Games Giant Zynga Starts Playing With Bitcoin

Social gaming giant Zynga has announced that it will be accepting bitcoin for in-app payments in selected games, as a "test" with payment processor BitPay. The move opens up $200m per quarter in potential markets for the digital currency.

The Zynga team account posted the following on reddit:

"The Bitcoin test is only available to Zynga.com players playing FarmVille 2, CastleVille, ChefVille, CoasterVille, Hidden Chronicles, Hidden Shadows and CityVille. The games can be accessed at http://zynga.com.

Zynga is always working to improve our customer experience by incorporating player feedback into our games. We look forward to hearing from our players about the Bitcoin test so we can continue in our efforts to provide the best possible gaming experience."

Sources connected to BitPay and Zynga users quickly confirmed the announcement as true.

It might also be worth mentioning that Union Square Ventures and Andreessen Horowitz, who contributed to Zynga's Series A and B funding rounds in 2008-09, also both have a stake in bitcoin payment processor and wallet service Coinbase.

Zynga is among a new generation of companies focused on social gaming. These games, which often piggyback on existing social networks, draw users into addictive play sessions, in which they can compete and collaborate with their friends.

Zynga’s revenue comes in two forms: direct payments in games, and revenue from partners. Direct payments are made inside games to buy assets that can help players to compete.

Reddit user 'betafall' posted this video showing the simplicity of making a bitcoin purchase within a Zynga game:

The firm also announced a push into real money gaming, releasing ZyngaPlusPoker and ZyngaPlusCasino in the UK in early 2013. In the US, it announced that it would pursue a real money gaming license, but in July, it backtracked on the decision, ending its real money gaming efforts in America.

Zynga has a turbulent history when it comes to the use of alternative currencies for in-app purchases. In 2010, the company reportedly threatened to end its relationship with Facebook after the social networking giant tried to force it into using its own virtual currency, the now-defunct Facebook Credits, for purchases inside its games. Had that deal gone ahead, Facebook would have pocketed 30% of all in-game payments made to Zynga on Facebook-hosted games.

The companies overcame their dispute and signed a five-year contract, but Zynga also started its own Zynga With Friends network, which connects players of its games from various platforms. It also created a Zynga API allowing developers to create social games on its network.

Founded in 2008, the company went public in December 2011. Last year was tough for Zynga – in July, figures emerged suggesting it had lost almost half of its user base in the course of a year.

Zynga’s casual, mobile-friendly market stands in contrast to the traditional console game market, in which sprawling, complex games often rival Hollywood movies in budget and production time. In the console sector, companies have moved away from virtual currency. Microsoft, for example, abandoned its Points system earlier this year, returning instead to straightforward fiat currency for purchases, made via credit cards.

Taking bitcoin as an in-game currency would bring several benefits, ventured Jeffrey Green, “The benefits would be to give the user another payment option. Give the user what he wants, so to speak,” said Green, who wrote an analysis of virtual currencies launched by large online firms when at Mercator Advisory Group. He explained:

There is also the commission to consider. PayPal charges commission on payments, and although big fish like Zynga may get a discount, bitcoin’s low-to-no transaction fees are difficult to argue with.

There are, however, negative aspects to using bitcoin for in-game payments. Notably, the virtual currency doesn’t yet allow for recurring payments, which could be useful in social gaming.

Disclaimer: CoinDesk founder Shakil Khan is an investor in BitPay.