Could Zynga Game On Without Facebook?

Can you build a long-term business on other people's platforms?

Illustration by Brian Staufferr
Illustration by Brian Staufferr

The oxpecker is an African bird that ekes out a living from the ticks that live on the backs of rhinoceroses. I imagine even it would be embarrassed by Zynga's dependency on Facebook.

That the details of the Zynga-Facebook relationship still had the capacity to shock--as they did when Zynga disclosed its financials in preparation for its initial public offering--underscores just how deeply the game maker's fortunes rely on Mark Zuckerberg's goodwill. Not only does Zynga derive "substantially all" of its customers and revenue (almost $600 million in 2010) through the social network, but in a five-year agreement that it signed last year, Zynga also promised to give Facebook a heads-up before it releases any new game on the social network and to grant Facebook exclusive access to those games.

Of course, Zynga is not alone. Silicon Valley is littered with companies whose fortunes are tied to what you might call "OPP"--other people's platforms. There are multitudes of Apple and Facebook app developers, Twitter clients, and Google-dependent content farms. These one-sided relationships rarely end well. So why do so many promising young developers resign themselves to building barnacles rather than great new ships?

Reason number one, perhaps inevitably, is that there can be a quick buck in being a barnacle. The hot new Facebook game, Twitter client, or iPhone app can see immediate revenue. What's more, the OPP strategy means developers can rely on well-known coding environments and built-in marketing opportunities (all those Mafia Wars status updates!), reducing costs. Plus, if your timing is excellent, you can cash out before the host turns hostile. Loren Brichter and Iain Dodsworth, for example, each created popular tweet readers (Tweetie and TweetDeck, respectively) that Twitter acquired--in Dodsworth's case for as much as $50 million.

Often, though, the success is short-lived, because barnacles have no say in where the ship is headed. Twitter is now avidly co-opting functions of the many businesses built around it--for instance, it developed its own link shortener. Meanwhile, Google rejiggered its algorithm to shuck off parasitic content farms, and Facebook's new rules for how apps can earn revenue on the site just happen to involve giving a cut to Facebook. Apple keeps changing its App Store rules and co-opting the features of popular apps such as Camera+ and Instapaper for its newest iOS, squeezing several of its best developers. As platforms get bigger, there's less concern about goodwill. Steve Jobs never apologizes to the creators who populate his App Store.

Can companies that start off as barnacles evolve into free-swimming giants? Not easily. In the tech industry, the most promising path to victory has always been to create your own platform (see Microsoft, Apple, Facebook, etc.) or to create technologies that work across all platforms (see Netflix). The smartest new social startups are adhering to this latter strategy. DataSift, for instance, is a three-year-old U.K.-based firm that provides brands with tools to search and analyze trends across several different social networks. The firm is one of only two companies in the world that Twitter has allowed to re-syndicate its content. "But we're certainly moving carefully," says Darren Patterson, DataSift's COO. "The Twitter license is a huge opportunity for us, but it's also a potential land mine, so we've been really focused on getting as broad coverage beyond Twitter as we possibly can."

This now seems to be Zynga's strategy too. The company has recently acquired a handful of iPhone developers and one studio, Area/Code, which has built so-called real-world games that take place beyond any tech giant's walled garden. The hope is that these firms will help give Zynga access to markets outside Facebook's reach.

But pulling this off will be tricky. Indeed, it's difficult to think of any other tech company that has managed to outgrow the platform that helped it hit the big time. For years, Zynga has feasted off Facebook's back. Venturing off now in search of a new meal might require such a dramatic change in diet that investors will find it hard to stomach.

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3 Comments

  • Pro-Edge CCTV Installation

    I don't think Facebook will be gone too soon..
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  • ReedPrinters

    they might be one of those java games? 
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