Zynga, the social game provider behind massive hits such as FarmVille and Words With Friends, is facing major changes following a challenging couple of months. The company made a loss of $52.7 million in the July-September quarter (equalling about 7 cents per share), something which can be mainly attributed to the devaluation of OMGPop, which Zynga acquired for $183 million in March.
To make matters worse, last week a designer named Justin Maxwell brought global attention to Zynga’s struggles by tweeting that the company had laid off approximately 100 employees from its office in Austin, Texas, with no prior warning. CEO Mark Pincus has since confirmed that Zynga is undergoing organisational restructuring which will see its workforce downsized by at least 5%.
Zynga, whose motto and mission is “connecting the world through games”, is still the number one provider of games for Facebook, and this remains its primary revenue stream. Efforts are being made to score a similar win on the mobile market, but as yet the results have been largely unremarkable.
Enter Bwin.Party, a leading real money gaming company. Zynga has just entered a partnership with them in the hopes that incentivising players with cold hard cash will help to generate revenue. In an official statement, executive vice president of corporate and business development Barry Cottle said; “Partnering with an established leader like Bwin.Party is a strategic and prudent way for us to enter a key RMG [real money gaming] market while giving local players the real money games they’ve been asking for.”
Zynga is not the first games provider to take a chance on real money gaming; back in August, their main competitor Big Fish partnered with Betable and rebranded their popular Card Ace: Casino app into the real money gaming platform Big Fish Casino. Facebook are also partnering with Gamesys in order to allow over eighteens to play for real money on its Bingo Friendzy app.
It’s no surprise that this is the direction gaming providers are choosing to follow, since Bwin.Party has indicated that the online casino market has the potential to grow to $8 million in the next three years. The ultimate aim in Zynga’s case is that, while the games themselves will be much more niche and targeted than the crowd-pleasing Words With Friends, the revenue per user will be much higher.
The Zynga / Bwin.Party partnership has already been blasted by Betable CEO Chris Griffin, who has dismissed the deal as “vanilla” and “run of the mill”. He has also criticised Zynga’s proposed gaming model, saying; “these are not Zynga games, these are basically Bwin.Party games in Zynga clothing”, referring to the Bwin developed, FarmVille branded slot games.
While real money online gaming is still illegal in the US (hence the number of gaming platforms based in Europe and the UK), it is likely that the prospect of securing a portion of a booming market will be strong motivation for American gaming companies to start lobbying for change. Zynga has already made headway, investing in state and federal lobbying initiatives ahead of the official launch of its real money gaming lines in early 2013.