When Mark Pincus dropped the bombshell that we all already knew about that Zynga were going to take on real money gambling, the news was met with lots of cynicism.
One of the prominent trains of thought is that Pincus will do just about anything at the moment to see Zynga’s shares take a break from constantly disappointing. Whether this is asking for another shout out from Mark Zuckerberg or going outside of the company’s comfort zone, it doesn’t matter. Pincus will be desperate to show that the social gaming company can make big money.
In order to do this, it looks increasingly like Pincus is turning to real money gambling as a way out of the current mire. If so, that’s a risky bet to place, even more so when you’re not doing it with Facebook credits.
It would appear that he is pinning numerous hopes on gambling after it became apparent that former 888 Maytal Olsha had joined the team as chief operating officer of new markets. It doesn’t take a genius to figure out what new markets these are as Zynga are clearly stepping up their real money gambling efforts – no doubt hurried by Facebook’s relationship with Noel Haydon and Gamesys.
Pincus is certainly looking to milk real money gambling for all that its worth. For example, Olsha had leaked the news of her new role on LinkedIn by adding the new post to her profile but was made to remove it as the news was held until it could have the largest effect on share price. Fortunately it worked as stock rose by 7.4%, which was the biggest increase since Zuckerberg had given his two cents on the company.
Zynga’s financial situation is no secret. Like many companies in the gaming and gambling sector, they’re failing to fulfil promises and meet previous expectations. Part of this is because their income has remained pretty flat after their products began to stagnate slightly.
This issue is worsened by the fact that Facebook’s sources of income have diversified meaning that the social network is now nowhere near as dependant on Zynga as it once was. Facebook’s July SEC filing shows as much with revenue coming from Zynga making up just 14% of total revenue from the first six months of this year. To put this in context, in 2011 this figure was 33%.
Requiring Real Money
Pincus has spoken of Zynga’s advantage in Facebook gaming being that they make sure everything is as social as it can be.
He told the Guardian: “At every juncture, we’ve doubled down on social – our fundamental belief is, our games have to be fun, but they really have to be social. The unique sauce in what we do is that we hope out experiences are always the most social versions.”
What Pincus may soon realise is that being social and gambling online will only mix to a certain degree. While real money online gamblers are likely to enjoy a social element of a game, it’s far from the ‘unique sauce’ that Pincus speaks about. Far from this major flavour, in iGaming a social aspect is perhaps more of a side dish, something that’s cheap so it doesn’t matter if you don’t eat it.
Even if he does realise this then it will mean moving away from the exact thing that he claims has made Zynga’s games so successful. Either way you look at it, it’s a risky move.
All of the regulated markets outside of Facebook are already crowded enough as it is and all of the operators in that group will already have brand loyalty so it’s hard to imagine a way in which Zynga would venture outside the confines of Facebook.
When in Facebook, they obviously have a large loyal following. However, of this following few are likely to be willing to risk their hard earned money. If they had wanted to do so then they surely would have headed to a gambling operator some time ago.
Of course, there’s also the considerable obstacle of Gamesys who have been able to strike an agreement with Facebook. This agreement has come in the form of Bingo Friendzy being the first real money gambling app on Facebook.
Having acted too slowly to be in Gamesys’ position, Pincus will be annoyed that he wasn’t the first to come to this form of agreement. One advantage they have is that when they do get real money play, they’re simply asking their customers to make the transition from freeplay to pay to play. Gamesys, on the other hand, will be relying on paid traffic and clicks from their own websites in order to fuel play on their app.
How Will They Go About It?
Zynga are known to launch their games before they’re fully built. Pincus has explained that games have gone live when only 20% built. In a niche such as social gaming that was in its formative years this was something that they could get away with and was even an advantage in some circumstances. However, neither online poker nor any other iGaming vertical is still in a formative stage. Perhaps a gap may have been left by the Black Friday victims but there is no shortage of suitors to fill it.
This means that a real money poker product will have to be launched complete and ready to go because if it’s not up to scratch, players have other options. Of course, they do already have a poker product which they know to be successful and it would certainly be very interesting to see whether they could simply plug in real money in order to create a successful play for real app.
Immediate concerns when doing so would be the fact that players would become more competitive and the lack of anonymity in Zynga Poker could lead to some issues. Perhaps they would be well advised to follow Bodog’s recreational poker model which comes complete with total anonymity.
Venturing outside of poker would mean to create products that they haven’t had quite the same level of success with (i.e Zynga slots). However, that’s a fact unlikely to put them off as entering a new area is something that’s unlikely to deter Pincus at this stage.
Anyone familiar with the launch of Dream Heights will be well aware that Zynga is hardly opposed to launching products that are very similar to what’s already out there (that’s a polite way of saying they copy). However, should they do this in the gaming sphere they should be warned that most software companies have considerably more force than NimbleBit – creators of Tiny Tower.
To suggest that how Zynga go about their move into real money gambling will have a profound effect on the iGaming industry is probably a bit of an exaggeration. They will, however, surely be looking to make a sizeable dent in the real money Facebook market. While this may be of little significance for the gambling industry, it’s pretty much a make or break situation for the social gaming giant.