recently ventured into online real-money gambling through the
launch of ZyngaPlusPoker and ZyngaPlusCasino games in the United
Kingdom. Zynga will be offering the games in partnership with
Gibraltar-based real-money gaming operator Bwin.Party for players
aged 18 and above.
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Zynga's move is largely seen as an effort to boost top-line
growth as revenues from its social games continue to remain
sluggish. Zynga expects to launch the social version of
real-money games on
and mobile in the UK through the remainder of 2013.
According to data available from market research firm H2 Gambling
Capital, global gambling industry's total gross win is expected
to grow 5.6% to $417.0 billion, of which 8.1% comes from online
sources. This is expected to increase approximately 10% by 2015.
We believe that this provides a huge growth opportunity for Zynga
over the long term.
Zynga is expected to expand its game offerings into other
European countries such as Belgium, Italy and Denmark, where
online gambling is permitted, in 2013. Moreover, Zynga has
significant growth opportunities in the domestic online gambling
market. Although online gambling remains illegal in major parts
of the United States, states such as Nevada and Delaware have
already legalized online gambling.
In Dec 2012, Zynga filed an application with the Nevada Gaming
Control Board for an online gambling license in the state. The
whole process of granting license is estimated to take
approximately 15-18 months to complete.
We believe that Zynga will utilize this time to build strategic
partnerships with casino operators in the state. The company has
sizeable cash balance ($1.7 billion at the end of fourth
quarter), which will also help it to pursue acquisitions in the
sector. These partnerships and acquisitions will help Zynga to
gain an immediate foothold in the online gambling market post
Nonetheless, we believe that uncertainty over the license grant
considering legal hassles will remain an overhang on the stock
going forward. Moreover, Zynga is also expected to face stiff
competition from established casino operators such as
International Game Technology (
Bally Technologies (
in the near term.
Currently, Zynga has a Zacks Rank #3 (Hold).