Midday Report: Facebook Gaming On the Rise; How to Monetize?
Produced by Drew Trachtenberg
Game playing on Facebook (FB) is soaring: The company says the number of people paying to play games on the social network has jumped by 24 percent from a year ago.
Two hundred-fifty million people play games on Facebook each month. That's about one in five Facebook users, and represents a solid increase from a year ago, and shows that there's still plenty of room for growth in this area.
All of these gamers could help Facebook meet one of the big criticisms on Wall Street – that it needs to find a way to monetize its vast platform of more than one billion users.
Games can help it do so in two ways. First, it makes money on the ads that show up when you play. Facebook also takes a percentage of the fees we pay to game companies.
Gaming also means a lot of money for game developers: Facebook says it paid developers $2 billion dollars last year. However, Zynga (ZNGA) is no longer the main attraction. With popular games such as Farmville and its spinoffs, Zynga grew rapidly by offering its games directly through Facebook.
But the two companies have had a falling out recently and are moving in separate directions. One problem from Facebook's point of view was that many of its users were angered by Zynga's onslaught of spam. So Facebook has sought out more developers, and placed tighter restrictions on how they can market to users.
As for Zynga, players of its games are no longer required to have a Facebook account to play. It's also setting up its own way of collecting customer fees on virtual purchases.
But users will no longer get prompts about challenging their Facebook friends to play Zynga games with them.
It hasn't been fun and games for shareholders of either company. Since going public in 2011, Zynga shares have lost 64 percent of their value. Facebook is down 33 percent since its stock market launch last spring.