Saturday, October 6, 2012

Zynga Inc (NASDAQ:ZNGA) shares slump Again, Facebook Inc(NASDAQ:FB) follows

Social networking site Facebook Inc(NASDAQ:FB) and game developer have a symbiotic relationship with each other.

Their shares rise and fall in tandem.

Late Thursday Zynga Inc(NASDAQ:ZNGA)said that it would be reporting weak quarterly earnings and revenues and also cut the earnings forecast for the full year. Zynga provides the popular `Farmville' game for Facebook as well as other social games

Zynga shares fell and on Friday it closed down nearly 12 percent at $2.48 a share. Shares in Facebook also slumped in sympathy and ended down 4.7 percent at $20.91 on Friday.

A significant portion of revenues of Zynga is generated from Facebook and any problems that Zynga faces is bon to have a spin-off effect on Facebook as well.

In fact recently Zynga has been trying to reduce its dependence on Facebook by creating games that are not for the Facebook platform and has also made an entry into the gambling business.

For Zynga, the continued success of its partnership with Facebook will also hinge on how well the social networking site is able to monetise its billion users.

Finally all these users have to be converted into revenues and profits and the whole issue is what Facebook is doing in that direction.

Facebook has been very late in getting on to the mobile bandwagon and it is only now that it is waking up to the fact that so many of its users are no longer on their desktops or PCs but are there on their mobile devices.

While both founder Mark Zuckerberg and Chief Operating officer Sheryl Sandberg recently made all the right noises, we still have very little clarity about what the company's game plan is for the near and medium term.

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