Zynga Jumps Into U.K. Gambling

Launch of new apps sends ZNGA shares soaring

   

Following a flurry of news, Zynga (NASDAQ:ZNGA) stock is making yet another big move today — up 16% as of this writing.

The company has launched real-money apps ZyngaPlusPoker and ZyngaPlusCasino — part of a partnership with bwin.party, a top online gambling operator in Europe — in the U.K.

Don’t expect a huge surge in revenues just yet — Zynga still is in the test phase, trying to get a sense of the conversion ratios and stickiness. Still, the company is known for its in-depth Big Data analytics and will be able to constantly make changes to fine-tune things.

And if there is traction — which seems reasonable — Zynga could get a nice boost. Consider that its Poker franchise has a staggering 37 million monthly active players (up 8% in 2012). Even if a small percentage starts to engage in real-money gambling, the impact could be massive.

Right now, it looks like online gambling will ultimately become legal in the U.S., thanks to favorable rulings from the U.S. Justice Department; Nevada, Delaware and New Jersey have already passed legislation allowing for it in their states.

Zynga also recently announced the departure of Dan Porter, VP and general manager of the NY operation. The former CEO of OMGPOP, Porter came on board after Zynga acquired the company for $180 million about a year ago. Unfortunately, the deal turned out to be a dud as the company’s main title, Draw Something, peaked out, and Zynga eventually announced it would take a charge of up to $95 million.

Porter became a magnet for controversy more than a company asset. For example, in a recent post in Quartz, Porter claimed that Zynga’s titles were merely knock-offs. Needless to say, CEO Mark Pincus was not thrilled, and Porter was forced to apologize.

Turnover has been substantial at Zynga. Other major departures have included Mike Verdu, chief creative officer; John Schappert, chief operating officer; and Ya-Bing Chu, vice president of the mobile division. However, while seemingly disruptive, the moves might come out in Zynga’s favor in the long haul, as newer minds with fresher perspectives could help the social gamemaker amid months of seemingly losing its edge.

I’ve been bullish on Zynga’s prospects for a while. The company has tremendous resources and has taken tough steps to reorganize its operations. Plus, the real-money gambling business should be a success, and there’s of course still the possibility for additional hits on the traditional gaming side. Most recently, its new title What’s The Phrase has reached the top 10 in Apple‘s (NASDAQ:AAPL) App Store.

Still, now’s not the time for buying. ZNGA has seen a number of spikes over the past year, and most have fizzled a bit before the stock began to head higher again. Thus, wait for a better price — you’ll probably get it.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


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