Facebook's Triumph

Zynga's commitment to Facebook clears the path to the next stage in the platform's evolution.

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This week's announcement that Facebook has signed what amounts to a concord agreement with Zynga - operators of the social network's most popular and successful games, including the gigantic Farmville - came as something of a surprise to industry watchers. Whispers had been circulating for months suggesting that Zynga was falling out with the firm on whose platform it operates; rumours reached a crescendo last week with both firms reported to be on the verge of an acrimonious split.

Yet this week, suddenly, it's all peace and light between the two, with an agreement signed which keeps Zynga's games on Facebook and ensures that they will transition towards using the social networking platform's Facebook Credits currency more widely. Farmville players can breathe a sigh of relief, while Facebook's growing band of vocal detractors will snap their fingers and mutter darkly about pesky kids, recognising that a golden opportunity to take some of the wind out of Facebook's sails has passed.

Looking at the substance of this agreement, it's hard to characterise it as much other than a capitulation on Zynga's part. Realistically, it's Zynga that came to the table with grievances - Facebook has, in recent months, taken a number of moves that have not been positive for Zynga's business, including implementing systems which remove game updates wholesale from the frontpages of non-players, and moving towards enforcing Facebook Credits (from which it takes a 30 per cent cut) as the de facto currency for applications on its network.

Yet when it came down to it, Zynga blinked first. It really only had one thing with which to threaten Facebook - the removal of its games from the Facebook network, with the potential consequent loss of traffic and growth for Facebook. That's not an inconsiderable threat, of course - Farmville alone boasts tens of millions of sign-ins each day, and many of those users probably sign into Facebook specifically to play Farmville. Add in Zynga's other games, and this company alone could be accounting for a genuinely significant percentage of Facebook's daily sign-ins.

The question, of course, was whether this action would be tantamount to Zynga cutting off its own nose to spite its face - a question which has been answered fairly clearly by the firm's decision to look past the tensions of recent months and pin its colours all the more firmly to Facebook's mast.

While Facebook may no longer be quite so friendly a place for Zynga and its rivals to do business, it remains pretty much the only game in town. The torrid time which the social network has been having in the media in recent months disguises the fact that its growth continues to be stunning; indeed, one could reasonably ask whether the public would care quite so deeply about Facebook's faltering commitment to user privacy if it wasn't seen, quite credibly in some regards, as the "new Google". Its userbase is almost absurdly huge compared to even its closest rivals, and its dominance has reached a point where new startups will find reaching critical mass extremely difficult.

For just about anyone in the internet business, especially on the entertainment side, there's simply no question of trying to compete with Facebook at the moment. For now, at least, it has become an immovable object in the landscape; the question for entrepreneurs is no longer, "how do we beat Facebook?", but rather, "how do we integrate Facebook into our business plan?"

Given that, and given the extraordinary speed with which Facebook has become an important and immensely profitable platform for game development and distribution, it's worth taking a look at the differences which arose between Zynga and Facebook, and what they tell us about the future of this platform.

The core problem was that Facebook was forced to find a balance between the interests of game developers on its platform, and the interests of two other core groups of people - its users, and its accountants. The ability to attract new players into games using the social tools which Facebook provides is one of the most attractive features of the network platform, essentially giving developers the ability to use their existing player-base as powerful, inexpensive marketing drones. However, it's not quite so good for the users themselves, who found themselves inundated with updates and requests from games which they didn't play and had no interest in.

Facebook was forced to make a choice, and it chose to shut down this marketing channel to a large extent - providing a simple interface which allowed users to block messages from games easily and intuitively. Now Facebook game developers need either to get cleverer with their marketing - some inexpensive avenues do still exist - or to take Zynga's approach, which is to spend millions of dollars each month on Facebook display advertising. To many developers, this is tantamount to the end of the gold rush; the heady early days are over, and some smaller firms feel locked out of the market by Zynga's dominance and Facebook's policy changes.

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