Craig Eisele on …..

March 3, 2012

Can Zynga Survive the Perils of Becoming a Separate Platform from Facebook

Filed under: Uncategorized — Mr. Craig @ 10:18 pm

I will give Zynga (ZNGA) this much: The company has some serious stones for setting up as a place for its own games and those of third parties to live outside Facebook. You can’t really blame it for doing so. After all, too much dependence on someone else’s social network—whether it be for users, revenue, or both—is never a good thing. But being a platform provider and an aggregator of entertainment options is a hard business that’s not to be taken lightly.

The launch of is more than a bit of a reversal for the casual-gaming company. After all, Zynga exists today only because it tapped into Facebook’s app platform and rode the wave of social sharing to success. That is not necessarily a bad thing. Zynga has simply been better at social than anyone else in terms of getting users to share and convince their friends to sign up, gaining rewards all the while.

Prior to Thursday’s announcement of the new site, Zynga and Facebook had a symbiotic relationship in which, like the Nile crocodile and the Egyptian plover bird, each party helped the other out. Nearly all of Zynga’s revenues have come from Facebook and about 12 percent of all Facebook revenue has come from Zynga.

That might have been a fine relationship to have when Zynga was a scrappy little startup. Now that it’s a publicly traded company, its reliance on Facebook is a huge risk factor for investors. So it makes sense that Zynga would want to have a little more control over where and how users access its games—and a little more independence from Facebook.

But I question how many casual gamers recognize that Zynga makes FarmVille, Words With Friends, and Mafia Wars—and how many, knowing this, will take time out of their Facebook gaming sessions to go to some other site to play those games instead. Games will still be linked to a user’s Facebook profile. Zynga is just giving people the option to play on But it’s notoriously difficult to create a platform and a destination site and to aggregate an audience, even one that is already using your product.

A lot will depend on how much actual value the platform will provide to consumers. Facebook works because (surprise) people spend more time on Facebook than pretty much any other site on the Internet—as much as seven hours a week, according to a recent study.

As time has gone on, there is evidence that it has become more and more difficult for game developers to stand out from the crowd on Facebook. Last month, IHS iSuppli reported that the percentage of all Facebook monthly active users visiting games on the site has dropped from 50 percent to about 25 percent. With a growing amount of content being shared, it has become harder for gaming companies to attract new users on the social network.

Will help reverse the trend? Can it get more people playing its games and others by providing an alternative place for casual gamers to congregate? Zynga is talking up the site as a place where users can quickly and easily find other friends who are active on the platform. The flip side is that it might become a place where only gamers congregate, which would mean the addressable audience for new games will be much smaller than the more heavily populated platform that Facebook has.

Morgan Stanley Exec Charged With Hate Crime

Filed under: Uncategorized — Mr. Craig @ 8:01 pm

William Bryan Jennings, Morgan Stanley’s bond-underwriting chief in the U.S., was charged with a hate crime in the stabbing of a New York City cab driver of Middle Eastern descent over a fare.

Mohamed Ammar said the banker attacked him Dec. 22 with a 2½-inch blade and used racial slurs after a 40-mile ride from New York to the banker’s $3.4 million Darien, Connecticut home.

Jennings, who had attended a bank holiday party at a boutique hotel in Manhattan before hailing the cab, refused to pay the $204 fare upon arriving in his driveway, the driver said. When Ammar threatened to call the local police, Jennings said they wouldn’t do anything to help because he pays $10,000 in taxes, according to a report by the Darien police department.

Ammar, a native of Egypt, said he then backed out of the driveway to seek a police officer. The banker called him an expletive and said “I’m going to kill you. You should go back to your country,” according to the report, filed in state court in Stamford. A fight ensued as they drove through Darien, and Jennings, 45, allegedly cut Ammar, 44, police said.

The banker, who eventually fled the cab and turned himself in two weeks later after a vacation in Florida, was charged with second-degree assault, theft of services and intimidation by bias or bigotry. He faces as long as 5 years in prison on the assault charge.

Put on Leave

Pen Pendleton, a spokesman for New York-based Morgan Stanley (MS), said yesterday that Jennings, who is free on $9,500 bond and is set for a March 9 court appearance, has been put on leave.

The banker has worked at Morgan Stanley during his entire career in the securities industry, starting in 1993, according to the Financial Industry Regulatory Authority.

Now co-head of North American fixed-income capital markets, he worked his way up from associate; vice president, and then principal, for debt capital markets; to executive director for investment banking and then managing director for fixed income capital markets. He is a graduate of Williams College and received a master’s in business from Northwestern University.

