Zynga’s (NASDAQ:ZNGA) poker app is the top grossing iPhone app for the U.S and U.K market for 2012 and this is no small feat considering that the game has been around for two years and is still finding a large number of users. We expect this game to be turned into real-money games soon once the gaming license comes through. The company has officially filed papers with the Nevada Gaming Control Board for a gaming license in the state which will be subject to Zynga’s financial standing and regulatory track record. The company was also in talks with Wynn Resorts earlier this year for an online gambling partnership, and we expect to see significant growth in revenues led by real money gaming if the license and partnership deals go through. 
Zynga Will Roll Out Real Money Games In US And UK
While it waits for the gaming license in the US, Zynga will roll out real money games in other countries like the UK. It has already entered into an agreement with bwin.party to launch real-money gaming for its UK customers. It plans to launch a real-money version of Texas Hold’em Poker and FarmVille themed slots in the country. Once the company manages to rope in a Nevada partner, the regulated online gaming space in the US will be easier to penetrate.
Monetizing Mobile Easier With Real Money Games
The biggest issue faced by most app developers is the inability to monetize mobile apps. Most mobile games are free-to-play and monetization is mainly through ads. This is not ideal as ads tend to be intrusive to the gaming experience. Only top games such as Rovio’s Angry Birds can successfully monetize through paid versions of the game and this is not ideal for Zynga as its games are free-to-play. While the company monetizes via ads and in-game purchases on Facebook, the introduction of mobile-based real money games provides a much better avenue for monetization of the mobile app as the company can make the game free and charge a fee for real money gaming features.
Outlook For The Rest Of 2012
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Raising its lower end of the estimates, Zynga has guided for bookings in the range of $1.09 billion to $1.1 billion and adjusted EBITDA of between $152 million and $162 million for 2012. It expects full year non-GAAP EPS in the range of $0.02 to $0.03 based on a full year share count of approximately 830 million shares. We expect cost reduction and focus on top games will help its results in the next few quarters.
We have a $3.19 Trefis price estimate for Zynga, which stands significantly above its market price. We expect Zynga’s new platform and gaming network and online gambling initiatives to account for much of its future earnings potential.Notes: