It should come as no surprise that Zynga is seeking partners in Internet gambling. Zynga Poker is still the top poker game on Facebook, Zynga has announced plans to create a Zynga Casino suite of games, and there has been a lot of merger and acquisition (M&A)activity around social game companies that focus on casinos recently.
What is surprising is that they are tipping their hand around this strategy, just a month after going IPO.
Internet gambling still is illegal in the US and Zynga just went public with the intention of becoming the number one company to play games, not to gamble. So, why the admission, when it would have been just as easy to play it coy?
The answer is their lackluster stock price, which is still below $9 (opening price). The stock has risen in the past few days, however, as a result of rumors that it is looking into Internet gambling, which could make the company a lot more money than its current micro-transaction model.
Which leads me to a completely different conclusion. Zynga’s upcoming release of earnings based on fourth quarter numbers may not be as good as expected. The numbers should be good. Fourth quarter is always the best time for any game company and Zynga released a bunch of new games for both mobile and on Facebook (Dream Zoo, CastleVille, etc).
If the drop off from older games exceeded the gain from newer games in terms of revenues, however, then this would be yet another quarter of potential no growth. And this actually means something now that Zynga is public and their stock price is tied to released earnings.
This is just speculation, of course. But, if fourth quarter numbers were good, why would Zynga be admitting they are looking into expanding into Internet gambling as a way to make money in the future, when Internet gambling is still a black market business?
It could be a case of Zynga being honest about its intentions to enter into a lucrative multi-billion future business. Or it could be a not-so-good sign about its current business model. We’ll know more when Zynga releases its earnings in the upcoming weeks.
Here is the public statement to AllThingsD:
“We build games and experiences that our players want and love. Zynga Poker is the world’s largest online poker game with more than seven 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.”