The company will focus on free play social games
Social gaming giant Zynga has recently announced its intentions to scrap the plans regarding the US online gambling market. Instead, the company will focus its efforts on making free-to-play social games. The decision came as a surprise considering the bad time Zynga has been having lately and the struggle to stay afloat. The potential offered by the starting online gambling market in the United States was expected to be a big opportunity for the popular games developer.
Most of the revenue the company now generates comes from selling virtual goods within its games. For example, users can buy poker chips while playing “Texas HoldEm” or get farming equipment in “FarmVille 2” for real money. However, the users can’t win real money from these games.
Last year, Zynga stated that the real money gaming market would be the natural fit considering the fact that it already had casino games, including poker. After hiring a former online gambling executive, the company applied for a license with the Nevada Gaming Control Board late last year and after eight months, it seems that Zynga had a change of heart.
Zynga has had a lot of success in the social gaming industry, being best known for games such as Words with Friends and Farmville, and will try to do it again under the new management. Less than a month ago, the Chief Executive Officer was replaced with Don Mattrick, who used to be the head of Xbox businesses at Microsoft.[geocode id=1]
In April, Zynga launched a real money online gaming site as a result of a partnership with bwin.party. This was only available in the United Kingdom and allowed users to enjoy Zynga Plus Poker and an online casino. It was expected for this to be a way to test the waters and get ready for entering bigger markets, like the US, but this is now no longer available.
Zynga shares drop
After making the announcement that Zynga will no longer pursue plans to enter the online gambling business in the US, shares dropped as much as 20%, reaching $2.81 in early trading. Before two days ago when the statement was made, Zynga shares had increased by 48 percent from the beginning of the year as it took the preliminary steps to enter the US gaming market and get a license in Nevada. The online gaming market in the United States is expected to reach $7.4 billion per year by 2017.
Zynga’s dominance of the game offer on Facebook has also gone down this year. There are only three top-10 games now available on the popular social network that were developed by Zynga, compared to seven last year. Analysts estimate that the third-quarter loss will be somewhere between 2 to 5 cents per share.
The decision to enter the mobile gaming market was to be expected but the company doesn’t have the same advantage here as it had on social networks. There are many operators that now focus on mobile gaming and leaders like Apple, Google and Facebook are seeing huge platform growth.
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