With the help of the Seeking Alpha community, I have been considering the potential of Zynga (ZNGA) gambling for several months. We have imagined several market positions from which the social gaming behemoth could penetrate legalized online real-money gambling:
A) Cautious: generate paid referrals to 3rd-party gambling services
B) Straightforward: offer a real-money online casino
C) Greedy: turn real-money gambling into an entirely new experience
As I wrote of Option C in the comments to my first ZNGA article:
Of course, this is all assuming poker would be the only game to get legalized. There are a few even more speculative questions to ask: I am waiting for a response from a lawyer--I asked him if a legalization of poker could lead to the legalization of any game of skill that Zynga chooses to create. There are political realities of course, but why should poker be special?
Option C is incredibly exciting. As Mark Pincus, CEO of Zynga, has said, gambling is already a state of virtual reality. Zynga brought a layer of social to gaming; what if Zynga brings a layer of gambling to social gaming? I'm not talking about your great-grandparents' gambling games - I'm talking about everything from Monopoly to Mario Kart.
It appears Mark Pincus prefers Door C - maybe he read my article about the Monty Hall Problem. In any case, here is what Pincus recently said confirming his company's ambitious potential in online gambling:
We're interested, but you should expect to see us do a lot more than offshore casinos.
Active stock traders such as yourselves should understand that games of skill become more engaging when real money is involved. So, not only would real money gambling allow Zynga to dramatically deepen its revenues, it would also allow Zynga to reinforce the engagement that brought it users in the first place.
The moat that many complain has been diminishing for Zynga (due to competition from smaller social gaming shops), would be widened by the institutional barrier to entry of gambling regulation. Ironically, many complained this institutional barrier would hurt Zynga's prospects in gambling. Let's not forget that Zynga is a big company.
That's right, Zynga is big enough to take advantage of an institutional barrier to entry, and small enough to maneuver into a leading position of disruption ie, next-generation gambling games. Such is the competitive adaptability of Zynga aka honey badger. By the way, Pincus just had lunch with (need I say) politically-connected Rupert Murdoch...I wonder what they discussed?