Facebook makes majority of it’s revenue from advertising, but Zynga is a big piece of the pie with their gaming apps. About 12 percent of Facebook’s revenue comes from Zynga. Check out the graph below for a breakdown of their revenue.
12 percent of Facebook’s 4 billion plus revenue will equate to about $480,000,000!
This is how Facebook describes Zynga’s important in the SEC filing:
In 2011, Zynga accounted for approximately 12% of our revenue, which amount was comprised of revenue derived from payments processing fees related to Zynga’s sales of virtual goods and from direct advertising purchased by Zynga. Additionally, Zynga’s apps generate a significant number of pages on which we display ads from other advertisers. If the use of Zynga games on our Platform declines, if Zynga launches games on or migrates games to competing platforms, or if we fail to maintain good relations with Zynga, we may lose Zynga as a significant Platform developer and our financial results may be adversely affected.
With the Facebook credit system, every time players of Farmville and games similar buy something of the virtual game, Facebook gets a percentage so this is where most of the $480 million Zynga contribute to Facebook’s revenue. Facebook also display their ads on the sidebar; so when people play Zynga games Facebook also get ad impressions.
When Facebook went public, it affected Zynga’s stock prices, the two companies are going to have a long history and very well need each other. Now Facebook is a public company they need to gain other sources of revenue to justify the 100 billion valuation. As time goes on I believe Zynga will slowly become a smaller piece of the pie as advertising revenue increases as Facebook figure out, how to make them work on mobile devices, in which half of their users engage from.
Therefore, to break it down simple, Facebook get their money from Zynga through:
- Processing payments fees
- Advertising on Zynga app platforms
- Display ad impression on Zynga apps