Zynga 2011 Annual Report Download - page 11

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Table of Contents
may in the future produce legislation or other governmental action that could require changes to our games or restrict or impose additional costs
upon the conduct of our business.
Some of our games are based upon traditional casino games, such as poker. We have structured and operate our poker game, Zynga Poker
,
with the gambling laws in mind and believe that playing Zynga Poker
does not constitute gambling. We also sometimes offer our players various
types of sweepstakes, giveaways and promotion opportunities. We are subject to laws in a number of jurisdictions concerning the operation and
offering of such activities and games, many of which are still evolving and could be interpreted in ways that could harm our business. Any court
ruling or other governmental action that imposes liability on providers of online services could result in criminal or civil liability and could harm
our business.
In the area of information security and data protection, many states have passed laws requiring notification to users when there is a security
breach for personal data, such as the 2002 amendment to California’s Information Practices Act, or requiring the adoption of minimum
information security standards that are often vaguely defined and difficult to implement. The costs of compliance with these laws may increase
in the future as a result of changes in interpretation. Furthermore, any failure on our part to comply with these laws may subject us to significant
liabilities.
We are also subject to federal, state and foreign laws regarding privacy and protection of player data. We post our Privacy Policy and
Terms of Service online, in which we describe our practices concerning the use, transmission and disclosure of player data. Any failure by us to
comply with our posted privacy policy or privacy related laws and regulations could result in proceedings against us by governmental authorities
or others, which could harm our business. In addition, the interpretation of data protection laws, and their application to the Internet is unclear
and in a state of flux. There is a risk that these laws may be interpreted and applied in conflicting ways from state to state, country to country, or
region to region, and in a manner that is not consistent with our current data protection practices. Complying with these varying international
requirements could cause us to incur additional costs and change our business practices. Further, any failure by us to adequately protect our
players’ privacy and data could result in a loss of player confidence in our services and ultimately in a loss of players, which could adversely
affect our business.
In addition, because our services are accessible worldwide, certain foreign jurisdictions have claimed and others may claim that we are
required to comply with their laws, including in jurisdictions where we have no local entity, employees, or infrastructure.
ITEM 1A. RISK FACTORS
Our business is subject to many risks. If any of the following risks are realized, our business, operating results, financial condition and the
trading price of our Class A common stock could be materially and adversely affected.
Risks Related to Our Business and Industry
If we are unable to maintain a good relationship with Facebook, our business will suffer.
Facebook is the primary distribution, marketing, promotion and payment platform for our games. We generate substantially all of our
revenue and players through the Facebook platform and expect to continue to do so for the foreseeable future. Any deterioration in our
relationship with Facebook would harm our business and adversely affect our operating results.
We are subject to Facebook’s standard terms and conditions for application developers, which govern the promotion, distribution and
operation of games and other applications on the Facebook platform. We have entered into an addendum to these terms and conditions pursuant
to which we have agreed to use Facebook Credits, Facebook’s proprietary payment method, as the primary means of payment within our games
played through Facebook. This addendum expires in May 2015.
7