In issuing its first ever financial report as a public company on Tuesday, Zynga Inc. announced their first ever loss for the fourth quarter of 2011 while the company entertains ideas about entering into the online gambling market.
The company behind Zynga Poker, the largest poker site in the world with 35 million monthly active users, reported that they made $311.2 million over the final quarter of 2011. Because of their debut on the NASDAQ exchange in December – and the related costs from that initial public offering (IPO) – losses were reported at $435 million at the end of the month. For the same quarter in 2010, when Zynga was still a private company, Zynga earned nearly $43 million.
Although this report may look bad, the IPO of the company was able to raise a great deal of money. When it was introduced in December, stock in Zynga Inc. was offered at $10 per share. 100,000 shares of the company were sold during that IPO, generating $1 billion in operating capital for the company. Since that initial price, the stock has traded anywhere from slightly under $8 to as high as $14.44.
The company reported several options for improving their revenues over the upcoming year. One of those options is in developing their own platform for putting their games to the public. As of this time, Zynga is dependent on the social media site Facebook to host their games and that in itself has been a slight drain on Zynga’s overall profits.
During the fourth quarter report, it was revealed that Facebook earns approximately 12% of its revenues from Zynga’s offerings. In turn, almost all of the revenues that Zynga brings in are because of its association with Facebook. Over the course of 2012, Zynga is reporting that they are looking at moving away from that Facebook dependency, making their games available on mobile phones and an independent site Zynga is developing called “Project Z.”
Of particular interest to the poker world are some of the statements from John Schappert, the Chief Operating Officer of Zynga, regarding future interest in poker. Zynga is looking toward expanding into online gambling over the course of the coming year. What isn’t stated by Schappert is whether the step into the online gambling arena will be exclusively poker or into the full online casino business.
“It’s very interesting to us,” Schappert stated during the report about Zynga’s interest in gambling. “We are the leaders in online poker gaming and we have the most social and popular poker game. Obviously, we know the audience.”
The potential for a Zynga-based online poker room or casino could be a game changer in the online industry. Following the U. S. Department of Justice announcement in December that their previous defense for making online gambling illegal – the Wire Act of 1961 – only applied to sports betting, both Zynga and Facebook announced their potential interest in moving into the online casino/poker arena. Before they could do that, however, there would be some pitfalls that either company would have to avoid.
Because of their availability to the under-18 set, age verification issues would have to be resolved for either Facebook or Zynga – together or alone – to ensure that children wouldn’t play on the potential site. In addition, there would be the difficulties in finding a payment processor who would handle the transactions for a potential company.
Following the announcement on Tuesday, Zynga Inc. experienced a slight downturn in their stock, but it seems to have rebounded by today. After trading on Tuesday, Zynga’s stock dropped 77 cents. With trading in action today, however, Zynga has been able to recoup some of those losses. Zynga stock is currently trading at $12.28 after being as high as $12.42; the current price is a 38 cent increase over its opening price on Thursday morning.
