Zynga 2012 Annual Report Download - page 21

In addition, we have benefited from Facebook’s strong brand recognition and large user base. If Facebook
loses its market position or otherwise falls out of favor with Internet users or other factors cause its user base to
stop growing or shrink, we would need to identify alternative channels for marketing, promoting and distributing
our games, which would consume substantial resources and may not be effective, or available at all. As noted
above, Facebook has broad discretion to change its terms of service and other policies with respect to us and
other developers, and those changes may be unfavorable to us. For example, starting in April 2011, Facebook’s
policy requiring that applications on Facebook accept only its virtual currency, Facebook Credits, as payment
from users, provided Facebook with a greater share of payments made by our players than it did when other
payment options were allowed. Facebook may also change its fee structure, add fees associated with access to
and use of the Facebook platform, change how the personal information of its users is made available to
application developers on the Facebook platform or restrict how Facebook users can share information with
friends on their platform or across platforms other than Facebook. Beginning in early 2010, Facebook changed its
policies for application developers regarding use of its communication channels. These changes limited the level
of communication among users about applications on the Facebook platform. As a result, the number of our
players on Facebook declined. In addition, Facebook’s policy requiring that applications on Facebook accept
only Facebook Credits as payment from users provided Facebook with a greater share of payments made by our
players than it did when other payment options were allowed. Our current agreements with Facebook allow our
users to use Zynga-branded game cards for the redemption of Facebook Credits in our games on Facebook. Our
game cards that were previously printed and delivered to our distributors and retailers may continue to be sold to
game players until all such cards are sold. We do not plan to print and sell more of our cards for redemption on
the Facebook platform; however, we have the right to sell our own game cards for use on other platforms,
including the With Friends Network after March 31, 2013. Our future bookings and revenue may be negatively
impacted during this transition period and upon the expiration of our game card program. Any such changes in
the future could significantly alter how players experience or interact within our games, which may harm our
business.
We operate in a new and rapidly changing industry, which makes it difficult to evaluate our business and
prospects.
The social game industry, through which we derive substantially all of our revenue, is a new and rapidly
evolving industry. The growth of the social game industry and the level of demand and market acceptance of our
games are subject to a high degree of uncertainty. Our future operating results will depend on numerous factors
affecting the social game industry, many of which are beyond our control, including:
• our ability to extend our brand and games to mobile platforms and the timing and success of such
mobile game launches;
• continued worldwide growth in the adoption and use of Facebook and other social networks;
• changes in consumer demographics and public tastes and preferences;
• the availability and popularity of other forms of entertainment;
• the worldwide growth of personal computer, broadband Internet and mobile device users, and the rate
of any such growth;
• the transition of our players from the web to mobile devices; and
• general economic conditions, particularly economic conditions adversely affecting discretionary
consumer spending.
Our ability to plan for game development, distribution and promotional activities will be significantly
affected by our ability to anticipate and adapt to relatively rapid changes in the tastes and preferences of our
current and potential players. New and different types of entertainment may increase in popularity at the expense
of social games. A decline in the popularity of social games in general, or our games in particular would harm
our business and prospects.
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