Ammar, an American citizen who immigrated to the U.S. in 1994, is a resident of the Astoria section of the New York City borough of Queens. He is married and has three children, he said yesterday in a phone interview. Ammar has been driving yellow cabs since the Sept. 11, 2001, terrorist attacks cut business for a limousine service he had operated starting in 1997, he said.

Called Police

He told police Jennings flagged him down in front of Ink48, a hotel on Manhattan’s West Side. The hotel confirmed there was a Morgan Stanley party that night, which Jennings said he had went to following a charity event.

The banker appeared “drunk,” the driver said, according to court documents.

Jennings told police that, while he had been drinking throughout the afternoon, he wasn’t “highly intoxicated,” according to the police report. The executive said he had hosted the charity auction for Morgan Stanley until 6 p.m. before heading to the bank’s holiday party at the hotel’s rooftop bar.

He left the party sometime before 11 p.m. and headed to the street, where he was supposed to be met by a car service, Jennings said. He hailed Ammar’s cab after the livery car didn’t appear, according to the report.

Ammar said Jennings agreed on the fare and told him he would pay cash. Jennings fell asleep during the trip, the driver said. Once at the destination, though, Jennings said “he did not feel like paying” because he was already home, Ammar told police.

Threatened Him

Ammar told officers Jennings threatened him, and that he feared for his safety. He backed out of the driveway with Jennings still in the cab. Ammar said he had tried to call 911 but was hampered by poor cellular reception in the wealthy Fairfield County suburb.

As he drove off, Ammar said, Jennings pulled the knife and began stabbing him through the open partition that divided the front and rear of the cab. Ammar said he tried to defend himself by using his right hand to block the opening, and then pulled over and dialed 911 again, as Jennings got out and fled, police said.

Jennings told Darien police the cab driver accidentally cut his hand while attempting to block the banker from calling the police himself on his cell phone, according to the report.

Florida Vacation

The Morgan Stanley executive told police he was afraid to come forward after the incident because the cab driver knew where he lived. He then went on vacation to Florida, police said.

Jennings told officers he subsequently called his lawyer after a friend told him police were looking for a suspect in the stabbing incident, according to the report.

“Jennings said he didn’t know what to do — he just wanted the whole thing to go away,” Darien Police Detective Chester Perkowski said in a court document filed with the report.

In the arrest warrant application dated Feb. 26, Perkowski wrote his investigation “discredits Jennings’ statement that Ammar reached into the back of the cab while he was driving.”

Ammar reaching into the backseat while driving, as Jennings claimed, would have been “virtually impossible,” he wrote, adding that Jennings never attempted to call police in the aftermath of the incident. Jennings was charged Feb. 29.

Eugene Riccio, his defense attorney, said the driver made an “exorbitant demand” closer to $300 and that he attempted to abduct his client.

Denied Claims

“My client was the victim of a crime that night — not the perpetrator of one,” Riccio said, denying that his client was drunk or made any racial slurs. “He was abducted against his will from his own driveway. Fortunately he was able to escape.”

The driver threatened to return to New York, Riccio said. Ammar denied the lawyer’s allegation.

Riccio contended that the driver was “seconds away” from the on-ramp to the highway heading back to the city when Jennings drew a knife from his pocket.

“He pulled it out in an effort to try to get the man to stop,” Riccio said. “He was in a car that was racing down the road, disobeying traffic signals with the back door open.”

In a telephone interview, Ammar said that, when he first quoted a price for the ride outside the Ink48 hotel, located on 11th Avenue in Manhattan’s Hell’s Kitchen neighborhood, Jennings said it was “no problem.”

‘Bunch of Money’

“He pushed his hand in his pocket and pulled out a bunch of money. I said it’s OK,” Ammar said, adding that he showed Jennings the price as listed in New York City’s Taxi & Limousine Commission’s guidebook for cab drivers.

Jennings asked him to stop somewhere for food before taking the highway, so he took him to a deli on 10th Avenue, a stop that helped police investigators identify the banker, Ammar said. Video footage from the deli allowed police to recognize Jennings after Ammar said he was unable to remember the location of the banker’s house in Connecticut.

Police also took garbage that Jennings left in the back of the cab as evidence, Ammar said.

“I don’t feel safe,” Ammar said yesterday of the events more than two months ago. “I never felt somebody could do something like this in America.” He said, however, that he had no choice but to continue working as a cab driver.

“This is my job and I have to do it,” he said.

Round Trip

Ammar denied allegations by Jennings and his lawyer that he tried to return to New York from Darien during the dispute.

“Why should I take him back to New York, give him a round- trip?” Ammar said. “I just want to get my money and that’s it.”

His hand required more than 60 stitches, he said. Ammar said he refused to be treated in Connecticut and instead chose a New York hospital.

Yesterday at Jennings’s home in Darien, nobody answered the door when a reporter visited seeking comment on the case.

