Is the Facebook Ecosystem Falling Apart?

There’s no shortage of companies that could — and probably are — being adversely impacted by some recent changes at Facebook.

For obvious example, Facebook’s official new currency, Facebook Credits, allows Facebook users to earn credits through credit card reward programs, to trade in unwanted gift cards, and to sign up for third-party offers — exclusively through its trial partners, including certain credit card companies and offer providers TrialPay and Peanut Labs.

For the many companies now forced to use Credits, it’s no minor development. The most negatively impacted by the move is seemingly games publisher Zynga, which has the most to lose. As everyone knows, Zynga has supercharged its growth off Facebook, partly on its own terms. And at least, until now, Zynga has been able to work with the offer networks of its choosing, including OfferPal, as long as it has provided Facebook a piece of every transaction.

That piece was not upwards of 30 percent of its gross revenue. Now, it is. And now, Zynga has little choice other than pay up or find real estate elsewhere, and it may do exactly that. Indeed, TechCrunch is confirming that Zynga is about to launch its own separate social game network off the Facebook Platform. Called Zynga Live, it was announced to employees late yesterday afternoon on the heels of heated, and presumably failed, negotiations with Facebook over the terms between the two companies.

If Zynga is unhappy with Facebook, it has plenty of company. While Facebook is taking a 30 percent cut from all of Zynga’s transactions, a source familiar with the situation say that in other cases, Facebook is trying to extract up to 40 percent of gross sales from publishers and other app developers that rely on its platform. Indeed, according to this source, “the less power you  have, the more Facebook is trying to extract right now.”

So who else may be dramatically rethinking its immediate future right now? Digg, quite possibly, which yesterday laid off 10 percent of its workforce. Indeed, last week, when I spoke with seed-stage investor Josh Felser, we discussed the impact of Facebook slathering its “like” buttons across the Web as fast as it can. While Felser thinks it’s a “net positive for the Internet consumer,” he also said that with Facebook “extending distributed trust,” there won’t be much need to Digg things, too.

That’s saying nothing of Meebo, whose sharing toolbar Facebook has just made redundant, or advertising networks, which “should be watching Facebook with a very wary eye,” said Felser. “I don’t know what Facebook’s next chess move is, but they could build the largest targeted ad network that we’ve ever seen before.”

Earlier this week, at the NVCA conference, we asked Reid Hoffman which startups stood to lose the most from Facebook’s new vision. “Where Facebook is offering toolbars and a social experience, then it’s probably harder [for companies, trying to do the same thing], because that’s where the tanker is going,” he answered.

That’s a whole lot of companies. In fact, Hub readers, I’d love to hear from you what other venture-backed companies you think are most at risk of being hampered (if not worse) by Facebook’s new strategy. Please feel free to comment on them below or, if you’d rather reply privately to me, email me at connie.loizos at thomsonreuters.com. (And thanks in advance.)

In the Tanker’s Path:

1.) Zynga

2.) Digg

3.) Quantcast

4.) Buddy Media

5.) Meebo…

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2 Comments

  • [...] Is the Facebook ecosystem at risk of falling apart?  (peHUB) [...]

  • I’m not sure how the Facebook toolbar makes Meebo “redundant”. The Meebo bar has Multi-IM network support and ad revenue sharing for partners. You can access Facebook chat and the Like button on the Meebo bar.

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