Is Zynga Inc (ZNGA)’s Bet on Mass Market Gambling a Game Changer?

A look at Zynga’s main challengers

Zynga Inc (NASDAQ:ZNGA) faces competition from Electronic Arts Inc. (NASDAQ:EA) , a company that develops, markets, publishes, and distributes game software content and services for video game consoles, personal computers, mobile phones, tablets and electronic readers, as well as the Internet, Zynga’s main revenue source.

Electronic Arts’ stock recently hit a new 52-week high following optimism by analysts from Macquarie Capital. The company’s stock was upgraded by Ben Schachter from market perform to outperform, citing focus on cost controls and optimization of infrastructure for the new console cycle and digital opportunities.

Electronic Arts boasts a trailing 12-month revenue of $5.34 billion compared to Zynga’s $2.58 billion. Net income for the same period stood at $175 million for the Redwood City-based company, compared to a loss of $209 million for Zynga. Nonetheless, Zynga trumps Electronic Arts in terms of gross margins, with 0.73 percent compared to EA’s 0.64 percent.

Glu Mobile may not be regarded as a direct competitor to Zynga, but according to the shift in device preference, Zynga could yet again find it tough to rival the more seasoned mobile player. Glu Mobile stands a chance, based on the current shift from desktop usage to mobile device usage. The introduction of tablets and smartphones to the computing world has revolutionized entertainment as app-based games are becoming more popular than web-based games.

The bottom line

Zynga has been in the gaming business for the last five years, going through its worst experience last year. However, the news of monetizing online gaming and gambling offers the company another opportunity to express its authority in social gaming. The biggest question is, however, whether the company can successfully conjure a rebound with its new bet, not forgetting the threat posed by Electronic Arts and Glu Mobile.

The article Is Zynga’s Bet on Mass Market Gambling a Game Changer? originally appeared on Fool.com and is written by Nicholas Kitonyi.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.