Internet casinos raise the stakes

Online gambling is coming of age, with punters expected to bet billions this year. Now the big names are getting involved,
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When internet gambling sites first appeared, four years ago, it was hard to find a familiar name, but now the major bookmakers and casino chains are all over the Web, and big brands are raising the stakes beyond the reach of the original betting Web pioneers.

Reductions in fears over security, twinned with an increasing cultural acceptance of gambling, have combined to produce rapid growth in internet betting. Various bookmakers estimated that of the £100m bet on the last Grand National, £5m was wagered via the Web.

The amount of money being bet worldwide should reach £500bn this year, according to Ladbrokes; the investment bank Merrill Lynch predicts that the worldwide online gambling market could be worth £123bn by 2015.

Aspinalls, a casino chain with 40 years behind it, is the latest player to launch a gaming site, and Russell Foreman, chief executive officer of Aspinalls.com, says it has not left it too late to enter the market.

"The online gambling industry is only a few years old and we looked at it and realised it had the right dynamics, because gambling is a form of entertainment, and in the world of bricks and mortar gaming it is not always user-friendly," he says.

"People who like this type of entertainment can't get it when they want, and on the internet you don't have to dress up smart and become a member," he adds.

Foreman says few dot.com rivals will be able to match the strength of its brand: "If you are playing, you want to know who you are dealing with, that your money is safe and that when you win you will get a pay-out. Aspinalls is a public limited company, not completely private and anonymous."

If the types of people who bet online split into those who are experienced punters surfing for the best odds, and inexperienced novices trying out betting in the non-intimidating confines of cyberspace, having a recognisable brand is likely to attract virgin gamblers.

"For someone who hasn't done much betting before, the internet suits them because they can have a look and browse in their own time. For those people, brand will be important, and it helps that Ladbrokes has a shop in every high street," says Andy Clifton of Ladbrokes.com.

Novice gamblers may not represent a large amount of the online market, but they tend to bet heavily on national events such as the Derby and England football internationals, and there has been a shift in attitudes toward gambling, helped largely by the National Lottery.

"Betting is more socially acceptable now than it was 10 years ago, and the lottery has helped with that because it has made having a flutter every week part of the culture," adds Clifton.

Successful gambling sites need to attract and transform novice gamblers into loyal customers, because experienced punters move from one casino to another, taking advantage of the free cash provided on registration, and use the internet to get the best prices from bookmakers.

"There is not much loyalty. Every week two to three online casinos open, and a lot of punters spend every week looking for where they can get free games from," says Chris Sheffield, CEO at the interactive media consultancy Eunite.

Sports-betting operators have to contend with their odds being displayed and compared with rivals: sites such as oddschecker.com alert knowledgeable betters to where the best prices can be found.

"I would not want to be a betting shop online, because if you are an experienced punter shopping on price, you will go to the site with the best odds, and that will drive margins down," says Josh Hannah, CEO of flutter.com.

Faced with large numbers of competitors offering similar services, few gambling operators have begun to use technology to develop an experience that differs from the majority of gaming sites, many of which mimic a bricks and mortar operation.

"Seventy per cent of bookmakers use the same software, so how can they be any different? All anyone has done is create what is in the real world online, but there is an opportunity to get other people involved with gambling," says Sheffield.

Hannah estimates that half of flutter.com's monthly expenses go toward developing the software to support its peer-to-peer betting site, which allows users to bet against one another.

The pressure of having to compete against large brands and companies with the technological ability to produce their own software to attract customers is squeezing out many of the internet-gambling pioneers offering a no-frills gambling service. "It is already happening now," says Foreman at Aspinalls.com. "There has been a very low barrier to entry, and some of the smaller sites have quickly built up some revenue but are unable to move on and can't offer customer service, so a number will wither away.

"The people who have credibility and can back that up with marketing and customer support will succeed, provided they work at it constantly," he adds.

Unscrupulous operators trying to make a quick buck could find life becoming more difficult since last week's recommendations from the Gambling Review to encourage online gambling sites to apply for a licence from the Gambling Commission and be registered as a British company with its server in the UK.

The past few years have marked only stage one in the development of online gambling. The race everyone wants to win is the development of a global service. "Of the people who have set up in the past two to three years, a lot will fall by the wayside, but a select few of the existing operations that have a real killer brand will become global players," says David Annat, managing director of PA Sporting Life.

Because of hesitation and legal hold-ups, the large names from Las Vegas have been slow to launch online, and there is a chance to establish a global presence before these big casinos go into cyberspace.

"The internet is out there, but you are no one without a global brand and, in the history of the Web, what has been important is to have an international name," says Andrew Tottenham, director of gaming development at Harrods Online. The Harrods casino is expected to do well because of its connection with the famous store, but there is some marketing work to be done by other major brands strong in the UK but not as well known in the lucrative Middle Eastern and Far Eastern markets.

"In other parts of the world, people don't know the names of Ladbrokes and William Hill," says Simon Noble, CEO of the sports-betting and casino site intertops.

Even at this early stage, with a predominately localised service, the internet has successfully given the gambling industry an alternative route to getting in touch with punters. For the novice gambler, the Web has been just as useful in helping to escape the experienced betters that make casinos and a trip to the bookies so intimidating.

"Most betting shops are full of strange men smoking, are very downmarket, are always close to pubs and are not pleasant places to go," says Annat.

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