebook enjoys the highest payments ARPU, which is more than three times as high as in Europe. Facebook doesn’t disclose these figures specifically, so some manual calculations are required.

Geographical Segment Payments ARPU (MRQ)
US & Canada $0.65
Europe $0.21
Asia $0.07
Rest of World $0.03
Worldwide $0.20

Source: SEC filings and author’s calculations. MRQ = most recent quarter.

With that in mind, Facebook is likely going after domestic game makers with its publishing forays. With the payments business beginning to slow, the social network is hoping some direct intervention can reinvigorate gamer interest.

The article Facebook Wants to Become Zynga originally appeared on Fool.com and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook. It also owns shares of Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!