Zynga, the embattled social-gaming company, has watched its shares fall as investors get the first chance to react to a modified contract the company signed with Facebook.
According to documents filed with the Securities and Exchange Commission yesterday, the amended agreement between the companies no longer requires Zynga to display Facebook ads on its site, use Facebook Credits, or develop titles only for the social network's platform. In exchange, Zynga won't be allowed to promote its games inside other titles it has developed that people are playing on the social network.
The news was apparently bad news for investors. Zynga's shares are currently down 6.5 percent to $2.45. That share price is up compared to its 52-week low of $2.09, but far from Zynga's 52-week high of $15.91 back in March.
In its last quarterly earnings report, Zynga revealed that it generated 80 percent of its revenue from Facebook. Although neither Facebook nor Zynga would say how the modified deal might impact revenue, investors ostensibly believe that Zynga will get hit hard in the modified arrangement.
Still, Zynga, which has watched its financial performance dwindle as it's trying to refocus its operation on mobile and partnerships with third-party developers, is still offering some of the most popular games on Facebook. A modified agreement between the companies likely won't stop a committed CityVille player from continuing to play that game on the social network. The loss of the ability to draw those players to other Zynga games through cross-promotion, however, could prove troublesome.
To allay fears, Zynga Chief Revenue Officer Barry Cottle yesterday issued a statement on the amended agreement, saying that the deal will help Zynga achieve its overarching goals.
"Our amended agreement with Facebook continues our long and successful partnership while also allowing us the flexibility to ensure the universal availability of our products and services," Cottle said.