Zynga Reverses Course

Weeks ago a spokesman for Zynga indicated that the social media gaming company was not interested in real money gaming. Recent news reports indicate that the company has reversed course and is  exploring the possibilities of real money online gaming. Zynga already has a popular poker game and 7 million people play poker using Zynga’s app daily. Zynga has also announced that they will launch an online bingo application in the near future. For those unfamiliar with the company Zynga is a San Francisco based social network based game developer. Zynga develops browser based games that are available on social networking sites such as Facebook and MySpace. In November 2-011 it was reported that Zynga’s games on Facebook have about 200 million active users. Facebook has an estimated 800 million users so the potential for real money gaming can easily be seen.

The online gambling market has been volatile since the United States passed draconian anti internet gambling legislation in 2006. The legality of online bingo and poker has shifted several times over the past two years. In December the US department of justice gave the online gambling industry an early Christmas in the form of a decision that may clear the way for states to offer online games such as online bingo games and poker. The DOJ’s decision was the result of a query from New York and Illinois about the legality of online lottery ticket sales. The DOJ sand that the 1961 wire act only bans sports betting and that other games are legal.

Zynga is a relatively new company and since their initial IPO went nowhere the company wants to enter the world of real money gaming. Zynga poker is a big hit and could allow them to transition to real money gaming easily. A Zynga spokesman stated “We build games and experiences that our players want and love. Zynga Poker is the world’s largest online poker game with more than 7 million people playing every day and over 30 million each month. We know from listening to our players that there’s an interest in the real money gambling market. We’re in active conversations with potential partners to better understand and explore this new opportunity.”

Zynga could use the new revenue stream. According to an article in Forbes Zynga is losing $150 on each customer. Sterne Agee interactive media analyst Arvind Bhatia said that Zynga has to spend $300 on every new player they acquire but currently Zynga is only spending $150 . Although some analysts say that the company is unstable and the new venture is risky Zynga could use the extra cash. Zynga is planning to combing Zynga poker and bingo into a Zynga Casino which will offer several betting games. Zynga also faces stiff competition from established online gaming sites. The move carries additional risk because, as several analysts have pointed out, the department of justice could reverse course if a new administration takes over in Washington.


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