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Zynga Drops Real Money Gambling Plans

Zynga Drops Real Money Gambling Plans

Added: July 27, 2013

Zynga, the company everyone knows for their popular games on Facebook, recently announced that they are officially dropping their plans to offer online casino services in the United States. Zynga's investors cashed in their shares immediately after the company made the public announcement. The shares dropped 14 percent to $3.01 at the close in New York, marking a record for the biggest one-day decline since July 2012.

On Thursday, Zynga posted its second quarter earnings reporting that the losses previously revealed had been trimmed through several strategies, including cutting stuff to lower costs. Everyone expected the online casino venture to bring the much needed revenue to the company, but instead the company withdrew plans to pursue an online gambling license in the United States. However, Zynga still has plans to test real money online gaming products in the United Kingdom.

Zynga is a company that went public in 2011, conquering the online gaming world with games like Zynga Texas Hold'em, Farmville, Mafia Wars; however, more recently other companies have displaced it with games like Candy Crush and the picture stopped seeming as bright for Zynga. After the bad revenue report, Zynga gave Mark Pincus, the founder and CEO one more quarter to turn the results around. The next quarter will see former Microsoft executive Don Mattrick as the new CEO.

There is a lot of optimism behind Mattrick, as he possesses the skills that could turn the future of Zynga around. "We believe Mr. Mattrick will act swiftly to focus on a handful of new initiatives and to right-size Zynga's staffing levels," said Wedbush analyst Michael Pachter. He also commented, “Zynga probably realized they’re not going to get one in the near term. There’s a greater sense of urgency on turning the business around.”

The main interpretation as to why Zynga decided to drop their plans to enter the online gambling world after the great success of Zynga Texas Hold'em is that the operation might be too costly for the company right and they are expecting for revenue reports to change before making major investments into new markets. Nonetheless, investors were not pleased and cashed in their shares in a heartbeat upon hearing the news. The Zynga stock is down 70 percent since its initial launch in late 2011.