Zynga Stock Plunges after Ditching Gambling Plan

Zynga’s stock plummeted, right after releasing a statement last Thursday, to declare that the company is officially ditching its plans of acquiring a license for Internet-based gambling in the U.S. Although investors expected Zynga’s reported loss for the second quarter, it was the announcement after releasing the reports that sent Zynga’s after-trade share price, plunging down to only $3.01.

Many have repeatedly insisted that former Zynga CEO Mark Pincus’ online gambling plan was merely a bluff. This was in order to convince stockholders to stay on, in light of the company’s declining popularity among Facebook users and crumbling social gaming operations.

Although the social game maker launched an online gambling website and real money gambling games (RMG) at Facebook for UK players, the impact was not strong enough to sustain a continuing boost in share prices. After all, Zynga’s online RMG venture is merely a partnership deal with Bwin, which uses Bwin’s Internet gambling platform with Zynga’s trademark attached to it.

Zynga started sending mixed signals when the company went from acquiring Spooky Cool Labs for its pool of casino game developers, to hiring former Xbox CEO Don Mattrick, next. The latter practically had no background in Internet gaming and all the regulatory trappings that came with it. Still, the last move gave Zynga’s share a short-lived boost at NASDAQ, since Microsoft’s Xbox attained success and profitability under Mattrick’s leadership.

Mattrick explained that it is important for Zynga to devote its resources on core competencies for social gaming via mobile devices, instead of diversifying into the Internet-based gambling industry that is highly regulated. That way, Zynga can overcome its inability to stay on top of the social gaming competition, and eventually achieve business growth in the Internet.