Are Facebook and FarmVille Developer Zynga in a Standoff?

FarmVille layout

 Zynga, makers of feed-cluttering, endless-status-update-generating agribusiness simulator FarmVille, is one of the biggest and most prominent Facebook developers. But that doesn't mean they get along. Their relationship as of late has been described as "intense" and brittle, and it seems to stem from Facebook's recent move into unified credits.

The credit system, in which all in-game purchases must be conducted in FaceBucks (patent pending on that winner of a pun, Zuckerberg) instead of real currency. No problem there. But pushing their own credit system means Facebook can take whatever kind of share they want, and in this case it seems to be a whopping 30% profit. That's money that Zynga would have simply kept before the introduction of the credit system, and the company is understandably irked.

Chris Dixon terms this the "buyer-supplier hold up." Zynga depends on Facebook's network for their business, so if Facebook imposes this kind of tax, the company's options are pretty limited. But Zynga is at least keeping the window of independence cracked a bit—they're letting users play FarmVille at Farmville.com, for one thing. It remains to be seen if FarmVille could remain popular without the warm nerdy embrace of Facebook, but it's not in Facebook's best interest to let them find out. Facebook wants FarmVille and its dedicated users on its network, looking at ads and submitting data. If Zynga flees, Facebook is worse off.

If buyers of traffic (e.g. app makers) fear future hold up, they are less likely to make investments in the platform. The biggest mistake platforms make isn’t charging fees (Facebook) or competing with complements (Twitter), it’s being inconsistent. Apple also charges 30% fees but they’ve been mostly consistent about it. App makers feel comfortable investing in the Apple platform and even having most of their business depend on them in a way they don’t on Facebook or Twitter.

This is pretty concerning for both Zynga and Facebook, though really it's of much less importance to Facebook (whose livelihood does not depend on this specific deal). But as that quote above shows, it could mark a precedent that would be unwanted. Be nice to your developers, Facebook. You need them as much as they need you. Remember: if developers and their apps didn't matter, Palm would have already won the smartphone war.

Dan Nosowitz, the author of this post, can be followed on Twitter, corresponded with via email, and stalked in San Francisco (no link for that one—you'll have to do the legwork yourself).

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