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November 30, 2012

Facebook can now develop their own games, Zynga shares suffer

Facebook and Zynga have changed their developer agreement to allow the social network to develop its own games, causing the gaming company’s shares to tumble.

By Tineka Smith

Zynga

The new agreement means that Facebook does not have exclusive rights to Zynga games and can now launch their own starting March 2013.

However, the social network told PC Advisor that it does not plan to venture into social gaming.

"We’re not in the business of building games and we have no plans to do so. We’re focused on being the platform where games and apps are built," said Facebook.

The amendments also mean that Zynga is no longer required to feature Facebook ads and offer Facebook credits as a form of payment.

While Zynga will now be able to operate an independent gaming site, the company has lost the ability to promote its service on Facebook’s network of 1 billion members.

Zynga users will also lose the ability to network with Facebook friends through Zynga or post about their Zynga progress on the social network.

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Games like Farmville will still be available on Facebook’s site but no longer have the ability to feature cross promotions.

"Effective on March 31, 2013, certain provisions related to web and mobile growth targets and schedules will no longer be applicable and Facebook will no longer be prohibited from developing its own games," Zynga said in a regulatory filing. "Further, Zynga’s right to cross-promote between games on the Facebook web site will be governed by Facebook’s standard terms of service."

News of Facebook loosening its ties with the social gaming company caused Zynga’s shares to fall by 12% to $2.30.

The social gaming company has had a rough year, recently reporting a net loss of $52.7m for its third quarter.

Online game revenues totalled $285.6m, a decrease of $2.3m from Q3 2011 and a 2% decrease from Q2 2012.

Four executives left the company this year including its finance chief who joined Facebook earlier this month.

Zynga filed with SEC to raise up to $1bn for its IPO on July 1, 2011. The company began trading on NASDAQ in December and was responsible for generating nearly 15% of Facebook’s revenues last year.

Please follow this writer @Tineka _S or comment below.

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