Zynga Dealt Strong Hand in Gambling
By ROLFE WINKLER
Wall Street Journal
January 14, 2012
Gambling industry giants are raising the stakes at virtual casino tables. For Zynga investors, that's good news.
Late Thursday, slot machine company International Game Technology said it would pay $500 million over three years for Double Down Interactive, the developer behind a popular virtual casino on Facebook. The price looks high considering Double Down has just 4.7 million monthly active users according to AppData, although Facebook lists it as the third-largest social gambling app. Double Down has not disclosed its financial results.
Why the huge sum for a modestly sized developer of casino games that makes its money, not from gambling, but by selling virtual goods? IGT's Chief Executive Patti Hart argues that Double Down is a strategic asset. IGT's customers, which include gambling industry companies like Caesars Entertainment, MGM and Las Vegas Sands, are anxious to market themselves to the new crop of online gamers. Indeed, Caesars just completed an acquisition of Playtika, the developer behind slot machine game Slotomania, the second-largest social gambling app on Facebook.
It also puts IGT in a better position if more states, and perhaps the federal government, decide to legalize online gambling. That looks a stronger possibility after the Justice Department opened the door to online gambling last month.
If Double Down's less than five million users are worth more than $100 each, what of the 30 million users playing Zynga Poker? That is by far the most popular social gambling app on Facebook. While Zynga isn't likely to sell the game, surely those users represent an even richer marketing opportunity for casinos. Casinos have little choice but to reach out to these gamers. As online gambling gains steam in the wake of the Justice Department memo, casino revenues could be at risk as some gamblers decide to play poker or slots from the comfort of their living room. This could give Zynga a valuable trump card.
Write to Rolfe Winkler at rolfe.winkler@wsj.com
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