Zynga Builds Out in China With Tencent Partnership and 'CityVille'

Facebook Is Banned in China, so Casual Game Giant Finds a Local Partner

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While rumors of the venture have been around for months, Zynga has announced its partnership with Tencent in China to launch local versions of "CityVille," a game that lets players build their own dream cities. This move by Zynga will not only put it in a market with scale when it comes to users -- this is China, after all -- but also will lessen Zynga's dependency on Facebook as its major source of revenue.

Zynga City Street Peddler

After Zynga's acquisition of Chinese social-game developer XPD Media in early 2010, Zynga China opened in May of that year. Since then, the office has grown to become one of Zynga's largest international locations. Zynga has around 250 million users playing its games, and "CityVille" is its most popular. A large portion of that number plays the games on Facebook, which charges the social-gaming developer 30% for every in-game transaction involving virtual goods.

The Chinese audience will be able to play the "Cityville" game in beta in Chinese; the game will also feature new content and game play inspired by traditional and pop culture in China. Because Facebook is currently banned in China, its future in that market is unclear. In its recent IPO filing, Zynga said that a souring of the company's relationship with Facebook could hurt Zynga's revenue-making abilities. While the two companies are getting along right now, new partners are an important part of Zynga's future earnings potential.

And their newest partner is impressive -- Tencent, a major Chinese portal, reports 492 million active users as of December, potentially exposing Zynga games to hundreds of millions of new players.

"Zynga needs a partner like Tencent, one that has a very large user base -- and with Tencent, Zynga is not relying on Facebook for the platform," said Paul Verna, an eMarketer senior analyst who focuses on social gaming. In China, the internet culture is focused on entertainment and social games, so it's ripe for Zynga-style games. "Zynga has been better than any other company anywhere in the world at designing games that have this perfect recipe of addictiveness and virtual goods monetization," Mr. Verna said.

The Zynga team will work out of the office, which is in Beijing, and will hire additional talent from the local pool. The team currently working on the "CityVille" game is made up of local Chinese game designers, artists and developers. The partnership with Zynga is the latest strategic development of Tencent's newly launched open platform, which allows game developers to work with Zynga on Chinese games. "As a social-game developer, Zynga fully recognizes the value of Tencent's Open Platform and their professional service capability," said Andy Tian, general manager of Zynga China.

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