Zynga Tumbles In Another Setback to Facebook Gaming

NEW YORK ( TheStreet) -- Online social games maker Zynga ( ZNGA) fell 5.85% to close at $3.22 Monday after Electronic Arts ( EA) said it was taking down some of its Facebook ( FB) games due to waning demand, underscoring the complications faced by Facebook-based social gaming companies.

Facebook said Monday it was taking down The Sims Social, SimCity Social and Pet Society.

Both Electronic Arts and Zynga have been seeing a marked drop-off in demand as the model of drawing in users to their free games on Facebook in hopes of luring them in to buy extra features or "micro-transactions" suffers diminishing returns. Associated advertising revenues have also been hit.

"It's just harder to get people to commit to games they don't pay for," said Edward Woo, a senior research analyst for Ascendiant Capital Markets.

Zynga exploded onto the social media gaming scene several years ago, but is now having to close down games to cut costs, with Electronic Arts following a similar pattern.

Electronic Arts fell 3.81% to $16.91. Facebook tumbled 3.21% to $26.52.

Electronic Arts and Facebook are likely to weather the complications to social media gaming with more ease than Zynga given that they have multiple revenue streams, said Woo.

"Games overall are not as important to Facebook .... EA has their traditional buy the game for $60 and go home and play ... Zynga -- that's their only business," said Woo.

Written by Andrea Tse in New York

>To contact the writer of this article, click here: Andrea Tse.

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