Zynga goes into greater detail on interest in online gambling

[The Buzz]

The Street has a really interesting interview with Zynga's vice president of treasury, Mike Gupta. The interview focuses, in part, on Zynga's online gambling strategy. Here's the money quote:

I think ultimately who we partner with will be somewhat driven by how the legislation gets written and what's required

http://www.thestreet.com/story/11584...cm_ven=GOOGLEN

[TheGooner]

Zynga is rapidly become a dot.com bust.

Their share price on the NASDAQ has slipped from 15.91 down to 5.89 as of tonight - falling in tandem with Facebook as people begin to realise that having millions of Tweenies playing and using for FREE does not constitute a viable PAY market.

[GamTrak]

I've been playing the FREE games since 2009 and what they do is get you to buy virtual stuff for real cash in order to have a better playing experience and most of the folks I know that play will pay for it. I know that I've gotten suckered into to buying a lot of stuff I don't need to play the game.

Basically, they are making more money than you would think. Also the slip in shares is logical and I'm glad to see that folks are waking up to the fact that Zynga, facebook and others are way over valued.

[TheGooner]

It's clear that SOME people must be paying Gamtrak ... but I think it's a lot less than people expect.

Zynga is NOT making a LOT of money, they made $12.3m on 3Q 2011 from $307m turnover. That sounds a big number- but it's half what they were making the year before. Also consider that their IPO priced them at $10 BILLION - basically 250x their annual profits - and you can understand why the share price is tanking.

Anyone out there want to pay me 250x annual profits for Red Card Media???

[PingPong]

according to wide-spread reports Zynga has made around 1.5bln since 2007 in revenue. So it's definitely not 250x, but 50x their annual profits.

http://tctechcrunch.files.wordpress....ga-revenue.jpg

I'm pretty sure they'll be fine anyway

[PioneerRalph]

i'm amazed that Stars haven't bought Zynga just for the data alone!

[TheGooner]

Here's probably the best investing summary about Zynga from the "Motley Fool".

http://beta.fool.com/lynbetz/2012/07...st-zynga/6465/

ZYNGA is a big company with nearly 3000 employees - revenues are not growing much - and huge R&D expenses (game development) mean profits are low at around 5-6 cents per share per quarter (20-24 cents per year). That's why the stock price is steadfastly around $5 instead of the $10 IPO price.

The only people making money on this stock are employees who were allocated "free" shares during the IPO, and they are rapidly selling those shares at whatever price they can get as those allocated shares become available after a mandatory "lock-out period".

Not to say that ZYNGA won't succeed - but right now they're not something to invest in.

[the_soc]

Reading Zynga's statement I had to smirk: it reminds me a bit of Neo Games - starting in one "non gambling" industry (scratch cards) and gradually creeping closer to real money gambling as they discover the real money only exists where there is... "real" money. Neo games started with scratch cards and now they're in what is called "soft gambling"; Zynga sounds like their on the way to the same track.

As best I understand, the trouble with Zynga's industry ("social gaming"; I think some also term it "casual gaming" - amazing how many euphamisms there are) is that the income is generated from advertisements accompanying the games. That's a big risk on the part of these companies - millions in R&D in exchange for pennies from their users. One company in that industry summed up their business model for me in such terms - millions of visitors but pennies in income from the x% of them who react to the ads.

[Gabriel_LCP]

Didnt they buy that application for smart phones called Draw Something?? I cant remember if it was them or not...

[rak]

Zynga is rapidly become a dot.com bust.

Their share price on the NASDAQ has slipped from 15.91 down to 5.89 as of tonight - falling in tandem with Facebook as people begin to realise that having millions of Tweenies playing and using for FREE does not constitute a viable PAY market.

I couldn't have said it better myself. I lol'ed at the number of people jumping onto FB stock. It reminded me of the first dotcom bust. Everyone jumped on the bandwagon and expected the stock price to increase. This time round, people are clearing out of it not wanting to experience a dot com crash burden again.