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Friday, October 5, 2012

Facebook Shares Continue to Collapse

I discussed before why Facebook was overrated at its IPO. It seems nothing can arrest its declining share prices:
Facebook has been dealt another blow after the gaming company responsible for much of its revenue announced that it was slashing its outlook for the year.

Shares in the social network had slipped by 2.5 per cent to $21.41 by Friday afternoon after Zynga announced that its number of paying customers had fallen.

Analysts have once again reduced their expectations for Facebook over fears that the company is overly dependent on the struggling maker of FarmVille and Mafia Wars.

At one point Zynga's shares fell by 20 per cent to just $2.21 - a fraction of the $15-plus they were worth in March.

Facebook is strongly exposed to any deterioration in Zynga's performance, as it derives around one seventh of its revenue from the company's games.

In turn, Zynga is heavily dependent on Facebook - it gets most of its revenue from titles that are played on PCs using the site's social gaming platform.
Its games FarmVille, FrontierVille, Zynga Poker, Mafia Wars and CityVille accounted for 83 per cent of the total revenue last year.

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