Facebook generated $3.71 billion in sales last year; some $445 million of that came from its partnership with Zynga. Facebook made $1.97 billion in 2010.
Zynga, which went public just three months ago, is the developer behind wildly popular online and mobile games including FarmVille and Words With Friends. The company hosts many of its games on Facebook, through which it sells virtual goods using Facebook's payment system. Facebook takes a 30% cut on each transaction, and also generates revenue from money Zynga spends on Facebook advertising.
The gaming company's dependence on Facebook as a source of revenue has long been seen as a source of risk for Zynga investors. But the news that Zynga makes up a significant chunk of Facebook's revenue should bolster investors confidence somewhat as Facebook, it turns out, is also dependent on Zynga.
Indeed, Facebook's S-1 filing notes that "We currently generate significant revenue as a result of our relationship with Zynga, and, if we are unable to successfully maintain this relationship, our financial results could be harmed." The filing points out that Zynga generates "a significant number of pages on which we display ads from other advertisers" and that if Zynga were to launch games on or migrate to competing platforms the company's financials results could be adversely affected.
The filing cites one industry study -- we believe it's this one -- that claims that the sale of virtual goods is expected to to generate $15 billion in 2014, up from $7 billion in 2010.
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