August 20th, 2013
Via Kevin’s Corner, a look at Zynga’s revised internet gambling strategy:
Zynga’s recent announcements regarding their internet gambling strategy has confused business analysts, game publishers, game developers, internet gambling experts, Zynga employees and land based casino business managers causing them to reassess their relationship with Zynga and their own approach to the opening of the US internet gambling market.
The confusion and debate about Zynga’s short and long term association with internet gambling has been driven by two seemingly conflicting actions.
Party/Bwin Zynga UK Introduction Of Internet Casino Gambling Platform – Zynga has decided to forego the development of their own “real” money internet gambling platform and has opted to have Party/Bwin launch the UK Zynga gambling brand using the Party/Bwin gambling platform and gambling operation. Essentially, Zynga has recognized that there is a significant difference between their current social casino games and operations deciding that, for now, it would be wiser to have a company with expertise in the internet gambling space run their UK internet gambling business.
Executive Decision To Not Pursue A Nevada Internet Gambling License – Zynga has recently gone though an upper management change and the new management has decided that investing in a Nevada internet gambling license is not in the best interest for Zynga at this time. They have decided that the core social/freemium business should be their primary focus. It appears that working on a Zynga internet gambling platform and launching a US facing internet gambling business will consume valuable time and resources that could be better deployed improving the social/freemium game business.
So how do we interpret these potentially conflicting actions. Is Zynga in or out of the internet gambling business?
Apparently, Zynga is not completely out of the internet gambling business. If they were they would have shutdown the Party/Bwin/Zynga UK internet gambling effort in addition to the pull-out from the Nevada Internet gambling business.
The recent reluctance to enter the Nevada internet gambling business could be a recognition that the Nevada market is too small to support a meaningful internet poker gambling community. In addition, Ultimate Poker has recently launched a “real” money internet poker business in Nevada further questioning the viability of the Nevada poker market if two poker brands are active in the state.
The slow roll-out of legal internet gambling in the US could have influenced their decision to not get a gambling license in the US. Is poker a viable gambling product in the US if the US continues to pursue a state by state roll-out of internet gambling? Is the ratification of a federal bill the only way poker can be successful in the US?
Struggling Social/Freemium Business – There is no doubt that Zynga’s core business is struggling and this business must be put back on track before a significant amount of resources are invested in developing an internet gambling games, a gambling platform and a marketing effort that targets internet gambling players.
Low Conversion Rates Of Social/Freemium To Gambling Players – There is mounting evidence that social/freemium casino players are not easily converted to “real” gambling players. Zynga was no doubt counting on a significant amount of their social/freemium player to migrate to “real” gambling when they first contemplated a move into the gambling space.. With this expectation in question where would Zynga’s gambling players come from if they did launch a gambling operation?
Testing The Power Of The Zynga Brand – In many ways the Party/Bwin launch of Zynga in the UK is a test of the power of Zynga as a gambling brand. The games are not Zynga games and the operation is not run by Zynga. Essentially Zynga has licensed their brand for use in the UK gambling market. This will be a very good test given the hyper-competitive UK internet gambling market. If Party/Bwin can take marketshare away from other well known gambling brands in the UK using the Zynga brand the future of internet gambling for Zynga may become more important in it’s evolving business strategy.
Overall, despite the confusing nature of Zynga’s recent internet gambling announcements and actions, Zynga is not necessarily “out” of the internet gambling business. The UK experiment will give Zynga much insight into the viability of getting into the internet gambling business themselves. The timing and nature of the roll-out of legal internet gambling in the US will also have a significant impact on Zynga’s decision process.
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