Saturday, January 21, 2012

Zynga Exploring Online Gambling

Wall Street Journal's MarketWatch reports that the the Facebook-focused social games provider Zynga is talking to potential partners with regard to expanding into bona fide online gambling. This follows last month's reversal by the Department of Justice on its position regarding the Wire Act. Until this reversal, the government's position was that the Wire Act prohibited all online gambling. Now, their position is that the Wire Act prohibits only online sports betting, which is actually in line with how the law was written.

Zynga, which is now traded publicly under stock ticker (NASDAQ: ZNGA), does provide an online poker game, which players compete for virtual chips, rather than actual money. According to the story, 7 million play this game daily. Zynga is wise to at least look at this possibility, as it is possible that their social games may not have much consumer growth left. In addition, they may be looking to spread out and not be as dependent on Facebook as a customer channel.

As explained in an earlier blog post, the gaming spectrum can be broken down into three component areas: entertainment, skill and wagering. Zynga operates now primarily in the entertainment area, with their poker for fun offering moving into the skill area. If as a public company, they now need to keep Wall Street analysts' lust for growth satisfied, a move into the wagering area may be required.

The issue for Zynga is if their brand is too tightly coupled to fun, social gaming and they would not be successful competing against true gambling brands such as Caesar's, Wynn and Las Vegas Sands. In addition, online gambling is likely to be approved on a state by state basis, with each only offering a few licenses. Zynga would have to compete with established gaming brands as well as tribes, for these scarce licenses. These licenses quite possibly may fetch triple-digit millions each. Zynga may be well served to try and locate unique gaming opportunities that will allow them nationwide exposure quickly, without having to battle on a per state basis. Also, if such gaming opportunities can be independent of Facebook, that would allow Zynga a direct channel to customers without having to pay the expensive Facebook "toll."


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3 comments:

Online casino said...

Zynga is online gambling destination and decided to expanding into Online gambling. Zynga is potential partner with facebook. It is very nice way to expend business. They provide the online pocker game and many more. Online pocker is very nice game to play.

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