Zynga Inc (NASDAQ:ZNGA) shares have jumped more than 6% in trading so far today, after an announcement that suggests online gambling may be one step closer to legalization. The firm's shares have risen by more than 30% since the start of 2013 on the hopes of such a deal. The new market is expected to open up massive opportunities for the company, and might lead it to earn a substantial profit.
Nevada legislators pushed through a bill yesterday that legalizes online gambling. The bill will also allow the residents of other states to Gamble online in Nevada based casinos, if the user's home State has an agreement with Nevada specifically allowing this. Online gambling has looked like the Holy Grail to Zynga investors - worried about the fast moving social gaming world.
Nevada is now the first of the United States to legalize online gambling. New Jersey may adopt similar legislation next week, should the bill meet with approval from Governor Chris Christie. The Governor vetoed legislation that would have legalized gambling last week, but offered advice on an amended Bill that he would consider signing.
Investors betting on Zynga are hoping that the company can take advantage of the legalization of online gambling in order to turn the prominence of its Zynga Poker game into a money making reality. So far Zynga has relied on a mixture of app purchases, ad revenue and in-app purchases for its earnings. The introduction of gambling presence could multiply its revenues.
Zynga's past business model relied on the quick development and deployment of new social games. Those games then had to gain popularity to the extent users bought items in the game world, or spent enough time and clicked enough ads to make the game's development worthwhile. Poker has been enduringly popular however, and online gambling is viewed as one of the biggest markets that might open in the near future.
Today's announcement makes it seem like online gambling will become a virtual reality very soon. It does not, however, suggest anything about Zynga's chances in the market, nor does it say anything about the attitude of Facebook. The social networking company's decision on gambling will be have a major effect on Zynga's prospects.
Zynga Inc (NASDAQ:ZNGA) has made strong gains in the opening weeks of 2013, particularly for a company unlikely to make a 2013 profit. Gambling may be an untapped market, but there's no guarantee that Zynga will be the one to tap it.