Allan Fromberg, a spokesman for the TLC, said the cab ride would have been outside the commission’s purview because the destination was outside mandatory drop off areas.

“The passenger and the driver would have had to come to an agreement on a flat fare,” he said.

Typically in cases like this, the cab meter runs until the city limits with the passenger and the driver negotiating on the final price, he said. Although the TLC uses GPS to track taxis, the system wouldn’t be engaged in a situation such as this because of the destination, Fromberg said.

Attacks on Drivers

Bhairavi Desai is executive director of the New York Taxi Workers Alliance, which calls itself the largest taxi driver union in the country. She said the group gets one or two reports of assaults on drivers every week.

“We know that most of them go unreported both to the police and to us,” she said. “People are silent because it’s almost become a norm as part of this work.”

Desai said that while group doesn’t see a special pattern of assaults for trips out of town to places like Connecticut, it does see a pattern of fare beating.

“We do have incidents of people jumping out and running into their homes,” she said in an interview. “The driver is not as familiar with the area. They tend to be very residential areas, they’re not as well lit. There’s not as many people on the streets, not as many police.”

The alliance has been promoting the Taxi Driver Protection Act, a bill that would make an assault on a driver a felony, as it is for transit workers.

The case is State of Connecticut v. Jennings 12-0176761, Superior Court for the State of Connecticut (Stamford).


Zynga Game Company Can Fly Without Facebook… Or Can It??

Filed under: Uncategorized — Mr. Craig @ 7:43 pm

For several months in early 2010 the engineering team at Zynga (ZNGA) halted work on all new games. The San Francisco startup and maker of hits such as FarmVille was in tense negotiations with Facebook, which then and now provides a home—and a huge audience—for Zynga’s titles. Chief Executive Officer Mark Pincus realized he needed a backup plan in case talks fell apart, and his engineers started building an online gaming site of their own. “It became an around-the-clock effort,” Pincus recalls. “It was an amazing feat of engineering. In very short order we were ready to host our own games.” The hub never launched, though. Tensions eased, Facebook and Zynga recognized they had a mutually beneficial relationship, and the companies signed a five-year deal.

Two years have passed. Zynga is now a public company, and Facebook is on the verge of becoming one. (Their partnership is one of the most profitable on the Internet; Facebook revealed in its initial public offering filing that Zynga generates 12 percent of its revenues.) And on March 1, Zynga will finally take the wraps off that long-gestating website. It’ll be housed at, which previously was just an informational site, and will feature not just Zynga hits but games made by rival developers. Those outsiders will be able to store parts of their games on Zynga’s servers and advertise to Zynga’s players in exchange for giving up a cut of their revenues. It’s Zynga’s attempt to become a platform—a digital bulwark on top of which other companies can grow their businesses—just as Facebook, Twitter, and other successful tech companies have done. “We want to grow the market for everyone,” says Pincus. “Our vision is a billion people playing together.”

On players will use their Facebook logins to tap into games, and when they buy such items as virtual tractors and crops, they’ll use Facebook’s payment system. Pincus says using the social network’s tools “takes a ton of friction out” of online game playing. But he also acknowledges that it has never been a perfect marriage—Zynga estimates that one-third of Facebook social gamers are only casual players and get annoyed when friends gush about their FarmVille cows. That’s one reason Zynga is carving out its own territory.

On the site, which makes its debut in a beta phase later this month, games such as CityVilleZynga Poker, and Words with Friends are featured prominently. When players select one, the game board takes up nearly the entire Web browser. On one side of the screen, a “zFriends” feed shows a constantly updated stream of game-related news from other players. While it will still rely on Facebook to know which players are friends, Zynga itself will generate matches between strangers who are interested in the same games and spend similar amounts of time playing them.

Along with the new site, Zynga Platform will publish games for other companies. Michael Pachter, a video game analyst at Wedbush Securities, calls this “an acknowledgment by Zynga that they don’t have a monopoly on creativity.” The main appeal for developers is access to the 240 million customers who play a Zynga game at least once a month. In exchange for promoting other companies’ games, Zynga will take an undisclosed cut of revenues. One person familiar with the details but not authorized to speak publicly says Zynga will take a 30 percent slice of what is left after the 30 percent cut Facebook takes for using its payment system. That would leave the original developer with 49 percent of the haul.

Paying a cut to two companies sounds steep, but at least one developer sees the upside. Mob Science, a game studio in San Diego, will unveil its role-playing game King Worldon the Zynga Platform this spring. In the game, players build up a character and try to rescue a princess. “Going it alone on Facebook is a very risky proposition,” says CEO Michael Witz. “We would need a lot of capital to acquire customers, and spreading virally on Facebook is really difficult. Instead we are going to spend our time creating the game and let Zynga use its incredible institutional knowledge about what makes a game successful.”

