Zynga’s Next Billion Dollar Opportunity: Online Gambling

January 17th, 2012 by Trefis Team
9.50
Trefis
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Zynga

Zynga (NASDAQ:ZNGA) continues to dominate the social gaming space and has made significant inroads in mobile gaming, but its stock performance has failed to impress as it continues to trade below its IPO price. However, a recently ruling by the Justice Department which enables states to allow online gambling could present a significant opportunity to Zynga to generate billions of dollars in revenue from casino games through online gambling. The online gambling market could be worth more than $40 billion by 2014, with online poker and casino games accounting for a major portion of the total market. [1] Zynga competes with Electronic Arts (NASDAQ:EA), Playdom which was recently acquired by Disney (NYSE:DIS) and other independent social gaming studios.


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Zynga already operates Texas HoldEm Poker, which is its most valuable game. It current has close to 30 million monthly active users, and is by far, the most popular casual gambling game online. If Zynga enables users to play its casino themed games like Poker with real money, it could lead to a significant increase in the average revenue generated per user, and account for a major portion of Zynga’s total revenues.

Last week, International Game Technology, a slot machine company acquired a Facebook game developer – Double Down Interactive – for $500 million. [2] Double Down had just 4.7 million monthly active users, much fewer than Zynga’s Texas HoldEm Poker.

Zynga has significant advantages over other companies that could try to enter the online gambling space. It already has a superior technology platform and a massive user base, which could make it the leading player in online gambling, should it choose to make a move. Zynga hasn’t made any related announcements yet, but expect a significant boost in its stock price, if it announces that it plans to enter the online gambling space.

Texas HoldEm Poker currently accounts for nearly 30% of Zynga’s $10 Trefis price estimate, which stands nearly 15% above its market price.

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Notes:
  1. Online Gambling Industry Grows by 12 per cent in 2011, Poker Pages [↩]
  2. Zynga Dealt Strong Hand in Gambling, WSJ [↩]