Is Online Gambling The Salvation Of Zynga?

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Steve Anderson
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Is Online Gambling The Salvation Of Zynga?

It wasn't long ago at all that Zynga's COO, John Schappert, walked out of Zynga following not only a litany of bad news, but also news of a substantial restructuring in the company's operations. Now, the COO slot has been taken on by Maytal Ginzburg, who has an unusual background for being the COO of a gaming company. Ginzburg comes Zynga's way from 888 Holdings, an online gambling company. That's got some wondering if maybe Zynga has a new plan in mind...a new plan that has less to do with running farms and more to do with betting them.

Zynga has a plan to release what's called Zynga Poker, a real-money gambling operation, in the UK starting in early 2013. This by itself is something of a risky move, not so much because it's online gambling, but because in the UK, online gambling has been around for quite some time. Thus, the field is populated by a wide variety of established players, many of whom have been around for some time and have established user bases. Zynga, as a newcomer, is going to have to find a way to break players out of their current gaming venue of choice and bring them into the fold.

This is probably a good chunk of why they brought Ginzburg on board in the first place, as she's got quite a bit of experience in online gambling, and has an idea of how other companies have done it successfully. But the market in general is something of a risky one, as online gambling is largely forbidden in arguably the biggest market on Earth, the United States. While there have been some inroads made--online gambling is currently only legal in Nevada, and requires state licensing at a cost of $1 million, with California, Illinois and New Jersey looking to join in--the bulk of the population is out of the game. So even if Zynga did go to online gambling, it would only have limited impact as much of the market is barred from play by law. However, with the United States Department of Justice recently issuing an opinion that suggests that the federal ban is only related to sports betting, as opposed to card games, this may well signal an opening up of the market.

If this does work, it may well prove to be Zynga's saving grace. Zynga can certainly present a good game--the guys who made Farmville have to have some idea how--and there won't be any outcry of imitating games that have been around for centuries. But the problem with this strategy is that it depends on a lot of circumstances coming together just right for the company, and with Zynga's stock price on the outs and its staff running for the exits, that grand convergence of circumstance may not happen fast enough.