Zynga has spent hundreds of millions over the past few years building its own server farms to replace those it previously rented from (AMZN). The new servers give Zynga the flexibility to offer more sophisticated services to other game makers. Later this year the company plans to offer a data analytics dashboard, which could tell game makers which features improve play or slow it down. Zynga execs also talk about one day serving as consultants to small game developers. “A lot of services we offer internally to our individual game studios we are planning to offer externally,” says Cadir Lee, Zynga’s chief technology officer. “Our hope is to make all games better. Even some big companies, as they scale, have technical difficulties.”Electronic Arts (ERTS), for one, has had trouble keeping its most popular Web game, The Sims Online, from experiencing downtime.

Pincus & Co. have no illusions about working with archenemy EA, but they believe they have developed a singular expertise in hugely popular social games, and if they can offer that insight to smaller rivals it will prove hard to resist. Many developers, though, are waiting to see exactly what Zynga offers and at what price. “Everyone we are talking to is interested in participating at one level or another,” Pincus says. But “they need to see us show up with some real there there.”

 The bottom line: To reduce its dependence on hits, Zynga has created its own platform, offering services to rival game makers at a steep price.

European Central Bank (ECB) Making Things Worse for EU??

Filed under: Uncategorized — Mr. Craig @ 6:37 pm

The ECB’s second dollop of easy money has comforted markets. But the euro crisis has not gone away. It would not take that much for it to turn acute again.

Most markets are indeed comforted, but not all. If the crisis is to turn acute again, we might expect the flare-up to begin here:


On a day when Mario Draghi is supposedly shoving a meltdown ever farther from the realm of possibility, markets are souring on Portuguese debt in a big way. Perhaps the long-term refinancing operations aren’t a cure-all after all. Given the onset of euro-zone wide deflation in January, Mr Draghi should soon find himself the target of serious, and deserved, criticism.

Bank Of America Plays Sneaky with Fee Structure AGAIN

Filed under: Uncategorized — Mr. Craig @ 5:36 pm

Less than five months after Bank of America (BAC) backtracked on its $5 monthly debit card fee, the country’s second largest U.S. bank is considering charging its millions of customers another fee. This time the fee would be for the use of a bank checking account, or what the bank calls an “Essentials” account. (See: Public Outrage Prompts Bank of America, Wells and Chase to Rethink Debit Fees)

The timing and certainty of the changes remains unclear, but the bank is already testing two options for the rollout in Arizona, Georgia and Massachusetts, reports The Wall Street Journal.

#1 Flat, Across the Board Fee: Some customers in those three states are currently paying a monthly across the board fee of between $6 and $9 to use Bank of America’s checking services.

#2 Conditional Fee: At the same time, some customers in those test-states are being charged a range of fees between $9 and $25 for a checking account, but have been given the option to avoid the additional cost if they keep a minimum balance or opt in to using other Bank of America services.

EDITOR’S NOTE The Daily Ticker reached out to Bank of America for a comment in response to The Wall Street Journal article Thursday morning.  After 3 pm here is the statement we received:

Media reports this morning provided inaccurate information. Bank of America is not planning to increase checking account fees with our existing customers.

Since January 2011, Bank of America has been testing checking account options for new accounts only, in Arizona, Georgia and Massachusetts.

Bank of America is continuing to learn from those tests and has not made any decisions about when, how, or if we would change our fees on new accounts.

Admittedly, no one likes paying more for the same service and at first mention many may balk at Bank of America’s potential price increase. But as The Daily Ticker’s Aaron Task and Breakout’s Jeff Macke remind us in the accompanying video, Bank of America is in the business of making money, and if you don’t like the fee structure, they suggest taking your money elsewhere.

That may prove a little more difficult in the post-Dodd Frank era, as many banks look to replace certain revenue streams that were squashed by the controversial banking regulation. JP Morgan Case (JPM) and Well Fargo (WFC) have already charge various fee to use their checking account services, which tend to otherwise be money-losers for the banks.

There is one issue, though, that Aaron has with this new practice of banks nickel and diming consumers for everything. “The problem I have is that we bailed them out — as taxpayers we bailed them out,” he says. “This is how they prepay me for bailing them out?”

Jeff, on the other hand, considers the new fees a small price to pay while reminding us just what we used to get in exchange for free checking: robo-signings and the mortgage crisis. He explains, before banks earned a lot of money from signing mortgages for people who could not afford them to pay them, which led to a run up in housing prices, an eventual burst of the housing bubble and people being thrown out of their homes. A nominal fee for checking is well worth the price when you consider the other options, he says.

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