Zynga (NASDAQ:ZNGA) is the world’s largest social gaming company with around 240 million monthly active users. Its most popular offerings include FarmVille, CityVille, Texas HoldEm Poker and Mafia Wars. It competes primarily with Electronic Arts (NASDAQ:EA), Playdom which was recently acquired by Disney (NYSE:DIS) and other independent social gaming studios. It has been focusing on the mobile gaming space as it plans to leverage the explosive growth of smartphones and tablets to add to its active user base, which has largely hovered under 300 million despite a few large acquisitions like Draw Something.
Zynga has churned out a lot of mobile gaming titles built by its own teams as well as mobile gaming studios it acquired over the course of last year. It has managed to attract a significant number of mobile gamers, thanks to the social integration with Facebook which enables it to create highly engaging games and spread the word.
Given the massive explosion in smartphone shipments, we expect Zynga’s next phase of growth to come from mobile gaming, should it be able to leverage its expertise in social online gaming to the mobile paradigm. Zynga’s Chief Mobile Office, David Ko, states that crossing over into mobile could be the best path to a billion gamers. 
Mobile users are also much more likely to purchase virtual items using in-app payments, so that could mean relatively higher average revenue for Zynga and could compensate for the relatively low average mobile advertising revenue.
Zynga has also expanded its partner program for mobile gaming studios, so it can publish mobile games by third-party developers while still taking a cut for giving them the massive marketing reach they want.
New games account for nearly half of Zynga’s total value, and a significant portion of that could come from mobile. We currently have a $14 Trefis price estimate for Zynga, which is nearly thrice its market price. We believe that the potential opportunities for Zynga in online and mobile gaming as well as online gambling justify its relatively higher Trefis value estimate.Notes: