Exclusive: Zynga leads race to buy Ongame
Five interested parties in frame to acquire bwin.party-owned poker network.
Social gaming giant Zynga has made a verbal offer to acquire Swedish poker network Ongame, eGaming Review can exclusively reveal.
Sources close to the matter have confirmed to eGR that Zynga is at the front of a five-company queue interested in buying bwin.party-owned Ongame, a group comprised of both operators and B2B suppliers.
Zynga representatives visited Ongame’s head office in Stockholm to commence negotiations last Friday with one source suggesting the social gaming leader is “in the lead” to buy the network. US B2B gaming provider Shuffle Master last Wednesday withdrew from a previous 19.5m agreement to buy the company that is said to be losing approximately US$20m a year including a costly 200-strong Swedish workforce that many industry commentators suggest would be both difficult and expensive to either cutback or remove altogether. Shuffle Master said the collapse was largely down to Ongame’s poor recent financials and a lack of progress in US egaming regulation.
At the time bwin.party reaffirmed its intentions to sell Ongame, which it deems a “surplus asset”. A spokesman for bwin.party told eGR last week that the breakdown in Shuffle Master’s proposed agreement “does not cause us concern, and we are confident that we can conclude a deal with an alternative third party.”
The move would mark Zynga’s first move in real-money gambling, and demonstrates its intentions to venture into regulated markets and away from its reliance on Facebook. In numbers seen during Zynga’s IPO prospectus the company announced that Facebook generates 12% of its revenues from Zynga which owns and operates four of the social network’s top five games including Zynga Poker and Farmville.
In March this year Zynga’s founder and CEO Mark Pincus (pictured) described real money gambling as “the perfect fit with virtual goods and social games.” It is currently not known what Zynga’s strategy would be should it acquire Ongame, the industry’s second largest network however it would immediately give it a dot.com poker presence in Europe with licensees including Betfair and Betsson.
This followed the company’s COO John Schappert admitting that the online gambling sector was “very interesting” during an analyst call after Zynga posted a net income loss of US$404.3m in its full-year results for 2011, despite Lo Toney, general manager of Zynga Casino, having previously told eGR the company had “no plans to enter the real money market” in November last year.
Zynga posted the large net income loss in its full-year results for 2011 released in February, the first figures since the company’s $1bn initial public offering (IPO) in December 2011. The losses came despite a 91% rise in revenues for the year, with daily active users (DAU) up 13% in Q4 2011 to 54m, from 48m in 2010, and monthly active users (MAU) up 23% to 240m in the same period. Its casino-style games alone including Zynga Poker, Bingo and Zynga Slingo total over 50m monthly actives, according to social analytics firm Kontagent, while the company last week announced the launch Zynga Slots for Android and iOS platforms.
EBITDA, however dropped 34% year-on-year, down from $103m to $67.8m for 2011, with rising sales and marketing costs and significant investment in product development blamed for the fall. Business Week reported that Zynga’s sales and marketing costs had risen to $112.2m “ almost three times higher than in 2010.
Zynga has also been in talks with Las Vegas casino and entertainment company Wynn Resorts to partner and potentially offer real-money gambling following the passage of US regulation should that materialise in the coming months and years.
A spokesperson for Zynga declined to comment when contacted by eGR.