War of Wills - Zynga Refuses To Pay Facebook Credits' 30 Percent Tax
Zynga, the number one online game provider on Facebook is threatening to leave the social network. In a war of wills, Zynga, the popular game developer of Farmville and Mafia Wars is disputing Facebook's requirement that Zynga and other game operators use "Facebook Credits" as the only form of payment going forward, - providing Facebook a healthy 30 percent tax off of every transaction - in essence acting as a broker.
Zynga CEO Mark Pincus's response is "no way Jose"(or Zuckerberg, as the case may be!) In retaliation. Pincus is going as far as saying that they will pull all their games off of Facebook and launch their own social game network called Zynga Live. According to Michael Arrington's recent TechCrunch report, he notes that Zynga interprets Facebook's tactics "as little more than a protection racket." However, that's a little like the pot calling the kettle black, considering some of the 'scammy deals' Zynga has been accused of in the past (see, "ScamVille? A New Online Game? Who's Up For The Challenge?")
Facebook Credits (or Facebucks, as I like to call it) allows publishers to price make transactions with digital goods and services in a virtual currency totally controlled by Facebook. While still in beta and Facebook asking developers to provide them with feedback as to their likes and dislikes, it appears that Zynga is not swallowing the kool-aid. (see "Facebucks, First Social Networking Currency To Roll Off The Facebook Mint")
To add fuel to the fire, Facebook is also pinning Zynga to the wall demanding that they agree to a long term deal of remaining primarily on the Facebook platform. According to Arrington, Facebook is also "punishing" Zynga by shutting off notifications for Farmville while threatening to shut down Zynga's games altogether - until these negotiations are settled.
Zynga's response to that volley has been to launch Farmville on its own Web portal. With 65 million monthly active users, this exodus (if all players were to follow) could put a significant dent in Facebook's user base and their subsequent revenue stream from Zynga.
Facebook and Zynga have both declined to comment on the ongoing debate. This war of wills may go on for sometime, but it's hard to fathom that if a break was to occur, that either party would walk a way a winner. This scenario is definitely a case of the 'whole is greater than its parts.' Zynga needs Facebook's 400 million user base to draw from and Facebook needs Zynga to prompt a good percentage of the 400 to keep returning to their site to spend money playing more games.
Is this tug-of-war, a case of two titans flexing their muscle in hopes the other blinks first? Or is it a lover's spat, that due to no signed 'pre-nup' agreement, it might be financially better to kiss and make-up, then throw away the couple's combined fortune in a messy divorce? Vote in our POLL and let us know what you think?
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