Anybody who has been reading this site for a while may remember that I’ve written about Zynga real money poker in the past. Originally, I wanted to dispel the idea that Zynga was guaranteed to become the next PokerStars due to their size and player base. At the time, I noted that Zynga had failed to hire a single notable executive out of real money gaming which would be mandatory for them to get into real money gaming.
This business is way too complicated to learn as you go if you’re talking about a company the size of Zynga. It’s too different from their core business of play money games to simply transition into real money gaming without someone experienced leading the way.
Well, Zynga has yet to make notable senior-level hire from real money poker but they have been testing the waters a bit with talk about buying an existing operator. That would likely give them the right personnel to run a real money gaming operation but it also proves one of my other previous assertions that play money poker software doesn’t easily convert into real money poker software.
Again, it’s a completely different business. Zynga doesn’t have to worry about fraud or collusion on a play money site. Zynga doesn’t have to account for every chip and every dollar in the system. They’re selling air. Pixels. The chips have no cash value. Designing a system where every single penny is accounted for every single second is not easy to retrofit back in.
But, Zynga is addressing the two major stumbling blocks to entering real money gaming; personnel and software. That does make them a viable threat now. Before, it was all talk. Now, we have action.
However, is Zynga ready to get into real money gaming? Let’s just be honest here, Zynga’s IPO has been one of the biggest flops since the dotcom collapse. As I write this their stock is trading 40% below the IPO price. You don’t have to be Warren Buffet to figure out that investors aren’t happy about that.
So is Zynga getting into real money gaming because they think they can be a world-class poker room competing with the likes of MGM and Caesar’s, or are they saying what they think investors want to hear because people are starting to get nervous about keeping their jobs?
Personally, I give more weight to the later than the former. Based on Zynga’s latest financials they’re not even doing well in their core business. There’s increased competition and players are tuning out.
Real money gaming in the US is a very tempting opportunity. The numbers are so huge that it’s easy to dangle them in front of investors in the hopes that it’ll distract them from the current horrible results.
But Zynga still has to convert those play money players into real money players, and as I’ve outlined in the past, this is not an easy task. They’re two different kinds of players. Yes, they both like poker, but one group either doesn’t have the money to play or they have no desire to play real for real money.
That’s not to say that they’ll have zero real money players but there’s been a lot of speculation about Zynga entering the real money gaming market and people usually go off on some wild fantasy about massive conversions which I really don’t think is going to happen. The truth is that on most of the real money gaming .Net sites, the number of people who convert to real money gaming after 90 days is a fraction of 1%.
The bottom line is that Zynga is a force to be reckoned with and they’re starting to make the types of moves necessary for them to enter the real money gaming arena. That doesn’t mean they’ll be successful in doing it though. And by no means is it the slam dunk win that everybody was saying it was going to be 1 or 2 years ago.
They may end up being successful though. They have a lot of knowledge about player behaviour that most real money gaming sites are just beginning to take notice of. However, it’s going to be tough. If they want to be successful they’re going to have to work for it just as hard, or harder, than everyone else.
As far as I’m concerned, I’m putting them in the “Have to prove themselves” column. They have some catching up to do so I don’t get too excited when I hear that they’re in talks to buy out a poker software company. Most of their competitors already have their own software. I also don’t get excited when they say real money gaming is important to them. Is it any less important to their would-be competitors?
Execution is often the difference between success and failure. Zynga needs to prove they can execute in the real money space before they can become a viable threat to anybody. So listen less to what they say and pay more attention to what they actually do.
Zynga have over 306 million active monthly users across the web so if they could convert even 1% of these users into actual paying customers then that would be provide a strong platform for growth. Given their close links with Facebook, I think a lot rests on whether or not Facebook themselves can exploit an avenue to incur more revenue. As we have seen with the recent flotation, and the subsequent devaluation of shares in recent weeks, investors are worried about the ability for big sites to convert users into cash. I would seriously be worried if I was a Zynga investor at the moment. The latest stock figures show a 70% plummet in share price from December’s IPO and they have lost around 20% of players on some of their most successful applications. If Zynga are to diversify into paid-poker, they need to have a plan in place and quick.
I agree, Yair. There’s a lot of pressure on them to prove that they have a real business. And each time they open the doors and let people peak in they don’t like what they see.
I get the feeling Zynga are going into this with the thought of opening a new revenue stream, to quiet down their investors. If they are actually think that the European poker market is gonna be a growth engine for them they will be devastated (as will their stock). As you rightfully said – they don’t know the business and till now have not hired the loads of people they will need to get this done.
I have to say – they can be a great affiliate for online gaming, and make boatloads of money. It just makes so much sense for them. But I have a feeling that the story they are trying to sell is anywhere between wishful thinking and investor fraud.
If things go as planned we could see tied dominance in the online poker market back in the PokerStars/FTP era. Over all, it’s a good thing for everyone involved.
Alan,
35,000 would be a good number of concurrent users. PokerStars averages around 35,000 people online at any one time. But it’s unlikely that Zynga’s 35,000 would all be online at one time so their concurrent users would be more like 2000 – 4000. That puts them more in line with 888 or Party.
Not shabby but you also have to consider that Party and 888 are operating in the rest of the world with no US players. Their numbers would shoot up dramatically if the US market opened.
You also have to consider that Zynga won’t just be able to keep their players. Caesar’s, MGM, and whoever else is in the market will be bombarding them with marketing messages. And, if you have the option of playing on Zynga with no real loyalty program and a major US casino who has combined their live casino loyalty program with their online poker loyalty program . . . let’s just say the land based casinos are going to have a compelling offer.
Bill
Bill:
Very interesting post. I was discussing this with a friend of mine who was also skeptical. My friend observed, “… most Zynga players are retired folks just looking for something to do before they croak.” (I’m not sure if that is an accurate profile of the typical Zynga play money poker player as I’ve never been on the site, but that’s how my poker buddy characterizes them.) He believes, as you do, that most of these folks are not likely to spend a lot of real money playing online poker. You estimate that a “fraction of 1 percent” of Zynga’s current player base might convert. That’s a miniscule percentage, but doesn’t Zynga have a current player base of what – 35 million play money players? So let’s stipulate that they convert only one-tenth of one percent of that massive pool. By my calculation, that adds up to 35,000 real money players. Not sure how that compares to Poker Stars and whoever else is still in the market, but it’s not a bad start. If they can grow the conversion rate up to a full 1 percent, that would be 350,000 real money players. Is it not realistic to believe they can (eventually) get their act together and figure out how to convert just one of every 100 [current] play money players? (I have a feeling Zynga has commissioned some very sharp marketing consultants to take a very detailed look at just this question.)