Why Zynga Poker Will Not Be The Next PokerStars

I was having a nice chat with my good friend and former Party Poker cohort Hilly a few weeks ago sitting in the Old German Beer House on Soi 11 and somehow the conversation drifted around to Zynga Poker. I grabbed my trusty iPhone and made a note as I told Hilly, “I always love our conversations because I end up with like 4 or 5 great blog topics to write about.” Seemingly by coincidence, a few days ago I received an email from someone else who asked me about my thoughts on Zynga.

See where I’m going with this?

I think the title of this post is sort of a spoiler as to what my views are but let me explain the reasoning.

As much as Zynga Poker seems to have captured the Facebook world by storm, the cold, hard truth is that free money poker doesn’t convert very well. Just ask any affiliate who set up a website and SEO’d it up for keywords like free poker, freerolls, etc. Yeah, you get tons of signups but THEY NEVER CONVERT TO REAL MONEY PLAYERS!

That’s an awfully strong way to put it and perhaps NEVER CONVERT should be “convert at a rate so low that it might as well be zero” but you get the point.

Free Poker

See, someone who types in “free poker” in Google probably already searched for “poker” and got a list of sites like Full Tilt, PokerStars, Party Poker, etc. They went to those sites and said “Make a deposit?!? WTF?!?! I want to play poker for fun. I don’t want to lose money.”

The model works for the online poker sites themselves because they’re part of a little game online poker sites have to play in order to advertise in certain media. It’s the old, Dot Net game. You advertise in markets where it would be illegal to advertise by advertising the play money Dot Net site in the hopes that the players will be smart enough to figure out that by putting Dot Com at the end of the poker site name they can get over to the real money side.

Even then, the conversions from play money to real money aren’t necessarily fantastic even for the online poker rooms. There are some people who either try out the software using the play money client or eventually graduate to real money after whetting their appetite but if they don’t convert within the first 60 or 90 days the conversion rate drops to a number so low it is effectively zero.

They may stay playing on the play money site for months or years but they’ll never convert. I explained as much in my previous post Play Money Players Are Free to Officially Hate Me where I defended PartyPoker’s decision to cap the number of chips a play money player could hold in their account. Literally, there are players with billions of play money chips. It normally takes longer than 90 days to accumulate a million in play money chips and we already know the conversion rate drops to near 0. Do the math. There’s no sense keeping those play money players happy if you have no way to monetize them since they just become a cost.

Zynga Poker Gets it Right

The thing that Zynga Poker has done that I applaud them on is monetizing play money players. All of the major online poker rooms with real money poker available have either botched this or are so blindly looking at their real money business that they don’t want to commit the time and resources to make money off of their play money player base.

Zynga had to build a poker room that didn’t rely on rake and could still make money. They approached the problem from a completely different perspective. Even these play money membership sites like the recently defunct SpadeClub from CardPlayer Magazine still approach the problem with a rake based mentality which is why they all fail. Zynga is a company that builds games and has figured out how to make money off of offering those games for free. Whether it’s Farmville or Mafia Wars or Zynga Poker they approach their products as games that need to be monetized rather than trying to get around gambling law loopholes.

But what do they really have with Zynga Poker? They have a massive database of people who want to play poker but don’t want to wager real money. Many people assume that many of these people can be converted from play money to real money in the event that online poker is legalized in the US. And with 3.7 million “Likes” on Facebook (and reportedly, 25 million players monthly) that would seem to be a pretty good assumption unless you just read everything I wrote in this post before this.

Try this little experiment, next time you get one of those annoying “Bob just won a $1000 pot playing Zenga Poker” status updates on Facebook, go send your friend a message and ask them if they know that it’s possible to play online poker for real money. I’m guessing that less than 1% are unaware that there is real money online poker being offered. I mean, it’s so mainstream that playing online poker is often referenced in television shows. Everybody knows.

So if they know it’s available and they enjoy playing the game for play money, why haven’t they found a real money poker site to play on? Because they don’t want to play for real money!!!! They might tell you 1000 different reasons but they’ll all basically boil down to the fact that they don’t want to risk losing their money.

So the assumption that Zynga flips a switch the second the president signs some bill legalizing online poker and suddenly Zynga has 3.7 million real money players is really absurd. Realistically, they might enter the real money playing field being roughly the size of Bodog (which is nearly 1/50th the size of PokerStars in terms of cash game players). Then they have to fight and claw for customers just like everyone else.

But Zynga does have some advantages:

Brand
An existing gaming platform that obviously can scale to accomodate a large number of players
An understanding of how to leverage social media
Existing cash flow (from their monetization of the play money Zynga Poker)

But then again, every existing online poker room operating today has #1, #2, and (hopefully) #4. They can always figure out #3 (maybe).

So, when you really look at it, Zynga isn’t a slam dunk. In fact, I would only rate them slightly higher than an underdog if the US legalized online gambling.

Zynga Poker in Asia

The person who asked me to write about Zynga (and I have kept his name private only because I’m unsure if he wants his name publicized - but if he does, write me and I can use your name and post a link back to your company website) suggested as a blog topic:

“Zynga Poker moving into Asia, and the consequences of ZP licensing a real gambling product, as opposed to their current social gaming rev model”

First off, I just want to air one of my pet peeves. Again, thank you Hilly for articulating this into a sentence which is easy to communicate. There is no Asia market. Every country in Asia is radically different than the next. They have different cultures, different customers, different languages, etc.

So, whenever I hear anybody talk about the “Asian Market” I automatically assume that what they mean is the Mandarin speaking part of Asia which is primarily Taiwan, China, Singapore, and to some extent Hong Kong (though Cantonese is the more common dialect, from what I understand enough HK citizens speak Mandarin that I’ve lumped them into the group). Sure, there are Mandarin speakers living all throughout Asia but when you read past the first sentence in the “Hey We’re Cracking the Asia Market” press release that every company does when they translate their client into Mandarin those are the countries they are typically targeting.

Nothing personal but hairs on the back of my neck stand up a little bit whenever I hear that phrase. :-)

So, with my little rant out of the way, I think for Zynga they’ll have a nice little bit of traffic from Facebook users in Hong Kong and Taiwan (Zynga did not mention any marketing plans in Singapore). They’re banned in China because even play money gambling is filtered out in China.

And, there’s a (major) difference between entering a market and translating your software. I read the press releases and I don’t recall any new office being set up in the Asia region to go after Mandarin speakers. I suspect they’ll do some targeted ads on Facebook and such but that’s not really what I would call “entering” a market.

It’s a subtle but important difference.

So I guess the point I’m trying to make is that unless Zynga is setting up shop in Taiwan or Hong Kong they’re really not committing to those markets at all. All they’re doing is hiring some Mandarin speakers to translate the software and to tell them what are the lucky colors and numbers and what cultural mistakes not to make.

I’m sure they’ll have some success in those markets just due to their size but I’m not sure that this actually has any relevant meaning for the overall online poker industry. People have been trying to get into the various Asian markets for years but nothing ever seems to stick. I mean, I can’t even begin to count the number of press releases I’ve read about this or that company setting out to crack the Asian market and then never hearing another thing about them until they announce they’re ceasing operations in that market.

Until I hear of a company that is opening up offices in Asia and running their company like an Asian company with a product specifically developed for that market I don’t get too excited.