Social gaming giant Zynga is to launch its first real-money gambling games in the first half of 2013, the company announced in its second quarter earnings call yesterday.
Mark Pincus, co-founder and CEO of the company behind the world’s biggest online poker game and Facebook’s most popular social game, Texas Hold’Em Poker, told analysts yesterday: “We have our first products in development, and we intend to release them in markets that are regulated and open, subject to our getting licensing.”
Their plans did not include the company’s home market at this time, though, said Pincus: “The US market is an attractive market, but it’s not an open, regulated environment today, so we don’t currently have plans for the US.”
The company’s chief also refused to be drawn on whether Zynga would be pursuing licences in its own right to enter these non-US markets or partnering with a company that already had licences for real-money wagering.
“We are not making any more public announcements about how we will enter those markets today, but obviously it is subject to having a licence.”
Zynga, which boasts 35 million monthly active users for Texas Hold’Em Poker, and also operates casino, bingo and blackjack games on Facebook, has been linked both with an acquisition of bwin.party’s Ongame real-money poker platform and also inviting Playtech and GTECH G2 to tender for the contract to provide a platform on its behalf. The company has reportedly also been discussing possible deals with real-money casino groups in the US, such as Wynn, to take advantage of the future regulation of online poker in the US.
The provider however made the announcement on a day when it missed analysts’ revenue and profit targets, prompting a 42% dip in the company’s share price amid speculation over the sustainability of Zynga’s revenue model, with the growth of social gaming slowing in recent months. Zynga partly blamed the shortfall on Facebook, on which it relies for 93% of its revenues, saying changes to the social platform had made it more difficult for users to find existing games.
The slump also affected Facebook, with shares in the social network falling 10% ahead of the company reporting its Q2 earnings today. According to a filing with the Securities and Exchange Commission ahead of its recent IPO, around 19% of Facebook’s revenue is tied to Zynga, either through the 30% cut it takes of the provider’s revenue on the platform or from ads bought by Zynga to promote its games.
Social casino and poker games – in which players can play for free to win points or virtual prizes with providers making their money from the minority paying extra for credits or chips to bet more – are however the fastest growing segment of social games on Facebook, now accounting for 13% of all players, up from 8% last year, according to data from US consultancy Kontagent.
The rapid growth of this sector has led real money gambling companies to invest large sums in acquiring the providers of these games in the last 18 months. US land-based casino operator Caesars’ interactive division recently parted with around US$200m to acquire Slotomania developer Playtika, while supplier IGT is spending US$500m on DoubleDown Casino. PartyPoker, PartyCasino and bwin owner bwin.party, scared off by the huge valuations placed on social gaming companies, recently unveiled a strategy to spend US$50m on developing its own standalone social gaming division. Other traditional online operators such as Jackpotjoy owner Gamesys have also built thriving social slots businesses.