Facebook estimates 4 percent of Q1 revenue came from ads on Zynga app pages, 11 percent from Zynga directly
Facebook estimates that about 4 percent of its first quarter revenue can be attributed to ads displayed on Zynga app pages, according to an updated regulatory filing. An additional 11 percent of Q1 revenue came from direct payments from Zynga.
Although Zynga accounted for 15 percent of Facebook’s $1.058 billion in revenue from Jan. 1 to March 31, that’s a lower percentage than the 19 percent it was responsible for in 2011. Investors are likely to see this as a positive development. Such reliance on a single company can be risky, particularly as Zynga expands its games to additional platforms beyond Facebook, including Google+, mobile and its own Zynga.com.
When the social network first filed for an initial public offering in February, it revealed that the social game company accounted for 12 percent of its 2011 revenue as a result of virtual goods payments and advertising, but it did not include revenue it generated indirectly from users visiting Zynga app pages that include third-party advertisements. Facebook says 7 percent of its total 2011 revenue was generated this way, compared to 4 percent in the first quarter of this year.
A greater proportion of Zynga-generated revenue now comes directly from the social games company rather than ads displayed on its app pages. This is likely related to Facebook making Credits mandatory for all social games in July 2011 and subsequently taking 30 percent of revenue from all sales of virtual goods. It is also possible that Zynga is spending more to acquire new users through advertising, although since the company does a lot to cross-promote its games to existing players, this might not be as much of a factor.
Either way, it’s likely Facebook will continue to reduce its dependence on Zynga as other developers build on its platform. More companies from a broader range of industries are developing applications on Facebook, leading to additional ad revenue for the social network. As these apps develop monetization strategies as social games did with virtual goods, Facebook can decide to take a similar cut of revenue in the future. For example, the company could take a proportion of subscription payments for Spotify, which currently requires users to have a Facebook account to sign up.