Zynga gambles on the future

The company behind Farmville and Mafia Wars is 'rolling the dice' on its future.

By TheStreet Staff Jun 15, 2012 11:31AM

By Chris Ciaccia


Despite Zynga's (ZNGA) recent sharp share price decline, the company is "rolling the dice" on its future: online gambling.


The San Francisco-based social gaming company is exploring the potential online gaming market, according to Mike Gupta, Zynga's vice president of finance and treasurer.


"We think it's an interesting adjacency to what we do in our core business," he said, in an interview with TheStreet. "We also have an interesting asset in Zynga Poker, which is one of the world's largest online game, with over 30 million monthly users."


Reports first surfaced earlier this year that the company would look to enter the online gambling space, as it seeks to diversify revenue outside of social gaming.


Online gambling is still illegal in the United States, but it's legal in other countries, including Britain. Senate Majority Leader Harry Reid (D-NV) has tried to push forward online gambling legislation, only to see it fail. Zynga may be poised to capitalize on any such legislation, should it eventually pass, Gupta said.


Zynga is heavily reliant on Facebook (FB), both in terms of revenue, and traffic, with the likes of Farmville, Mafia Wars and CityVille seeing explosive growth based mostly from the relationship. Online gambling could lessen this reliance, and Zynga may partner with other companies to help build the experience.


Potential partners include casino operators such as Wynn Casinos (WYNN), Caesar's Entertainment (CZR) and others, though Gupta added Zynga has nothing to announce at this time. Zynga recently launched its own Zynga.com platform, and has partnerships with Google (GOOG) Plus, Tencent and a recent announcement with Sina (SINA) Weibo to bring Draw Something to the Chinese social network.


The continued expansion of gambling in the United States will most certainly happen, as the federal government seeks to generate additional revenue to help pay down the federal deficit. New Jersey Governor Chris Christie has already said that he will push forward with his state's decision to allow sports gambling. The federal government, however, still has not approved sports gambling outside of Nevada, Oregon, Montana and Delaware.


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