Facebook Inc (FB) Games Business Growing, Should Zynga Worry?

 Facebook Inc (NASDAQ:FB) game business is thriving and performing better than ever, despite ending the partnership with Zynga Inc (NASDAQ:ZNGA) six months ago.Facebook Inc (FB) Games Business Growing, Should Zynga Worry?

Facebook Inc (NASDAQ:FB) posted its best three months period ever in the games segment between January and March. Facebook games earned revenue of around $213 million from payments, a gain of 15 percent from the previous year period.

Gaming a small segment, serves big purpose

The gaming business of Facebook Inc (NASDAQ:FB) is a small segment from the revenue point of view and initially did not exhibit such performance. Facebook earns a commission of 30 percent on selling any digital goods of game makers on the web. The largest social networking site is aiming at developers with different skills, which will safeguard the company from the failure of any one developer, says a report from CNET.

Compared to the advertising segment, the game segment is significantly small, but it helps the company to get longer hours from users. Wedbush analyst Michael Pachter said “Facebook is just trying to give people more options while on Facebook.” Pachter said.

Sean Ryan, the social network’s director of games partnerships also echoed the similar views and said that games keep the users happy and allure them to come back to play again.

Free from Zynga

Zynga Inc (NASDAQ:ZNGA) designed some of the most popular games for Facebook Inc (NASDAQ:FB) and became a leading game maker in the industry. The games from Zynga added 12 percent to the revenue of Facebook in 2011. Facebook was dependent on Zynga for a major portion of earnings before it issued its IPO, which was one of the concerns of the investors.

However, the fears have been dwarfed by the tremendous performance of the Facebook game segment. Initially, the game segment of Facebook was handled by a small team in the United States. However, the picture is bigger now as there are teams managing the games across Europe, the middle East, Africa and Asia.

Facebook encouraging mobile game developers

Facebook Inc (NASDAQ:FB) gives vital inputs about social networking strategies to the game makers. If a game is a hit or not, is decided by the ability of the developer to utilize all resources like news feed, mobile, notifications, ads and so forth. For instance, Criminal Case developed by Pretty Simple has 34.5 million active users on Facebook and the developer uses the News Feed in a better way.

Facebook Inc (NASDAQ:FB) is also making efforts to promote the smaller mobile game developers whom it will assist through marketing and distribution efforts probably by its own app install ads. Facebook will garner direct revenue through this.

 “We’re trying to figure out on mobile other ways to help developers succeed,” tells Ryan. “We don’t know exactly how yet.”

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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