Is Zynga Fighting an Uphill Battle?
Following the departure of VP Roy Sehgal and general manager Steve Schreck, shares of social gaming company Zynga (NASDAQ:ZNGA) added to Friday’s losses and traded over 9 percent lower on Monday afternoon. Aside from hemorrhaging talent, the company seems to have lost star-treatment status with Facebook (NASDAQ:FB).
Zynga’s new relationship status with Facebook catalyzed a sell-off on Friday when it was announced, sapping already fickle investor confidence from the struggling game developer. Monday’s sell-off is in many ways an extension of this evaporation in investor interest and was spurred on by news that not only will the company be shutting down Mafia Wars 2, but Facebook may be entertaining a new monetization model for smaller game developers.
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At a dinner hosted by Facebook CEO Mark Zuckerberg at the company’s Silicon Valley headquarters, game developers from companies such as Electronic Arts (NASDAQ:EA) tossed around ideas about how to breathe some life into the social gaming space. According to AllThingsD, one idea tossed around was a scaling fee model for smaller developers.
Currently, Facebook charges 30 percent for virtual goods sold inside its games. The model tossed around would fix the charge on virtual goods to the volume of goods sold, so smaller game developers would pay less. This would mean lower costs for new competitors hungry for Zynga’s dwindling user base…