Why Zynga's Real Money Gambling Could Be a Pipe Dream

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So, Don Mattrick was supposedly lured to Zynga (NASDAQ: ZNGA) by a hefty $50 million pay package; an amount that could soar in the event he executes the much needed turnaround. Amid the excitement over the pay, discussions on Mattrick’s prospects continue to take shape. Going by Mattrick’s success with timeless game titles like Need For Speed and FIFA, expectations are brimming and the market at large feels that he can turnaround Zynga.

However, in it all, the real headline behind Don Mattrick’s hiring has not been given that much attention. Don Mattrick’s hiring is perhaps the best signal that Zynga’s real money gambling stance is a pipedream or at best, a temporary solution.

Don Mattrick is not a gambler

When it comes to delivering gaming experience for users, Don Mattrick scores a straight ten out of ten. If this gaming genius, however, attempts to spend a day in the Las Vegas Strip, he might not do well. Don Mattrick is not a gambler; period. He has no experience to leverage when it comes to real money gambling. Does this mean that Zynga made an awfully bad pick? Not at all; if anything, Zynga reminded everyone that it is a gaming company, not a gambling company.

Apart from a large percentage of Zynga’s online poker players being below 18 years, it really has no experience, or reputation for that matter, to leverage against heavyweights like Caesars Entertainment. Zynga’s real money fantasy seems to have caught on, though not that much, in the U.K. In the U.S. however, the segment is strewn with pitfalls. From fierce competition from brick and mortar heavyweights in Las Vegas, to a largely unregulated online gambling frontier, there seems to be no viable entry point into this market.

With this in mind, what does Zynga hope to achieve from the online gambling craze? Zynga is using online gambling as a distraction. With investors’ attention shifted away from the core business, Zynga can peacefully push through with its turnaround efforts. Alternatively, Zynga could be looking to secure a small segment of the online gambling market; not for huge profits, but to remain afloat. It could use the proceeds from gambling to maintain liquidity in view of a widely uncertain gaming market.

Mattrick and team do the heavy lifting

While investors try to work around real money gambling and what it presents, Mattrick will be doing what he was brought in to do; turnaround the gaming business.

Despite coming from an entirely different segment in gaming, Zynga chose Mattrick for one simple reason -- gaming is all about gaming experience. The common denominator in hardcore, mid-core, mobile and even social gaming is gaming experience.

Being the key player behind Microsoft’s (NASDAQ: MSFT) newly unveiled Xbox One, Mattrick was a key influencer of the whole social integration idea. Microsoft’s Xbox One will have features such as media streaming and Skype conversations. This, coupled with an internet connection, makes the device score impressively when it comes to gaming experience.

Gamers want good experience both in gaming and non-gaming features. Reviewers are inclined to believe that Sony’s PS4 will outdo the Xbox One. However, that is an argument that can best be settled when actual sales figures finally grace the public domain. For now, the bottom line remains that Mattrick, from his experience, will be able to enhance gaming experience for Zynga gamers. This could pan out well for Zynga.

As of this writing, Facebook (NASDAQ: FB), is reportedly experimenting with becoming a mobile games publisher. Although 76% of Zynga’s bookings were generated through Facebook in the past quarter, the symbiotic relationship between the two seems to be heading south. And with Zynga becoming more and more independent, Facebook is looking for new revenue streams to offset Zynga’s progressive pull out.

Through mobile game publishing, Facebook seeks to make money while minimizing risk. Going by the report, Facebook will partner with small, independent developers, not the bigwigs. It will focus on distribution and promotion, while developers focus on editing and financing. At the end, Facebook will claim a share of sales without having to fork out millions of dollars.

Conclusion

Apart from Facebook, a host of other mobile game publishers are crawling out of the woodwork. And while Zynga struggles to position itself in the mobile segment, notable inroads are being made by smaller competitors. A leader like Mattrick will be instrumental in plugging customer loss and building more loyalty through enhanced customer experience. Notwithstanding, it is still too early to tell. Zynga is a hold.

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Lennox Yieke has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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