Why Zynga Gave Up on Gambling
If you're wondering why Zynga pulled the plug on getting into online gaming so early in the game, you're not the only one. You can include the analysts and the shareholders too who have been holding out for so long for this online gambling day to come. But as can be expected when a new CEO come into place, there is going to be changes and sometimes it goes with what he knows best. One would have to look at his background to see where the chips will be falling as Zynga moves forward. Don Mattrick's background is in video gaming, not gambling first of all. He started his own company in Burnaby B.C. Canada, which was purchased in 1991 by Electronic Arts and then that became Electronic Arts Canada. He then left the company in 2005 to go work for Microsoft and became Senior Vice President of the Xbox and PC gaming division. He was very successful at expanding the subscription base of the Xbox 360 and unveil the Kinect for Xbox product. He's even in the Guinness Book of World Records for selling 8 million units in the first 60 days with Kinect, which is a "controller-free gaming and entertainment experience" for Xbox 360 launched in making it the fastest-selling consumer electronic device ever. So if you see the pattern here as he is probably sees the gambling market as a risky and costly business to get into given the fact that he's not an expert in that business. In a lot of ways you can't blame him as he recognizes that the barriers to entry are a lot tougher for a company that is basically seen as the creators of Farmville, Castleville and other popular social games. They may have ZyngaPoker and ZyngaCasino but if you think about the stigma that is associated with Zynga, it's more of brand that is associated with free games and play for fun on Facebook. And the online gambling market is not an easy one to stay in as there are lots of market leaders out there who have earned there stripes from knowing the market and knowing what players want.
Even if Zynga hired the top marketing gun from 888 last year, that doesn't mean it's an instant game changer and the numbers prove it. That's why said Zynga COO David Ko points out that Zynga Poker, the brand that was going to take the world by storm has been disappointing and the competition is fierce. "We're not happy with our second largest franchise, Zynga Poker," Ko said, "Competitors are closing the gap. In response we're deploying top talent to get the franchise back on track."
Even then they are up against such massive market leaders as Poker Stars and Party Poker who are household names in the online gambling community. These companies have been through a lot and are well trenched in the minds of poker players. Poker is all about critical mass and the network, meaning you have to have a good mix of good and bad players to make it work. There's also a name association that not all poker players or even gamblers will take Zynga seriously.
You can bet your bottom dollar that most serious gamblers look at Zynga games and make more sense for their kids, while they play on the more "grown-up" sites like Poker Stars. And that's only poker. Now let's look at ZyngaCasino. They would have to acquire a major software provider to be taken seriously. The major software players in that market include the likes of Microgaming, Playtech and NetEntertainment who are now dominating the casino landscape and have been doing so for years. They've already sealed the big branding deals with Warner Bros, Universal Entertainment to market Lara Croft, Lord of the Rings, BattleStar Gallactica, Pink Panther and Marvel Comic characters like the Spiderman and the Fantastic Four. They are way ahead of the game and who knows what deals are being inked in the next few months or even weeks. Staring at the online gambling mountain and cost of going after these entrenched online gambling companies obviously made them realize there is no real sense in attempting to climb it. So, what better time to turn around do an about face and focus the company on their core competency, social gaming, in other words, stay where they are comfortable and well known.
That's why David Koo explained, "The decision we made around real money gaming centered around focus. We looked at social gaming, free-to-play. It continues to grow and we're not executing against that. It really centered around focus." Even though everyone was betting that Zynga was going to take the online gambling market by storm, it wasn't until they brought on the new CEO that had absolutely no gambling experience that really indicated where exactly they better focus their efforts. At this time it would be better to put your money on a Zynga gaming console coming out way before another poker table comes off the assembly line.