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Zynga Inc (ZNGA), Facebook Inc (FB): Will Big Bets Save This Gaming Stock?

Gambling is increasingly being used as a source of tax revenue by the states. Now Zynga Inc (NASDAQ:ZNGA) is trying the same Hail Mary pass. Will it work and who else might win this game?


Gambling money

People, for whatever reason, like to gamble. For years in this country that meant a trip to a small collection of areas in which it is legal to play such real-money games. However, seeing the tax revenue that gambling generates, more and more locales have moved to allow gambling.

This has been a big issue for places like Atlantic City and Las Vegas, since their status as gambling destinations has been tarnished by more availability. Now, with online gambling finding increasing acceptance, gamblers won’t even need to leave their homes. In fact, with a mobile connection, one can game anywhere there’s reception!

Hail Mary

Zynga Inc (NASDAQ:ZNGA) is trying to latch onto this trend by offering real-money games in the United Kingdom. The company that helped create the casual game market has struggled as customers appear to have tired of its offerings.

Most of its revenue is generated from in-game purchases made by players using Facebook Inc (NASDAQ:FB). Although it has tried to move beyond this giant social network, it has been a difficult transition. Facebook offered the perfect feeding ground for the company because of its large community. Zynga Inc (NASDAQ:ZNGA) simply can’t recreate that as easily with its own brand.

So, Zynga Inc (NASDAQ:ZNGA) has taken itself from social game company to real-money game company with the release of ZyngaPlusPoker and ZyngaPlusCasino. This is a big change of direction and one that is likely to be even more challenging than social games. Indeed, it’s a sure bet that every gambling related company is looking at the same space, many with much better industry positions than Zynga.

Although the shares advanced on the news, Zynga Inc (NASDAQ:ZNGA) still has a lot to prove before investors should jump aboard.


However, real-money gaming could be a huge win for the company’s partners. With regard to gambling, that means Digital Entertainment Plc (LON:BPTY). This tiny company is hosting Zynga Inc (NASDAQ:ZNGA)’s games. According to Bloomberg, it has the gambling license and will handle security measures.

The company earns basically all of its revenues from gaming and it has operations around the world. This makes it a globally diversified play on online real-money gaming. However, taking a step back, Digital Entertainment Plc (LON:BPTY) is, effectively acting as a distribution platform. It looks very much like a pick and shovel company.

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