October 04, 2012

Zynga is Gambling with its Move Away from Facebook

Zynga is Gambling with its Move Away from Facebook


Zynga Inc (NASDAQ:ZNGA), a company with a fate inextricably linked with that of Facebook Inc (NASDAQ:FB), has seen its stock price crumble since its highs last Spring. The company, which in 2011 accounted for 11% of Facebook’s total revenue, is in trouble. A new report from Stern Agee offers some hope for the company.
It appears that Zynga Inc (NASDAQ:ZNGA) has been faltering badly for several months. The company is slowly attempting a move to mobile, but since the stock hit its high point, several of its most prominent executives have abandoned the company.
Despite lackluster performance of its newest games, Farmville 2, The Ville, and Chefville, none of which managed over 8 million Daily Average Users in their first month online, according to the report. The three titles managed just 9.1 million Daily Average Users on average during the quarter. Zynga Inc is in trouble.

Zynga New Games
Users seem to be less willing to take up the firm’s new games. This may be mark of a saturated gaming market, in which customers find it harder to move on to a new game, or it could mean that users aresimply bored of the type of games that the company offers.
If there is hope, according to the report, it lies in exploitation of the most consistently popular game Zynga Inc (NASDAQ:ZNGA) has ever produced, Zynga Poker. If online gambling were to become legal in the United States, and legislation is waiting in the wings, Zynga could become  a powerhouse in the market.
Moving into online gambling could be the holy grail for Zynga. It might allow the company to disassociate itself with Facebook Inc (NASDAQ:FB), allowing its name to be spoken in a sentence, without that of the social network.
It will not be an easy road for the company, though the user base it already has in Zynga Poker will be a great tool to leverage, as it looks to enter the business. As the report rightly points out, Zynga will be unlikely to make a go of online gambling by itself, it will need a brick and mortar partner, comfortable with gambling.
Zynga Inc (NASDAQ:ZNGA) will be able to pick and choose among those Casinos that might wish to partner with it. No other firm offers such a large user base, and one already familiar with online gambling, albeit in a virtual way. Allowing users to gamble against each other, and in tournaments, could line the pockets of Zynga faster than any other business out there.
The Poker consumer Protection And UIGEA Act 2012, sponsored by Nevada Senator Harry Reid and Senator Jon Kyle of Arizona, would legalize and regulate online poker inside the United States. Currently the business is illegal, although sites from outside the States may be accessed from inside its borders.
Zynga Inc (NASDAQ:ZNGA), taking advantage of its huge user base and wide reach, would be the first company in line to reap the benefits from this transaction. It must be assumed the firm has already designed systems that would allow players to gamble real money in their game rooms.
If the company has not yet taken these measures, or is not ready to take them, online gambling in the United States will become the purview of overseas companies, who are already running operations in a jurisdiction where the practice is legal, such as the United Kingdom.
Zynga Inc (NASDAQ:ZNGA) is in real trouble. The company needs some way to extricate itself from the bonds of Facebook Inc (NASDAQ:FB), or embrace them fully. Rumors have been circulating for months, that at current prices Facebook should buy the gaming firm. Whoever owns the company, if and when online gambling becomes legal in the United States, will harvest a bounty.

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