Zynga 2012 Annual Report Download - page 53

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developing the With Friends Network, our own social gaming network for web and mobile players. We
will continue to invest heavily in developing our mobile platform to ensure our players can continue to
play our games anywhere, anytime.
•RMG. In October 2012 we entered into an exclusive partnership agreement with bwin.party, a leading
international RMG operator, to develop, test and operate certain real money online poker and casino
games in the United Kingdom. We expect to launch our first RMG products in the first half of 2013,
which include table games such as slots, roulette and blackjack. In December 2012, we filed an
Application for a Preliminary Finding of Suitability with the Nevada Gaming Control Board.
•Cost Reduction and Product Prioritization. We have implemented cost reduction initiatives to better
align our operating expenses with our revenue, including a reduction in force of 155 employees, or
approximately 5% of our current workforce, and also steps to rationalize our product pipeline, reduce
marketing expenses and consolidate certain facilities, and we plan to continue to manage costs.
•2012 Operating Results. Our operating results declined as compared to 2011. Total bookings decreased
by 1% and adjusted EBITDA decreased by 30% compared to 2011. These results primarily reflect
weakness of certain games within our “invest and express” category and include an impairment charge
of $95.5 million (excluding any tax impact) related to the intangible assets previously acquired in
connection with our purchase of OMGPOP.
•Facebook Agreement. In June 2012, Facebook announced its plans to discontinue the use of Facebook
Credits and instead will offer pricing in local currencies. Facebook will continue to retain 30% of the
stated price for transactions on their platform under the terms of their new payments program. We
expect to begin our transition away from Facebook Credits and to adopt Facebook’s local currency-
based payments model in the first half of 2013.
On November 28, 2012, we amended our agreements with Facebook such that our use of the Facebook
platform and any data from Facebook on any Zynga service offered through a Zynga game page (for
example, the With Friends Network) will be governed by Facebook’s standard terms of service
beginning on March 31, 2013. Under the current terms of service, we will be limited in our ability to
use a Facebook user’s friends list and Facebook’s communication channels to promote the With
Friends Network. In December 2012, Facebook amended its standard terms of service to prohibit
(i) apps on the Facebook canvas from promoting or linking to game sites other than Facebook and
(ii) the use of emails obtained from Facebook to promote or link to desktop web games on platforms
other than Facebook. We will be prohibited from cross-promoting traffic to games that are offered on
platforms other than Facebook from our games on Facebook. We will not be permitted to use e-mail
addresses obtained from Facebook to promote desktop web games that are not on the Facebook
platform, subject to certain limited exceptions.
Beginning on March 31, 2013, we will no longer be obligated to display Facebook advertising units or
utilize Facebook’s payment services (Facebook Credits and/or local-currency based payments) on any
Zynga game pages. We will have the right to process our own payments, and Facebook will no longer
have the right to receive 30% of the proceeds from payments made on the With Friends Network.
In addition, as of March 31, 2013, we will no longer be required to use Facebook as the exclusive
social platform for the Zynga properties, or be required to grant certain title exclusivities of Zynga
games on the Facebook platform, subject to certain exceptions. However, any social game launched
after March 31, 2013 by Zynga will generally be available through the Facebook web site concurrent
with, or shortly following, the time such game is made available on another social platform or a Zynga
property. The addenda with Facebook will each expire in 2015.
•AMEX/Hasbro Initiatives. In 2012 we entered into two strategic initiatives to create new ways for
people to play our games. In May 2012, we launched a new program with American Express to provide
co-branded prepaid AMEX cards that will allow customers to receive free virtual currency for signing
up for the prepaid card and for their everyday spending. In February 2012, we announced a global
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