Deal between social giants expires May 2015
Facebook has three years remaining in a deal which gives it 30 per cent of revenue from Zynga sales made through the social network.
On Wednesday the company offered unparalleled insight into how it operates by filing for a proposed stock floatation, of which it hopes to raise $5 billion.
Within the cache of financial data, Facebook revealed that Zynga accounted for 12 per cent, or about $450 million, of all the firm’s 2011 revenues.
“We currently generate significant revenue as a result of our relationship with Zynga, and, if we are unable to successfully maintain this relationship, our financial results could be harmed,” read the Facebook IPO.
Facebook takes a thirty per cent cut from virtual item sales made across its social network, though this amounts to a small fraction of total company revenues. Advertising accrues the vast majority of Facebook’s current revenues.
Yet the social network said, on top of the virtual currency it brings in, Zynga’s games “generate a significant number of pages on which we display ads from other advertisers”.
The IPO warned that, if Zynga was to abandon the social network, or lose popularity, or if it was to launch games on competing platforms, or fall out of favour with Facebook, the social network “may lose Zynga as a significant platform developer and our financial results may be adversely affected”.
In May 2010, Facebook entered a five-year agreement with Zynga. The games developer will give Facebook a thirty per cent cut of its virtual currency until May 2015, after which terms could be renegotiated.