Zynga has had a lockhold on Facebook gaming, paying $5 to $8 million per month for banner ads within Facebook. (CEO Mark Pincus is a Facebook minority investor.) Zynga’s success will undoubtedly slow when Facebook changes their money handling to proprietary Credits, charging up to a 30% processing fee (compared to PayPal’s 10%). Zynga is expected to make $460 million this year in revenues, ninety percent of which will come from the sale of virtual goods. Under the Credits plan, Facebook’s cut would be roughly $125 million. Currently, gamers give Zynga money thru credit card or PayPal. Zynga is PayPal’s 2nd largest merchant, after eBay. Details on Facebook Credits emerged at last week’s f8 Facebook developer conference.
There have been constrictions put on Zynga within Facebook, because of its excessive updates both within games and on gamers’ Facebook Walls. Until a few months ago, Zynga was able to elicit permission once from a gamer in order to publish game-related updates on the gamer’s Wall. Because of backlash against the spammy updates, including the creation of a 5 million member Facebook group named ‘"I Don’t Care About Your Farm, Or Your Fish, Or Your Park, Or Your Mafia!!!" and a 2 million member group named "Not Playing Farmville", Zynga now puts pop-ups in-game, asking sometimes a dozen times per gamer visit for one-time access to the gamer’s Wall. Gamers frequently deny Zynga access and Zynga’s business has slowed a bit.
Zynga recently transitioned to iPhone gaming, but because the iPhone doesn’t yet allow for in-app purchases, it has been forced to sell expensive versions of its apps like Live Poker, with chips included. But that’s about to change with the iPhone 3.0 software due this summer. The new software’s in-app purchases could very well take Zynga’s revenues even higher.
[Editor’s Note: Mary is on Level 60 of Farmville and Level 56 of Petville. –mrh]