Americans Getting Smart with Gambling on Social Media Sites

While paying real money for virtual products is somewhat understandable for games like Farmville or Candy Crush Saga what has always had me scratching my head was why anyone would pay real money for credits on virtual gambling games like Zynga Poker, Slingo or the other casino games currently available on social media.

To gamers it's very understandable why games like Farmville, Cityville and Mafia Wars have been so popular and why people would be willing to pay real money to earn credits that would allow them things like power ups and virtual tractors which allows them to gain more chance of progressing in the games.

"It's no different than current PlayStation or XBox games," a friend and avid gamer told me "If you're playing Tiger Woods golf it gets quite boring playing the same courses or using the same golfers over and over, so EA sports allows you to buy more players and more courses for a fee in order to keep the game fresh."

The fact that the games are free is the initial attraction of social media games but it's also understood that if you're going to be playing for an extended period of time you will almost certainly be sending money to Zynga or any of the other social media gaming companies at some point or another for game options.  But while paying real money for virtual products is somewhat understandable for games like Farmville or Candy Crush Saga what has always had me scratching my head was why anyone would pay real money for credits on virtual  gambling games like Zynga Poker, Slingo or the other casino games currently available on social media. After all, if someone wants to play these gambling games for free, they can simply sign up an unfunded account at any poker site (including sites like PokerStars where Americans are currently barred from real-money gambling) and play the free games where they build credits that are non exchangeable. And as for casino games, almost every online casino type has free demo games available where players can try the products for free and sites like Pogo have convinced many people worldwide to spend hours playing their slots to earn credits which are redeemable for nothing. Plus unlike with Zynga there is truly no cost. If you run out of credits on these sites you simply need to request more free credits and they will be given. But the popularity of the Zynga products in North America and comments by many in the industry that social media gambling was the wave of the future had me believing that I was just too old to understand the appeal or that I was missing the obvious. Less than 10% of Zynga clients actually purchase virtual credits but that's still sufficient to make the company a great deal of money.  I still recall well at last year's G2E summit in Las Vegas a cab driver expounding how he plays Zynga poker every night and expressed with glee how he was able to get 250,000 credits for only $5. He made it sound like he pulled off the heist of the century although the credits are useless and can never be redeemed for money or any physical item.

The possible naivety surrounding my skepticism was even more pronounced at the G2E summit when the organizers devoted a whole track to social media gambling. At a session called "Social Media Boot camp," the presenters quoted statistics showing that almost ½ of Americans have a Facebook account and spend an average of 20 minutes per day on there; that twitter feeds on game predictions and information related to issues like steroids are becoming the norm for news feeds; and that Google + is set to surpass both Facebook and Twitter because it offers the best of both worlds along with other features like video chat and instant picture and file uploads. The session did note that social media right now is more popular in North America than overseas. But the prevailing theme from that session was that social media was just going to grow on desktops and mobile applications and consequently any products, including gambling, would be the best growth opportunities if they were used on social media. As well in almost every other session I attended including sessions devoted to sports betting, regulatory developments, poker and merging land based operations with online operations, the topic of social media gambling was always raised.

It seems that Zynga also agreed with these industry people and last year decided to launch real money poker to capitalize on the popularity of Zynga poker. Zynga purchased an office in California and had set up temporary agreements with European companies to launch Zynga real money poker overseas. For a time it appeared that Zynga might even purchase the Ongame software from to launch it's real money product and get a head start in the European market but in the end Ongame was sold went to Amaya Gaming and Zynga instead set up a partnership with for the launch of Zynga poker in Europe. Zynga's philosophy behind this move was that since 125,000 people were playing Zynga poker each day (compared to less than 30,000 at PokerStars) then only about 25% of current Zynga players needed to move over to the real money product to make Zynga the biggest real money poker product in the world.  The logic seemed reasonable and Zynga apparently planned to incorporate its casino and bingo products into the site as well to give a full range of betting options to its customers.

The fallacy of this philosophy, however, became apparent in a survey from U.S. Gaming Survey ( and the Poker Player's Alliance ( where current poker players were asked about social media gambling. The survey clearly indicated that almost half of the respondents indicated that they played social media gambling but very few continued to do so. And the reasons they provided for not continuing to play social media gambling were the fact there was no monetary incentive, the fact that the games tended to move slowly and the fact that the play of other players was poor. Simply put, Zynga players played recklessly since there was nothing on the line and the amount of RAM used to run the programs made it move at a snail's pace. Real money poker requires speed or people will log off and real money poker also requires individuals who at least know how to play the game properly if they are going to continue doing so. Thus it is highly unlikely that many Zynga players would move over to real money poker sites even if Zynga offered real money poker since they would be eaten alive by poker professionals. Moreover, Zynga poker is very popular in North America but not so much in Europe.

It appears Zynga learned the truth quickly too. It teamed up with to launch Zynga poker, slot machines, blackjack and other games in April and by all accounts hasn't fared that well. Unfortunately for both companies it appears that the wave of the future isn't with social media gambling but rather with mobile gambling which Zynga's product just isn't well suited for. Zynga has forecasted a loss of 5 cents a share in the 3rd quarter and the stock has plummeted to less than $3 a share. The company laid off a large percentage of its workforce and as a result of its lackluster performance in the UK and its inability to secure a poker license in Nevada the company announced that it was foregoing its plan to launch real money poker in the U.S. To make matters worse, the social media free product which had Zynga so pumped up about introducing real money poker has dropped off significantly too. At last check Zynga poker players were down to 60,000 a day on average (less than half of what it was about this time last year) and the percentage of players paying for virtual chips was just around 5%, hardly enough to make the company profitable. Add to that the lackluster performance of the other virtual gambling products and it appears that Zynga has finally been hit with a reality check.

It appears the industry also has been given a reality check. I looked at the 2013 G2E sessions and only two were related to social media gambling although one of the sessions was really about how websites need to offer free gambling to entice players to play for real. There's no argument there, and almost every real money gambling site has a .net sister site devoted just to that purpose. Moreover sites like PokerStars and Full Tilt have had play for free tournaments and games available on their real money site since their inception. The real goal now is to come up with the perfect mobile applications not social media. Playtech is currently offering high quality casino games to non-Americans (and likely poker in the near future too), so that goal may not be far off either.

So with Zynga falling from grace quickly as well as teaming up with another dying company in it appears their future is indeed in question. A year ago all anyone could talk about was social media gambling and now it's hardly mentioned at all. It appears I wasn't that naïve after all.

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