Zynga (
ZNGA
) is expanding into mobile gaming and is looking to enter into real
money online gambling. It recently tied up with Nokia to add Draw
Something and Zynga Poker to Nokia feature phones such as
Nokia Asha Touch and the Nokia Series 40 range. The games
will feature in the phones released in Q3 and will cover nearly 100
million users. Zynga game apps are already available for
smartphones and the company plans to expand into feature phones to
increase its user base and target emerging economies.
The company has also hired a new COO, Maytal Ginzburg, who
was most recently the senior VP of regulated markets at 888
Holdings, a U.K-based online gambling operator. Zynga needs to
diversify its income streams and cannot depend on Facebook to drive
its revenues. It is becoming expensive for the social game maker to
advertise and attract new users on Facebook. In the first two
quarters of 2012, sales and marketing expenses for Zynga was up 44%
y-o-y while revenues from online gaming was up 18% y-o-y. We expect
mobile gaming and real money gambling to be the areas of focus for
Zynga in the coming years.
Check out our complete analysis of Zynga
Zynga - Nokia Deal
The hugely popular games, Draw Something and Zynga Poker, will
now be available on the Nokia Asha Touch feature phones along with
the rest of the Nokia Series 40 range. While Nokia's smartphones
haven't done too well compared to Samsung and Apple phones, it is
still a top player in the feature phone range in emerging markets
and hopes to extend this lead with touch-based feature phones.
The games will be available on a freemium model with free
play and the option to purchase in-game credits. These are the
first Zynga games to make their way to Nokia feature devices and
will potentially drive more people to its Asha
devices. The Zynga games will be added to the games already
available on Nokia's Asha Touch devices from publishers like EA,
Gameloft, Rovio, NAMCO BANDAI. This deal is an extension of
the Lumia deal to bring Draw Something and Words with Friends to
the smartphone range.
Online Gambling Lucrative
The online gambling market outside the U.S. is worth $32 billion
and this is the market Zynga plans to enter. Zynga Poker is the
world's largest social poker game and attracts users despite the
fact that there is no pay off. Hiring Maytal Ginzburg seems to
be a move to tap the real money gaming market. Zynga recently
begun lobbying in Washington and California and its best chance to
succeed is if online gaming becomes legal in the U.S.
Zynga will have to deal with competition from gaming incumbents
such as Caesars Entertainment, which already
operates online gambling services in Europe, and that bought
social and mobile game maker Playtika. Bally Technologies
and International Game Technology were granted online
gaming licenses in the U.S. The licenses only allow the
companies to provide systems and services to casinos and not yet to
offer games online; however, it is a step closer to online
gambling. Bally will now offer its iGaming platform to casinos
and IGT, its poker product to operators. If Zynga enters online
gambling, it goes up against popular gaming providers and casino
operators who have significant mind share with gamers and so it
will be harder for it to gain a foothold in the market. ((
Zynga Doubles Down On Online Gaming
, www.fool.com, Set 4, 2012))
We have a revised
$6
Trefis price estimate for Zynga
, which stands well above the market price. We expect Zynga's new
platform and gaming network and online gambling initiatives to
account for much of its future earnings potential.
Understand How
a Company's Products Impact its Stock Price at Trefis