Just when Zynga’s (NASDAQ:ZNGA) stock was gaining ground, it’s running into yet another setback. The company agreed to terminate its extensive contract with Facebook (NASDAQ:FB). On the news, the shares of Zynga are off 9% in today’s trading.
Effective March 31, Zynga won’t have to use Facebook ad units or payments system on its non-Facebook game sites, such as Zynga.com. And Facebook will no longer be required to provide a minimum level of traffic to Zynga. The social network will even be able to create its own games (although Facebook CEO Mark Zuckerberg has indicated no plans for this).
The contract termination should be no surprise, considering Facebook has been trying to promote other game developers on its platform.
And yes, Zynga has been focused on creating its own gaming system, especially for mobile. Yet the transition has been far from easy. Creating breakout mobile games has been elusive for Zynga, and its acquisition strategy has been a failure too, as seen with its disastrous $180 million deal for OMGPop.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.