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Zynga's (ZNGA) Q2 2013 results were down across the board, as has been the case for several quarters now. In fact, it makes no difference what the results might have been. Give or take a penny here and there makes no difference. The stock did not tank because of the bad guidance or the loss. The culprit is the company's online gambling endeavors.

For those following my Zynga logic all these months, at the heart of my thesis about the profit potential of the stock has always been the real money gambling aspect of the company's plans. I have always said that social games will keep the company afloat -- with small losses here and there -- but the real money for shareholders will be in real money gambling.

Even if eventually the company didn't make it in the gambling space, the market would have at least speculated on the possibility of success, and investors would have had a chance to make some good money from now to 2015.

Well it seems that Zynga's new management disagrees with that notion and announced that it will no longer pursue a real money gambling license in the U.S.

Zynga believes its biggest opportunity is to focus on free to play social games. While the Company continues to evaluate its real money gaming products in the United Kingdom test, Zynga is making the focused choice not to pursue a license for real money gaming in the United States. Zynga will continue to evaluate all of its priorities against the growing market opportunity in free, social gaming, including social casino offerings.

Revenue, profits and guidance from management have been negative for some time now. The market was really not expecting anything new on the social gaming front. However, the stock has been going up for some time now - not because of the company's social gaming endeavors, but because of the possibility the company might in the future make it big in the gambling space. If you take that away, there is not much to be excited about Zynga.

I don't know what's on the mind of the new CEO Don Mattrick, but he is definitely starting off on the wrong foot. Because if Mattrick thinks he's superman and he will find a way for people to continue to play boring social games that have become a dime a dozen -- just because he was successful in other gaming endeavors in the past -- let me tell him straight out he is wrong.

Social gaming is not going to become a smash success ever again for Zynga. There are simply too many players in the space and players have many more options today. There isn't much Mattrick can possibly do to revive the company within the social gaming space.

If Mattrick thinks he will pull some kind of rabbit out of a hat, that's fine. We will see what he has. But why did he have to stop the company's real money online gambling efforts? Zynga already had everything in place and was ready to go. Why in the world did he put a stop to this effort?

Anyway, everything I have said about Zynga in the past is by default not valid from now on. Forget about the price targets I have set and forget about speculating with the stock until 2015. Everything just went in the waste basket because Zynga's management changed their minds about the gambling space.

And since the only thing that got Zynga shareholders excited lately was the potential for future real money gambling revenue, now that gambling is not in the picture anymore, that excitement is now over. And that's the reason for the nosedive of the stock yesterday.

I will continue to follow the stock for the heck of it. If and when it becomes dirt cheap, I will alert you of the potential speculation possibilities. Until then, without the potential of real money gambling to get people excited, I see no reason to buy this stock. Because unless some kind of a miracle happens, the company will not make any money in social gaming.

Good night and good luck to Zynga shareholders.

Source: Zynga: Good Night And Good Luck