Dysfunctional Couple Update: Facebook and Zynga

There was an update on dysfunctional couple Facebook and Zynga last week. Zynga and Facebook play out their dramas in public, like friends who put up a good front in public but you know are bickering like feral cats in private. That’s to the detriment of investors who can’t leave the party early before glasses start breaking.

By the way, if you’re in New York, go see “Who’s Afraid of Virginia Woolf?” at the Booth Theater. It’s a Steppenwolf (Chicago) Theater production and really fantastic. I caught a Sunday matinee last week while in New York for the NYU Stern Ross Roundtable. Like Zynga and Facebook, it’s difficult to watch as the night wears on, but the script, an Edward Albee classic, is irresistible.

Facebook has amended its terms and conditions with Zynga over the use of the Facebook platform to host Zynga games. Yet again. It’s the third act of a drama that has only a couple more scenes left, given the dramatic stock price declines since the IPO for both. The last act, I predict, will be the disappearance of Zynga entirely.

Missing still is any detail about the non-cash credits that may be going back and forth between the two companies and propping up both sides’ revenue numbers.

I wrote in mid October:

Zynga may be recognizing revenue from Facebook that it’s receiving via undisclosed credits instead of cash for Facebook’s advertising on Zynga game pages and on Zynga.com. Facebook may also allow Zynga to pay for direct advertising on Facebook via credits instead of cash. There’s a lack of correlation between increased revenues, higher confidence in collections from Facebook and higher cash flow from operations.

Read the rest at Forbes.com, “Zynga and Facebook: Still Married But Taking Separate Vacations”.