Facebook can now develop own games after amending Zynga deal

Facebook Inc and Zynga Inc severed the cozy ties that once bound the Internet industry's closest couple, revising a years-old partnership between the two companies. 

The two companies reported in regulatory filings on Thursday that they had reached an agreement to amend a deal struck in 2010 that was widely seen as giving Zynga privileged status on the world's No.1 social network. 

Zynga stock fell 12 per cent to $2.30 in after-hours trading. Facebook shares were off 5 cents at $27.27. 

"Zynga's favored nation's status is gone but it seems like it's been slipping away for a while now," said PJ McNealy, CEO of Digital World Research. 

The new agreement gives Zynga a freer hand to operate a standalone gaming website, but eliminates the San Francisco game publisher's ability to promote its site on Facebook and to draw users from Facebook's thriving social network of roughly 1 billion users. 

Visitors to Zynga's gaming website will no longer be able to tap into their network of Facebook friends or post messages about their gaming progress to Facebook. 

Zynga games, like "FarmVille" and "Mafia Wars," will still be available on Facebook's social network, but those games will no longer feature cross-promotions directing users to Zynga's standalone website. 

The move underscores the widening gap between the two social networking pioneers, which went public within seven months of each other and have been intimately tied. 

In recent quarters, fees from Zynga contributed 15 per cent of Facebook's total revenues, while Zynga relies on Facebook for roughly 80 per cent of its revenue.

The 2010 agreement provided a variety of ways for Zynga to meet its monthly user growth targets, including guaranteed promotions of certain Zynga games on Facebook.