Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Social and casual game-maker Zynga (Nasdaq: ZNGA ) isn't going down without a fight. The company yesterday announced a new partnership with payments processor American Express (NYSE: AXP ) in a move to resuscitate investor confidence. Together, the duo is launching a rewards program that lets gamers earn virtual currency by making real-life purchases on a Zynga-branded prepaid AmEx card. However, I'm not sure the benefits are weighted in Zynga's favor.
A strategic agreement between Zynga and American Express is definitely a game-changer, but not necessarily for the game-maker. This comes at a time when Zynga needs a lift more than ever. The digital gaming company has had a tough time holding onto gains since its December stock market debut. In fact, shares hit a new 52-week low of $6.36 on Monday after being strangled by investor fears over the company's ability to keep growing revenue.
Facebook's (Nasdaq: FB ) troubled debut as a publicly traded company last week only made matters worse. With Zynga accounting for 12% of Facebook's total revenue, it wasn't surprising to see shares of the social gamer fall as much as 23% on Friday after the much-anticipated Facebook IPO. Zynga is down about 15% in the past week, despite headlines about the company's strategic partnership with American Express.
While the new deal can't hurt Zynga, there's certainly more upside for American Express, as it will help increase its customer base. Of course, this isn't the card company's first play date with Zynga. In 2010, AmEx let Zynga fans cash in Membership Rewards points for virtual gifts and game cards that could be used across six of Zynga's popular social games.
Under the new agreement, cardholders will need to spend more than $25 on the first five purchases to reap the in-game cash for Zynga's FarmVille title. With 4.5 million unique daily users, FarmVille provides an ideal platform for AmEx to attract new members and Zynga to incentivize brand loyalty among its users. Zynga said it plans to expand the rewards program in the future to include other games such as CastleVille and CityVille.
While this is a step in the right direction, Zynga needs to pull off many more deals like this if it wants to keep gamers coming back for more. Track these social media-related stocks by adding them to My Watchlist -- The Motley Fool's free tool that lets you track and monitor your favorite stocks.
Facebook recently became the largest company ever to IPO. Yet all the buzz around this social-media monster could prove off-base, as Facebook has deep problems converting its millions of members to revenue. We've created a new report, "Forget Facebook -- Here's the Tech IPO You Should Be Buying," that details a much better social-media stock that has a longer runway for growth than Facebook. The report won't be available forever, so get access today -- it's totally free.