The FarmVille creator is jumping into online gaming, and casinos should probably be worriedFacebook was Zynga's path to glory — the Facebook game FarmVille, a virtual agribusiness, put the San Francisco social-gaming company on the map. But since its $7 billion IPO in 2011, Zynga has been having a , culminating in the axing of 520 employees, or 18 percent of its workforce, last month.
On July 1, the job cuts reached founding CEO, Mark Pincus, who will be replaced by former Microsoft Xbox chief Don Mattrick. (Pincus will stay on as chief products officer.) The change was enough to boost Zynga's stock a bit, but on Thursday the company is giving investorsto get excited about: Gambling. With . On Facebook.
At a World Gaming Executive Summit in Barcelona, Facebook's Sean Ryan is showcasing two new Zynga games, ZyngaPlusPoker and ZyngaPlusCasino, according to . Zynga "says that social gaming remains its heart and soul," , "but the gambling games are a logical extension for fans who want to bet real money and win it in social games."
The first step is conquering Britain, where online gambling is legal and regulated. In April, Zynga released online and downloadable versions of its two real-money games in the U.K., in partnership with established British poker company Bwin.Party Digital Entertainment. Facebook and mobile versions are coming soon.
Americans (and Britons) canon Facebook, where you pay real money for virtual chips that you can never cash out. The new versions, when they drop, will let people win (and lose, of course) real cash. Investors applauded the news because, well, gambling generates a whole lot of money. The Facebook component is key to Zynga's strategy.
Zynga and its investors believe, with some justification, that "the real-money Facebook games could be a game changer, luring in the general U.K. population that has known Zynga for years as a social gaming pioneer," . People who have been playing FarmVille and Mafia Wars may not be big on online gambling, but Zynga could change that, with Facebook's imprimatur.
Britain is "the ideal test-case for Zynga, with it's concentration of seasoned online gamblers contributing to a £2.3 billion ($3.4 billion) industry for the country," . But the company's "sights are no doubt set on the United States, which, despite its currently restrictive gambling laws, could be worth $9.3 billion by 2020."
Rep. Peter King (R-N.Y.) is pushing for legislation to drop all federal regulation of online gambling, leaving it up to individual states to decide what to allow. Nevada and New Jersey — home to Las Vegas and Atlantic City, respectively — have recently legalized the practice. (Nevadans canonline real-money poker against other Nevadans, and New Jersey and Delaware are setting up their online gambling systems.)
It won't be a slam dunk getting a chunk of the Jersey or Nevada markets — Zynga needs to partner with a casino in Atlantic City, and only two of the 10 are still up for grabs, says VentureBeat's Jeffrey Grubb. But as signs point toward more online gambling in the U.S., Zynga has put itself in a prime position to profit. It has an established brand plus loads of customer data to work with, and Facebook is a great platform for minting new online gamblers.
"It's too early to say whether Zynga's online gambling bet will pay off," . "But at least it's given investors a glimmer of hope."
View this article onGetIssues of The Week
More from The Week: