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Monday, August 20, 2012

Zynga and Facebook Dive Into Internet Gambling

Although some people might be surprised about the recent announcements by Facebook, Gamsys and Zynga's intention to support and launch "real' Internet gambling apps within Facebook, this is really old news.

Facebook Internet Gambling
At the North American Internet gambling conference in San Francisco this year, Facebook representatives were everywhere seeking to partner with traditional gambling operators and to encourage them to actively work with together to develop the Internet gambling market within Facebook. Over a year ago Facebook  announced a business relationship with Gamsys, a UK based Internet gambling game developer and operator. They decided to pull the plug on the actual implementation until after the Facebook IPO. They were not interested in spooking the SEC probity effort potentially delaying the IPO or perhaps even putting it into question.

So we are right back where we started over a year ago and with about as much substantive information. Many questions are outstanding and will have to be answered before anyone can make an assessment of the viability, revenue, integration, licensing, etc. of gambling applications within Facebook. The following are just a few really important ones.

1.Age Identification - How are you going to keep under age people out of the gambling apps?
2.) Location ID - How are you going to limit access to a gambling application on a jurisdictional basis? 
3.) Licencing - How does a gambling application get licensed in Facebook?
4.) Hosting - Gambling applications have to be hosted in controlled and audited hosting facilities. What are they and where are the certified facilities?
5.) Certification - Who actually certifies and audits the application. this is a requirement for real gambling applications. Does the entire Facebook environment have to be certified?
6.) Facebook's Deal With Game Developers - What is the deal between the developers and operators of the games. Is it a percentage cut of the revenues and or a flat licence fee?
7.) Relationship With Virtual Currency/Good Economy - Can you have a freemium virtual currency game work in tandem with a real gambling game to increase traffic and revenue?
8.) Restrictions On Advertising - Can you advertise a gambling game openly in Facebook?
9.) Friend Requests/Walls, etc. - Can you exploit friend requests in the same way that other non-gambling applications can? If so, how do you control the age and the location of the people being friended and encouraged to join you in a gambling game?
10.) Taxation - Are taxes going to levied on the transactions to satisfy countries, states and municipalities?
11.) Game Developers - Can any game developer launch a gambling application in Facebook? Example Zynga, Playdom, EA, etc.
12.) Payment Processing - What companies are actively going to support taking payments within Facebook for gambling transactions. What will be the transaction fees be?

Clearly, we are a long way away from understanding the Facebook proclamation allowing gambling within their social network.

Zynga Internet Gambling

Many people would argue that Zynga already offers a gambling game in Facebook with their poker offering. Of course, this is a virtual goods and currency based system and therefore skirts the law actually classifying it  as gambling.

Why is Zynga scouring the planet for a "real" gambling platform and not using their own? The OnGame potential acquisition is just one example of their search for the real deal. They have also hired people from  Everest Poker(CIDC) a defunct real poker platform that has been operational in the European market.

In point of fact Zynga Facebook poker is far from a fair and an equitable poker platform. It has no RNG(random number generator) to randomly select cards played at their tables. I also doubt that they have the security within the entire app to avoid intrusions. Also, encryption of important data is no doubt absent. These are just a few of the obvious issues.

However, the real reason is that Zynga's existing poker platform  is not the  traditional poker played for "real" money and not a game that many real gambling  people will have an interest in. Yes, traditional poker gamblers have been seen in the Zynga poker rooms. However, I suspect that this is because they have an alternate reason for being there.

So where does this leave Zynga, Facebook, Facebook game developers, gambling operators, gambling game developers, etc?

Well, clearly we  really do not know.  There are far too many outstanding questions. However, it is clear with Zynga and Facebook struggling with their  respective revenue growth that they see the potential and absolute need to sort out a way to get into Internet gambling. 

Kevin Flood is the CEO of Gameinlane, Inc. Kevin writes  about online games and their impact and integration into iGaming and E-commerce environments. Kevin is a frequent speaker at online game events and conferences in Asia, Europe and the US. Kevin and his Gameinlane team are currently working with online gambling, social gaming and e-commerce companies integrating social gaming with online gaming operations and integrate game mechanics into e-commerce applications. 


Steven Kane said...

a sane perspective. thank you kevin -- so much hype-steria going on

Krister Bergström said...

interesting post! a lot of challenges to close before it will a reality.