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Zynga turnaround may ride on lady luck: Online gambling

6:36 AM, May 1, 2013   |    comments
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SAN FRANCISCO - Zynga CEO Mark Pincus may have an ace up his sleeve after all to save the troubled social games company he founded.

UltimatePoker.com on Tuesday delivered Nevada residents a first taste of real-money Internet gambling, a move that could soon be dealt up by Zynga - not to mention others in high-tech, such as payment-processors like PayPal.

"It's a significant opportunity for Zynga," IDC analyst Lewis Ward says of the company's online gambling prospects.

Billions of dollars could be in the offing after Ultimate Gaming, a Las Vegas-based casino operation, launches the first fully legal poker website in the USA. The move could portend the next chapter in gambling nationwide, since the Justice Department cracked down on Internet poker in 2011.

Sports gambling, if legalized, could be the mother lode of revenue, estimated at a nearly $400 billion business. That could prove a massive boon for the likes of PayPal and other payments processors.

"It's estimated that $380 billion is wagered on sports in the U.S. and only about $3 billion of it is legal because only in Nevada can you wager on sports betting," says Joseph Kelly, a professor of business law at SUNY College at Buffalo.

Zynga needs a little lady luck right now. Struggling Zynga last week reported a double dose of bad news: an 18% revenue slide coupled with a 13% dive in monthly active users from a year ago.

Pincus has one hefty play in Zynga's wildly popular online poker game. While Texas HoldEm Poker doesn't yet permit real money gambling, the game boasts 30.2 million monthly active users, according to AppData.

And on mobile platforms, casino-type games in general - card games, slot games and dice-based games - were hot. Such games landed in the top three genres for revenue worldwide in 2012, for both Apple's iOS and Google's play.

"The challenge there is that the rules for enabling those Internet gambling games haven't been set up on a federal level, and it's now state by state," says P.J. McNealy, founder of Digital World Research.

Zynga filed an application late last year for a license with the Nevada Gaming Control Board, a process that could take up to 18 months.

H2 Gambling Capital forecasts that by 2017 the U.S. market could hit $7.4 billion, based on recent legislation passed in several states that support online gambling.

Forecasting Internet gambling for the U.S. is somewhat dicey, however, because it is such a nascent market, cautions McNealy.

"Nevada, New Jersey and Delaware are just scratching the surface," says Kelly of those permitting Internet gambling. "A number of other states are considering this."

Also standing by is eBay division PayPal. It processes gambling-related payments in the U.K. and other countries where gambling is legal. In the U.S., however, it does not because there is no uniform federal law. "If that were to change, there is no reason why we wouldn't do it (in the U.S.)," says PayPal spokesman Anuj Nayar. The company does not disclose the size of its gambling-related transactions.

Zynga is also wagering on a stake of virtual casino dollars in the U.K. Under a deal there with Bwin.Party Digital Entertainment, Zynga this month launched its online poker and casino games for real money in the U.K.

Regulated real-money Internet gambling reached a nearly $30 billion market worldwide in 2012, according to H2 Gambling Capital.

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