Will Zynga Inc (ZNGA)’s Latest Plan Make or Break the Company?

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Once upon a time, it seemed like Zynga Inc (NASDAQ:ZNGA) was all but printing money. Stumbling on to a successful formula for social gaming success, the company seemed ready to take on the world with what was expected to be a wildly successful IPO. Things don’t always work out as planned, however. It now seems like every bit of news about the company has at least some people wondering whether it’s going to be Zynga Inc (NASDAQ:ZNGA)’s last.


The big news is that Zynga recently laid off 520 people, cutting approximately one-fifth of its workforce and reducing its staff to 2,300. Rumors began about the layoffs at the end of May. When they became official, people were worked into enough of a frenzy that trading of the company’s stock had to be temporarily suspended. Add this to a questionable new direction for the company, and it’s easy to understand why people are wary of Zynga Inc (NASDAQ:ZNGA)’s stock.

Not-so-social gaming

Zynga originally made a name for itself by developing social games for Facebook Inc (NASDAQ:FB). Some users disliked the excessive number of requests that they had to send to friends to complete quests in the games, but the company still did quite well for itself as a result of microtransactions for in-game currency and items. Unfortunately for Zynga Inc (NASDAQ:ZNGA), its competition started heating up and user numbers started to dwindle.

Zynga tried its luck at creating its own social gaming network, independent of Facebook Inc (NASDAQ:FB). Meanwhile, major game publishers such as Electronic Arts Inc. (NASDAQ:EA) started taking an interest in social gaming in hopes of capitalizing on the trend. Electronic Arts Inc. (NASDAQ:EA) has the advantage of being able to adapt games that social gamers already know and love, especially now that it owns the casual game giant PopCap. While Zynga Inc (NASDAQ:ZNGA) tries to come up with new variations on the same concepts to keep its fans happy, Electronic Arts Inc. (NASDAQ:EA) is giving them the option of playing Bejeweled, Zuma, and Plants vs. Zombies on Facebook Inc (NASDAQ:FB).

Taking a gamble

With its break from Facebook not going as well as it had hoped, Zynga is looking for new avenues that it can monetize. Apparently, the best option available is to make a transition to online gambling. This isn’t necessarily a huge stretch since the company already has a few casino games available. But this time around, the players won’t have to send requests for more chips to everyone on Facebook.

The problem with this is that Zynga Inc (NASDAQ:ZNGA)’s potential market is relatively small at the moment. The company plans to launch online gambling games in the UK, hoping that the trend toward online gambling legalization in the US continues. Zynga wants to get in on the ground floor.

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