Facebook vs. Zynga: The Turf War

Zynga and Facebook have had an extremely symbiotic and mutually lucrative relationship to date, but after the social network tried to use its weight to hold its leading social gaming application maker captive, Zynga looks to be mad as hell.

Let’s quickly recap how, up until this recent turn of events, co-dependent Zynga and Facebook have been:

* Zynga’s FarmVille and other social games have given many users a reason to join and spend enormous amounts of time on Facebook;

* By dedicating nearly 100 percent of its energy to building Facebook games, Zynga got tremendous traction that built on itself and through viral channels;

* Zynga’s ad buys have accounted for a significant portion of Facebook’s revenue for the last couple of years;

* Zynga was able to monetize and grow to a formidable status in the social gaming market in an incredibly short time (it was recently estimated to be worth $5 billion);

* Zynga CEO Mark Pincus himself was an early Facebook investor and Zynga, like Facebook, has significant investment from Facebook investor Digital Sky Technologies.

Zynga CEO Mark Pincus

But the social network and the social game builder have hit a rough patch. Zynga is by all reports not going to take it any more. Facebook wants to unite payments across its platform with Facebook Credits, from which it takes a hearty 30 percent cut. Zynga and other social game developers feel that’s usurious. And this was after Facebook altered its messaging channels, directly impacting Zynga’s ability to connect with its users and recruit new ones.

After negotiations with Facebook over credits and a firmer long-term relationship turned ugly, Zynga is now moving forward with plans to become a gaming platform of its own, reports TechCrunch, which published this email from an anonymous source:

Pincus announced at a 5pm meeting yesterday at Zynga that Zynga was going to launch a social game network called Zynga Live. The Zynga Live initiative was a social gaming network. Facebook and Zynga has been negotiating on Facebook Credits and the talks turned for the worst. In the negotiation process, Facebook shut off Zynga’s feeds and threatened to shut down games. Zynga in the process threatened to completely leave Facebook and prepared to do so in the previous upcoming weeks.

If you want to know what Zynga’s gaming network might look like, check out our story on Pincus’ keynote from the Inside Social Apps conference a couple weeks ago, a call to arms for app developers to preserve the integrity of their “app economy.”

Pincus said he thinks a proper application economy will require tools that create a consistent social gaming experience as users move between applications on the web. First, an “app bar,” would follow users around, enticing them to navigate back to their games — like the one from Meebo (which is tying up with other social web services through XAuth), the “social games bar”launched today by Heyzap, or the one expected to be launched by Facebook soon. Pincus said such efforts have the added benefit of increased engagement and revenues for publishers and networks who use the bar.

Second, apps need properly tuned user communication channels, Pincus said. These should be open enough to allow apps to grow through reaching out to their users, but closed enough to prevent obtrusive and annoying communication.

Third, an app economy would require universal social feeds that follow users around the web. This would allow users to connect feeds between destinations and activities, for instance sending activity in one game to a narrowcasted group of their friends on a certain network. When Zynga tested narrowcasting, or enabling users to share updates with a certain group of their friends, sharing increased 400 percent, Pincus said.

Facebook CEO Mark Zuckerberg

Pincus’ rallying cry for the app economy can be directly contrasted with Facebook CEO Mark Zuckerberg’s announcements at his company’s f8 conference the day after. Zuckerberg hardly paid lip service to on-Facebook applications at f8 — he instead laid out Facebook’s plans to colonize the rest of the web. I talked to one app developer in the parking lot who noted that there wasn’t a single session directly relevant to him throughout the whole day.

Zuckerberg’s new focus was also completely off-topic for Zynga’s interests. It seemed as if Facebook used Zynga to get to its current scale — remember, before the Facebook platform launch in 2007, the network had only 24 million active users! — and now has little reason to give it favorable treatment. But even so, Zynga is not going to go independent anytime soon. Dropping Facebook would be dropping its whole business. This is about diversifying.

Please see the disclosure about Facebook in my bio.