Facebook looks to gambling to revitalise its Payments platform
Following their disappointing Q2 results in which they posted a net loss of $157m, Facebook has announced that they are looking to revitalise their Payments platform, which has only grown from $188m to $192m in the past three quarters. This is in stark contrast to its 2011 performance, where it grew from $94m in Q1 to $188m in Q4. According to Facebook’s IPO, substantially all of Payments revenue in 2011 resulted from its partnership with Zynga the game developer. In 2012 however, Zynga have declined to such an extent that they have just announced a $108m loss for the last six months, forcing Facebook to search for alternative sources of revenue.
Facebook has been aware of its over reliance on Zynga for some time but previous efforts to find suitable replacements through schemes like offering daily deals through Facebook Deals, renting movies through Milyoni and the Spotify the music platform have to date failed to meet their revenue expectations. However their latest endeavour, to offer online gambling in my view could be the solution to their problems.
Their first online gambling product is called “Bingo & Slotz Friendly” which was developed for Facebook by Gamesy, a leading online gambling game developer, and initially will only be available in the UK to users over the age of 18, due to licensing regulations. Despite online gambling being banned in the US thanks to the Unlawful Internet Gambling Enforcement Act of 2006, which prohibits online gambling in most states with the exception of Nevada, New Jersey and a few others, it could prove to be a major new source of revenue.
According to PWC in their Global Gaming Outlook report, online gambling is set to grow by 9.2% a year from $117.6b in 2010 to $182.8b by 2015, with most of the growth coming from the Asia Pacific region. With revenue of this scale, the opportunity is there for Facebook to revitalise its Payments platform and generate significant new revenue for many years to come.