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.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations 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!