Call the cops: Zuckerberg just killed Zynga

Facebook means business, and it needs to put the hammer down on the social-gaming service.

By TheStreet Staff Oct 24, 2012 12:46PM

thestreet.com LoGoBy Rocco Pendola  

 

This is the last thing Zynga (ZNGA) CEO Mark Pincus wanted to hear Facebook (FB) CEO Mark Zuckerberg say on his Tuesday earnings call:

 

Now, I want to talk specifically about games for a bit, because I think the story here is a little misunderstood as well. Overall, gaming on Facebook isn't doing as well as I'd like, but the reality is that there are actually two different stories playing out here. On the one hand, our payments revenue from Zynga decreased by 20% this quarter compared to last year. But the interesting thing is that the rest of the games ecosystem has actually been growing. Our monthly payments revenue from the rest of the ecosystem increased 40% over the past year since payments has been adopted. This evolution is pretty encouraging.

Wow.

 

Just a few weeks ago, I suggested that Facebook should put Zynga out of business immediately. While the social network didn't quite do that yesterday, it flashed serious signals.

 

Of course, this slap across the face comes on the same day as the multi-millionaire Pincus sent a memo to staff detailing austerity plans, which include blowing out 5% of the company's workforce.

 

It must feel awesome to work at Zynga these days.

 

You have a front row seat to an all-out implosion that just so happened to begin shortly after insiders sold your company's stock into a secondary offering for roughly $12 a share. Here's hoping Pincus will at least invite some of the recently fired to his recently purchased San Francisco mansion for a meal.

 

Zynga stock closed at $2.20 on Tuesday.

 

Remaining Zynga staffers must be wondering if the company will reprice their stock options, again, on the way down the sub-$2.00 abyss. If I were a Zynga wage slave, I would have given up -- but I'd know I have talent and deserve better, so I would burn through company time on LinkedIn and Monster.com (do they still exist?).

  

In any event, the New York Post was a bit harsh when it reacted to the end of baseball season in New York with the headline: Dear Yankees, We Don't Date Losers. It's only a game. Don't be such self-entitled sports fans.

 

Zuckerberg ain't playing, though. There's no time and no reason to be nice. He sent that message, loud and clear, not only to Pincus, but to Wall Street on Tuesday's call.

 

We want to build a strong monetization and economic engine to build Facebook into one of the world's most valuable companies.

 

We're focused on executing on our advertising, Payments, and new business opportunities to translate our product successes into a strong and valuable business.

 

"Valuable." The word only came up once in Facebook's first conference call as a public company, though not as an adjective to describe the business. And, while Facebook did refer to building "a strong and valuable company" one time in its last pre-IPO public filing, it wasn't used in quite the same context as it was yesterday.

 

Zuckerberg hit a crossroads. He decided to take both routes. He'll execute Facebook's social mission at the same time as making monetization the focal point of his vision.

 

The media and many Wall Street analysts turned on Facebook after its IPO. That, as it turns out, challenged Zuckerberg. That much is obvious based on how well and how aggressively he has answered the call.

 

He sure as heck isn't going to let some here-today, gone-tomorrow spare social gaming company get in his way.

 

At the time of publication, the author was long FB.

 

More from TheStreet.com

2Comments
Oct 24, 2012 1:54PM
avatar
Really, how did he kill Zynga? Zynga games can be played from anywhere? What's so special about Fbook except that it's a social disease!
Oct 24, 2012 3:54PM
avatar
Manipulation to raise the price prior to the lock up expirations so the insiders dont flood the market - if it broke 15 it would have broken 10 by years end etc etc ......

I still say it will be between 15 - 17 by end of year once this short covering and price manipulation ends --
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