Traversing the current meteoric, yet volatile, universe that is real money online gaming is not for the faint of heart, as Zynga, the San Francisco-based social media games developer, is finding out the hard way. The company behind popular Facebook free-play games like “Farmville” and “Words with Friends” is discovering that moving into a real-money gambling environment puts you in a whole ‘nother stratosphere, business-wise, and they’re having to make some tough cost-cutting measures to keep their financial heads above water.
Moving Into Real-Money Gaming
It’s all part of getting Zynga into the wonderful world of licensed Nevada Internet gaming technology providers; the company applied for a preliminary finding of suitability at the end of 2012, but still has a lot to do before they can compete with already up-and-running Stations Casinos and soon-to-be-up-and-running Caesars Entertainment for those precious online big bucks.
As part of the belt-tightening philosophy, Zynga fired 520 employees and closed both its L.A. and New York offices recently. The company that once ruled the free-play social gaming network has been faced with some sobering new realities as it approaches the real-money world; one of those is that mobile gaming applications are far outpacing social gaming platforms in popularity for real-money poker online. So while Zynga’s free-play Texas Hold’em application is still popular on Facebook, their new audience is spending far more time on their mobile devices, and that’s an area where Zynga is not the market leader by a long stretch.
Can Zynga Transition?
The question remains, can Zynga cut it against companies with decades of real-money gaming experience in the cut-throat and now tightly regulated world of Nevada online gaming? The answer is: nobody really knows.
“Beyond some residual value of current franchises, much of Zynga’s value is based on the potential for real-money gambling, which is still speculative and the timing uncertain,” said Macqaurie Securities research analyst Ben Schachter, addressing investors recently.
As of right now, Zynga still needs an online gaming partner in Nevada, and rumors are that Wynn Resorts Ltd. might be a contender; while that would obviously put them in a competitive position to offer their version of real-money Texas Hold’em to Nevada Internet poker players, those rumors are yet to be confirmed. Meanwhile, the company needs to pass its “suitability” test by the Nevada Gaming Commission to make it to the next round as a social gaming technology provider in the Silver State.
Could be awhile before you hear any “ee-ay-ee-ay-oh’s” coming from Zynga’s CEO Mark Pincus.