Brick and Mortar Casinos vs. Online Gambling: Someone's Hiding the Ace

January 13, 2012 2:14 PM EST
Following news Thursday International Gaming Tech (NYSE: IGT) will acquire Double Down Interactive for almost $500 million, online gaming talks have heated up.

Double Down currently has 4.7 million monthly active users and a virtual casino on Facebook. While analysts think the acquisition price by IGT was expensive (approx. $106 per user), Facebook notes the company controls the third-largest social gambling app.

Although some analysts were stumped by the move, others argue real gaming companies need to get as much exposure to potential customers/gamblers as possible. IGT just upped its own ante so if/when online gambling is legalized, it will be better positioned to capture those gamblers aka customers.

Another potential beneficiary from the legalization of online gambling is Zynga (Nasdaq: ZNGA), which has 30 million users playing Zynga Poker (number 1 social gambling app on Facebook). Shares of Zynga IPO'd Dec 16, 2011 at $11, moved up to $11.50, but have sank since. The company has lost over 1.5 billion in market cap. Shares are trading up 2.2 percent Friday afternoon.

The final piece to the puzzle is: what will real casinos do? Companies like MGM (NYSE: MGM), Las Vegas Sands (NYSE: LVS), Wynn Resorts (Nasdaq: WYNN) and Boyd Gaming (NYSE: BYD) have been developing or acquiring sites online, but their bread & butter is actual guests. If online gambling is legalized, and people decide to stay in the comfort of their homes to play, IGT and Zynga may be playing the royal flush versus the casino's full-house.


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