16th
Zynga & Facebook & DST. Conflict of Interest, Anyone?
Last night news broke of Zynga scoring a huge new investment of $180 million more dollars… from the same Russian Venture firm, DST, that invested $200 million dollars in Facebook earlier this year.
Conflict of interest, anyone?
It’s one thing when two companies grow a shared market & community, but it’s another thing when when they are becoming bonded at the hip to the expense of what could be an important and broad ecosystem.
This new mutual alignment around the same investor can only have bad effects on the Facebook app ecosystem. Why not a straight acquisition? Too blatantly harmful to the other app developers? What about Zynga spinning off to create entertainment apps using a non Facebook distribution channel; how can they hedge their bet against Facebook when their investors are now ‘all-in’ on the other side?
Granted, Zynga is highly successful but also dead-in-the-water without Facebook, so I understand why DST would be interested in aligning the two. But you’ve got to wonder how the people at Facebook feel about this one.
[these opinions are my own, i’m not representing facebook]
First, congrats to Zynga on the funding. Those guys are killing it. Though I don’t really enjoy playing their games too much, they are extremely skilled at making games most people can understand and get addicted to.
I don’t know much about DST, so I’ll comment generally on the idea that investors shouldn’t invest in companies that are tied or competing. I think that idea is wrong.
The incentives are actually well aligned to make everyone money. It wouldn’t benefit facebook to make a decision that helps zynga but hurts the platform. They routinely do the opposite. And zynga doesn’t have much power over facebook except if they find a better platform. Maybe farmville.com would have better conversions if they didn’t use facebook. I highly doubt it, but it could be true.
If they do that, then it will be based on metrics. That means the failure is that of Facebook, in not making a converting platform.
As far as secrets, clearly that needs to be managed by all parties. Tipjoy shared investors with Twitter and built tools on top of twitter. It was really beneficial at times, and at other times we didn’t say certain things. That was a small minority of cases with critical information between the two companies. Overall, it didn’t impact either company.
[edit: I should add that I have no insight into zynga’s investors, so for all I know, this news of an investment isn’t even true]
