Are Zynga's Days Numbered?

Jan.31.13 | About: Zynga (ZNGA)

Next week, February 5th, Zynga (NASDAQ:ZNGA) will be reporting its earnings for the final quarter of 2012. Whether good or bad, there's no denying that Zynga has been going through a rough patch to say the least.

In 2012, the game application company eliminated jobs, studios and some of its previously most popular games. Currently trading around 2.53, the shares have seen a 52 week high of 15.91. That's a drop of 84%. There's no doubt that Zynga's directors and management must be worried. Even yesterday saw yet another blow to the company with the resignation of Brian Reynolds, the chief games designer. Yet another member of the senior management team to depart from Zynga.

Last October saw the move that many people had been awaiting. Zynga finally announced a real money gaming deal with the online gambling giant Bwin.Party.

However, since the announcement there has been no further news on the development of the Zynga /Bwin.Party real money gaming deal. Claims at the time from Zynga were that within the first half of 2013 the two parties would release a suite of real money casino games including roulette, slots, blackjack and poker. A product release sometime soon is being anticipated with baited breathe.

Since attending many online "casino" gaming conventions over the past eight years, there has always been much debate as to whether Zynga could actually make the transition into real money gaming. The debates always focused around the demographics and mindset of the players of virtual currency games versus the mindset of an online gambler.

From my personal experience in both worlds as a player and a professional marketer of online casino products and social games, I believe that despite a potential overlap in certain demographics between social gambling and real money gambling, players of social games are NOT online gamblers. In the world of real money online poker, players don't get the chance to play a million chips in a hand and come back the next day. It's a whole different story when every bet lost is the loss of real money.

In my professional and personal opinion there is only an outside chance that Zynga's transition into the world of real money gaming will be successful and thus marking the end of days for Zynga as the giant it once was.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.