Zynga launches real-money online gambling, stock price surges

While UK-only for now, poker and other casino games could come to US this year.

Cyrus Farivar – Apr 3, 2013 4:15 pm | 45

On Wednesday, Zynga Plus Poker opened up to British residents. Credit: Zynga Plus Poker

Zynga’s roller coaster ride

Since August 2012, we’ve been tracking Zynga’s rapid fall. The company lost top managerial talent and its stock price plummeted,it acknowledged that it overpaid for OMGPOP, and it racked up quarterly losses to the tune of $52 million. In February 2013, the San Francisco startup announced it lost more than $200 million in 2012.

Analysts told Ars that the new British scheme would likely not impact Zynga’s bottom line in the immediate future, but it could set the stage for eventual expansion to the United States. Various states are moving ever-closer to legalizing and launching online gambling within state borders—New Jersey and Nevada are expected to be the first, with California, Illinois, and Delaware not far behind.

“It is a test, they know going in that there are a lot of reasons for it to work and a lot of reasons for it not to work,” Sean McGowan, an analyst with Needham & Co., told Ars.

“How many [Facebook users] will convert [to gambling online]? How sticky is it? How much testing is there? Those are the things you might be able to extrapolate to other markets.”

After all, as we reported in February, Zynga filed a “preliminary finding of suitability” late last year with the Nevada Gaming Control Board, the first step toward offering real-money gambling in the US.

“These are all steps that are moving us toward our long-term vision in real money games,” the company’s chief operating officer, David Ko, told investors in February 2013.

Still could be a couple of years before this bet pays out

Given the company’s recent setbacks, Zynga really needs a win—and if that comes via real people gambling real money, then all the better.

“There is still a stigma attached to gambling where some users are more prone to spend more real (or virtual) money so some caution is needed from Zynga and users to make sure users don’t get into situations beyond their control,” Brian Blau, an industry analyst with Gartner Research, told Ars.

“But for users that just want to enjoy a few simple games of slots or poker, real money gaming is a way to get your fix, and with Zynga’s games you can share your results, play with friends, and have a more social experience similar to what you would find a real world casino.”

James Cakmak, a financial analyst at the Telsey Advisory Group, generally agreed—and he was overall bullish on Zynga’s prospects over the longer-term.

“I think you’re probably looking at 2014 or 2015 before [this move is] reflected in [Zynga’s] bottom line,” he told Ars.

“I think it’s a really good story right now, but I don’t expect the bwin.party partnership to provide any meaningful contribution to the company’s finances over near-term. The most important takeaway is going to be the knowledge that Zynga can leverage [online gambling] for the US.”