How badly is the drowning Zynga holding back Facebook?

zynga revenue

At the beginning of 2011, Nokia’s CEO described his company as “standing on a burning platform,” and that the company needed to innovate and fast lest it drown. Zynga’s outspoken CEO Mark Pincus didn’t offer up that sort of call to arms to his staff on Tuesday. He just fired them en masse ahead of the company’s third quarter earnings report.

Zynga’s Austin office, the studio behind The Ville, lost 2/3 of its team. Zynga Boston was closed entirely. More layoffs rocked its Chicago office. More than 100 employees in all were let go and outlets like Gamasutra claim that its branches in Japan and the UK are next on the chopping block. It will also cease operations for 13 of its social games.

Zynga shares much with Nokia. The Finnish mobile phone maker doesn’t have a whole lot in common with Zynga in terms of product. What it does share is a sudden, shocking riches to rags story. Between 2009 and 2011, Nokia went from the biggest, most profitable phone maker in the world to an antiquated, struggling corporate beast without an identity. Now as the social gaming boom is changing dramatically—bringing in more players but less revenue—Zynga is at risk of falling into obsolescence just one year after it went public.

It’s not just Zynga’s employees and shareholders that are falling with the company. Facebook, the social network that grew fat on its symbiotic relationship with Zynga, also stands to lose much as the game maker drowns. Facebook actually had good news for its partners at the end of the third quarter. Revenue’s for the July to September period were up 32 percent year on year. The social network also said that it’s lessening its reliance on Zynga for revenue. Payments from Zynga games fell 20 percent, but revenue from the rest of its gaming partners grew 40 percent.

Those numbers belie the real losses though. Revenue from payments and fees, the segment of Facebook’s business that includes gaming, dropped 9 percent from the previous quarter, falling from $192 million to $176 million. Zynga is still responsible for 43 percent of that revenue. Zynga’s bleeding isn’t being replaced fast enough by other gaming company’s operating on the network to keep fees and revenues growing.

“Gaming on Facebook isn’t doing as well as I’d like,” said Mark Zuckerberg on Tuesday. His company’s reliance on Zynga has been lessened in the past 12 months, but not enough to keep gaming growing. Facebook also won’t enjoy any of the cost relief brought about by Zynga’s new slash and burn approach. Luckily for Facebook it doesn’t need it. Zynga, now more than ever, needs Facebook’s help and frankly the network has no incentive to offer a helping hand.

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