Analysis: Bwin.party-Zynga alliance could change the game

Zynga has been the sole pure social operator to appear in eGaming Review’s annual Power 50 list for the last two years for a very good reason: it promised to enter the real money space in the first half of next year, and last night it delivered on that promise.

During the first six months of 2013, barring any delays, bwin.party, the industry’s fourth largest operator in our list, will exclusively operate real money poker and casino games in the UK using Zynga’s brands.

While no information is known as to the terms of the agreement or if a revenue share deal is involved, it is unlikely to be a material contributor to both sets of companies revenues. For now. But as Ivor Jones of Numis points out in a note this morning, “if it were to be extended to more markets and products, in particular should US Federal poker be regulated, then it could become very important”.

Bwin.party is already well positioned in the States after agreeing long-term B2B deals with two of the country’s largest casino groups MGM and Boyd Gaming and an exclusive partnership with the United Auburn Indian Community in California, one of the only states that could sustain its own poker network should it regulate as expected in the next two years. Add Zynga to the equation and it has land-based, tribal and social supplier contracts under its belt, placing it ahead of its competitors by some distance.

However it is Zynga Poker’s 35m+ Monthly Active Users – with around 40% of that number in the US and 11% in the UK – that must almost certainly be in the sights of co-CEOs Jim Ryan (pictured) and Norbert Teufelberger, with both men personally driven to re-enter the US after bwin and Party reluctantly made a sharp exit as soon as UIGEA came into force in 2006.

For bwin.party focus also remains on the shortlist of already regulated European markets where it is perhaps not leading, but holds significant market share and the potential to grow as these markets develop and the merged business becomes more closely aligned. This includes Spain where it is third behind PokerStars and 888, Denmark where it has the exclusive contract to supply former monopoly Danske Spil with casino and poker software, and Italy with its 2009 Gioco Digitale acquisition, on the recently sold Ongame network, third for both cash and tournament poker games.

Its dot.com brand ““ that also serves UK players ““ despite flitting in between second and third place in the liquidity rankings behind PokerStars, has arguably fallen behind in the recreational player stakes since Black Friday with iPoker and 888 in particular making up significant ground.

This week’s deal with Zynga, however ““ should enough new players come on board and the social gaming operator’s existing UK player base choose to make the leap into real-money when it joins bwin.party’s network as promised next year ““ would boost those numbers significantly and give it, as Jim Ryan hinted during its last results call, “clear number two” status and possibly even challenge Stars for top spot.

Crucially it will be one of the first large-scale tests of how freeplay social poker players convert and how highly recreational, low stakes poker players, regard the Zynga brand.

If there are 3.5 to 4 million UK freeplay poker players on Zynga and 2%, or 80,000, of those become real-money players, Pokerscout could make for interesting reading at the end of 2013.

One thing is clear however; real-money operators would swap the majority of their marketing teams in exchange for access to Facebook’s wealth of potential new players and as Jones concludes in his note, in working with Zynga, bwin.party will “benefit from the strength of Zynga’s business as a recruitment tool for new players”.

Done in the right way and without losing focus from its main goal of becoming number one in every vertical in every regulated market, this could well be a game changer.