Another week, another breaking story about Zynga moving into the real-money poker sphere.
This time, the company is making headlines for seeking a platform partner for real-money poker. According to EGR, Zynga has already received bids from Playtech (iPoker) and GTECH G2 (IPN) to provide Zynga with a poker engine.
That likely seems a curious development to those who read only weeks ago that Zynga was in talks to purchase Ongame, which would make Zynga the owner of a fairly well-regarded online poker platform (and therefore an unlikely shopper for such a platform). And what about the plans for a partnership with Wynn? What role would Zynga play in a ménage à trois involving a major commercial casino and a major platform provider like Playtech?
All of this begs a much larger question: What exactly is Zynga’s strategy for real-money poker? While I don’t have anything resembling inside information, a quick analysis of the possible paths the company could be considering still provides some interesting insights into Zynga, the future of the online poker market in the US and the prevailing attitudes of those outside online poker regarding the potential for regulation.
So, what are Zynga’s actual intentions when it comes to real-money poker? A few speculative answers follow.
To Prop Up the Stock During a Time of Need
2012 has been a tough year for Zynga - or for the company’s stock, anyhow. It is easy to see how online poker could be a tempting trinket to dangle in front of investors to distract them from the underlying issues dragging down the stock; online poker is a potentially huge market that has a lot of buzz, but exists in a weird fugue state thanks to regulatory foot-dragging on the part of states and the USFG.
As a result, dropping a leak or quote about this online partnership or that can make it seem like the company has a few irons in what could eventually be a very profitable fire without requiring much in the way of tangible investment or follow up. Bonus: You’ll find no shortage of potential partners looking for similar phantom bumps. Bad news: If this is Zynga’s strategy, it doesn’t seem to be working.
To Dissuade Competitors From Entering the Social Poker Space
It’s still very unclear how the worlds of real-money online poker and social poker will eventually converge, but a few things are clear:
- Social poker is worth a lot of money in both the immediate / real and the later / potential sense.
- Zynga currently dominates the space.
- #2 is the primary (possibly sole) asset driving Zynga’s potential as an online poker room.
The Company Has No Idea What It’s Doing
A lot of very smart people have gotten online poker very, very wrong. It’s certainly plausible that the reason why the company’s approach appears somewhat random is because there’s no one driving the bus – or the driver has had a few too many. If you look at the pattern of statements with little substance, leaks that suggest contradictory strategies and the lack of any apparent concrete progress, the simplest explanation for it all is that Zynga lacks a coherent, quality plan for exploiting real money online poker.
Zynga Is Just Hedging
It seems a little loopy to be at once considering both purchasing a poker network and simultaneously hiring out basically everything that purchase provides, but if there’s any context in which such bizarro world logic makes sense it would be the US market as it currently stands. Zynga (which certainly has cash to spare) could view Ongame as a potential side bet of sorts should player pools once again go global, while a partner like Playtech would be ready to immediately do the heavy lifting (technical and licensing) should US regulation rapidly roll out in a fragmented state-by-state fashion in the near term.
Bridging the Two Worlds is Much Harder Than it Looks
Maybe Zynga knows exactly what’s up, and everyone else is getting it wrong. The common wisdom is that we’ll eventually see a full-on convergence of real-money gambling and social gambling, but what if Zynga – armed with mountains and mountains of data about how people spend money recreationally online – has seen a future where traditional gambling and the pay-for-fun-quasi-gambling that dominates Facebook just don’t ever meet and mesh? It’s certainly possible that the two markets don’t have the type of overlap everyone assumes, and if Zynga has determined that to be the case, it would make more sense for the company to be pursuing a variety of options for real money poker.
Zynga is a big company with a battered stock, a lot of cash in the bank and a highly volatile core product. It’s also the current home of – as of July 24th at about 3pm EST - 150,244 people who are at least marginally interested in playing some form of online poker. How loyal they are to Zynga, how interested they are in trading faux chips for ones with direct value and exactly how Zynga will attempt to test the answers to those questions will all make for some interesting viewing in the weeks and months ahead.