Social games company Zynga (ZNGA) has piled more pressure on Facebook (FB). Announcing a profit warning for the third quarter, Zynga's share price tumbled by more than 20 per cent, dragging Facebook's value down with it.
Using the social network as a payments platform for its gamers, Zynga generated about a tenth of Facebook's revenue during the second quarter. Amid uncertainty about how far Facebook can grow advertising sales, which account for the other 90 per cent, the value of Mark Zuckerberg's company is still strongly linked to Zynga. The profit warning clipped nearly 5 per cent off Facebook's share price, taking it below $21. When Zynga reported poor second-quarter results in July, the market lopped 8 per cent off the social network's value.
Facebook's shareholders have had to endure a torrid time since the May IPO, which valued the company at a hefty $104bn on a $38 share price. While usage growth on Facebook is impressive, passing the 1bn mark for active monthly users - and double the amount registered in July 2010 - advertising spend is unlikely to keep pace. New Facebook accounts come mainly from Brazil, India and Indonesia, places where incomes do not justify the outlays in advertising seen in developed markets. Facebook has started to weed out fake profiles, to reassure advertisers, but the disclosure that an astonishing 80m accounts are used for the likes of spam and marketing sent the share price below $20 in September.