Facebook Inc (NASDAQ:FB) has been struggling to raise its revenue prospects. Now, it has borrowed a strategy that has proven gainful for casino companies and many state governments, namely ‘The gaming business’. The social networking giant will allow third parties to run real money wagering, rather than virtual currency or points, for adults in the U.K.
The gain for the company in this approach is extra money. But there are some problems putting morality and ethics aside for a moment, there would be more law, reliance on a small proportion of customers for a growth of profit, and nowhere close to the target amount of additional revenue set for the Facebook in order to fulfill market hype and investor expectations.
Investors are raising questions over whether the company would be able to generate revenue growth that would defend the greater than $100 billion market valuation when the company went public. The stock has dropped much since its IPO debut in mid-May as shares are down by about 45 percent from the initial $38 price.
Users are increasing in number, but in geographic areas where average revenue per user is less than in North America. Facebook not only needs to raise the number of users, but also the average revenue per user.
Online gaming for money provides an attraction for FB as well as Zynga Inc (NASDAQ:ZNGA), which will launch real-money gaming service in 2013. London-based online gaming company Gamesys plans to run a bingo game using Facebook for U.K. members at the age above 17. A major online gaming site called Jackpotjoy.com is already running under Gamesys control.
This is not Facebook’s first deal with the idea of gambling. It has permitted gambling virtual currency. But even the move to real-money gaming might not help to reach the level of revenue boost that Facebook needs. The company will rely on individual companies, even if the gaming industry is large as a whole.
Even the range of the top U.S. gaming companies is between $1 billion to just over $2 billion. There is a chance that gaming could become part of what Facebook needs to calm down investors. But a good number of additional activities is needed as well to hit the growth that people predict.