In 2010 the relationship between Facebook and Zynga became strained over Facebook’s demand that Zynga use Facebook Credits (and swallow Facebook’s 30% fee) for games. The relationship became so strained that Zynga was preparing to launch its own network outside of Facebook.
Like the 1962 U.S. standoff with the Soviet Union over the Cuban Missile Crisis. If things went to war both sides would lose big. But neither side wanted to back down.
Eventually Zynga did back down, swallowed the fee, and went on to its IPO.
I was reporting on the strain at the time, with sources close to both companies. But there was information I was never able to get my hands on. Emails back and forth, supposedly, that were alarming, entertaining, or just plain threatening, depending on your point of view. I tried hard, and failed, to obtain those emails.
Lawyers could get their hands on those documents, though, as part of a lawsuit. And they’d likely become public if that happened. That’s why this Facebook Credits lawsuit is more than just a little bit interesting to me. It’s mostly just historical curiosity at this point, but I’d like to know how close they were to firing the nukes.
Uncrunched 
Must be a slow news day…
… nope.
The information IS important for many reasons — mainly because it would shed some light on FB management’s attitudes, intentions, business practices, etc., essential for those considering doing business with them now or in the future…
Correction “… it would shine some light on FB management’s attitudes, intentions, business practices, etc…”
@thetrufus – hardly a slow news day (!)
the whole FB/Zynga monetization fight plays a key role in the larger picture of technology disruption around “currency” and payments and this has major implications for Visa, PayPal and everyone else in payments
David Evans shows how Credits expanded use could “eventually transform today’s social gaming currency into tomorrow’s global smart currency” and he breaks it all down here:
http://pymnts.com/briefing-room/featured-briefing-rooms/facebook-commerce/Facebook-Credits-Do-Payments-Firms-Need-to-Worry/#.T00nklM75Dg.twitter
Michael,
In their IPO papers, Facebook indicated that they have some terms that they worked out with Zynga in regards to the payments. I took that to mean that the actual amount being charged to Zynga is actually considerably far less than the stated 30% due to the mutual reliance that the two businesses have. I haven’t been able to confirm that though.
Do you have that info?
everything the companies ever said was that it was the same deal for everyone.
Yeah. I suppose I was sidetracked by this section of the filing:
“In May 2010, we entered into an addendum to our standard terms and conditions with Zynga pursuant to which it agreed to use Facebook Payments as the primary means of payment within Zynga games played on the Facebook Platform. Under this addendum, we retain a fee of up to 30% of the face value of user purchases in Zynga’s games on the Facebook Platform. This addendum expires in May 2015.”
The words “addendum to our standard terms” and “up to 30%” threw me off.
Never has any side said they were getting any discounts. The only additional deals that exist between the two are revenue share on the ads.
Facebook credits hurt the integrity of many games, as a developer I would never use such system since it gouges my money and it just shows that “I am a whore, buy credits to get further in the game you might actually enjoy”
From an monopoly/anti-trust perspective, is Facebook’s requirement to use their credit system any different than Apple’s requirements in the app store?
There is no sense to move from a platform in which you earn 90% of your total revenues. I like to think that people are thinking that Facebook is going down. Instead of being what it was now it is a Facebook/Twitter/Diaspora platform which is missing the point.
Hope it doesn’t end like Emacs.
I think it’s note-worthy that this is exactly the same way that Apple phrases such developer payment relationships and let’s face it – the Apple AppStore situation is hardly an un-enviable one.