Less than a week ago, Facebook renegotiated a contract with Zynga. This new agreement allows for increased independence for both companies, lessening the reliance on the other. With this, Facebook is now allowed to make its own games (although the company strongly ensures that it will remain a platform for games/apps rather than a designer of games/apps). On the other hand, Zynga will no longer be forced to rely on Facebook as its only social platform for gaming, allowing expansion onto other websites. This renegotiation reveals more if the stock prices are examined, too. After becoming publicized, Zynga’s stock immediately took a 8% plunge while Facebook shares managed to close up a few percentage points. Clearly, Zynga’s asymmetric dependence on Facebook is incredibly defined.
This revisits the question, why didn’t Facebook buy Zynga, and why won’t it buy Zynga? Of course, games have been a cornerstone of social interactions with Monopoly and other board games dominating the pre-internet era. Why didn’t Facebook buy the social gaming giant? First of all, Facebook doesn’t make many acquisitions, especially at the scale of Zynga’s value a few years ago. Zynga’s value soared to over $15 billion at one point after a dramatic climb toward its IPO. Not only would that be a massive, expensive investment, but it is also a poor decision. Social gaming has a large amount of competition on Facebook’s platform, as developers are definitely plentiful. Next, as for skeptics that support an acquisition of Zynga now while it’s priced inexpensively (its stock value dropped over 70% just this year), Facebook has no use for Zynga. Zynga is a dying company; the games that once dominated Facebook simply do not command the large crowds anymore. Even on other platforms, i.e. the App Store for iOS devices, Zynga only makes one of the top 50 grossing games. This kind of performance reveals a company that is running out of ideas and the talent backing the company isn’t going to last. Clearly, if Facebook wanted to advance into the gaming scene, it would’ve handled it much earlier by setting aside a development team for games.
Then why did Facebook make the acquisition of Instagram? By buying Instagram, Facebook nearly bought out the entire photo-sharing market on all mobile devices. Although Twitpics are fine and dandy, no photo editing/sharing program dominated the mobile realm like Instagram did. By shelling out a hefty sum, Facebook competes nicely with Twitter in the immediate photo sharing scene with the pseudo-hipster appeal of the Instagram edits. If Facebook bought Zynga, they would not have a monopolistic control over game development, as dozens upon dozens of companies exist in that department. By acquiring Instagram, though, they now dominate the market for photos and have a team of development experts in their team.