Facebook and Zynga declare detente over virtual currency

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Facebook and Zynga have buried their pitchforks -- for now.

The two Silicon Valley companies Tuesday morning issued a joint release announcing a five-year agreement that officially puts an end to a game of corporate chicken in which both threatened to run over the other.

Facebook had wanted to start using a virtual currency called Facebook Credits used by all developers on its platform, with Facebook taking a cut of all sales. Zynga, which created Farmville, Mafia Wars and several of the most popular apps on Facebook, threatened to start taking its games elsewhere.


In a kiss-and-make-up statement, Zynga’s chief executive Marc Pincus and Facebook’s chief operating officer Sheryl Sandberg said Zynga is ‘testing Facebook Credits in select games and will expand to more titles over the coming months.’

They declined to say how much of each sale Zynga would get to keep and, conversely, what Facebook’s cut would be. In similar models, such as Apple’s iTunes and Microsoft’s Xbox Live, the owner of the platform typically takes a 30% cut, with developers receiving 70% of any sale.

Outside estimates of Zynga’s annual revenue range from $240 million to $600 million, according to Jeremy Liew, managing director of Lightspeed Venture Partners. That’s $72 million to $180 million a year potentially walking out the door of the San Francisco social game company.

Traces of the dispute remain, however. Here’s Pincus’ quote:

We are excited about Facebook’s long-term commitment to social gaming and Zynga, and look forward to working with them and other platform providers to bring the best social gaming experience to users worldwide.

And here’s Sandberg’s statement:

We look forward to continuing our work with Zynga and all of our developers to increase the opportunities on our platform.

The subtext is clear: If this doesn’t work out, there are other fish in the sea.

-- Alex Pham

Image Credit: Zynga.


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