vnunet.com feature: Smart money backs online poker

Got to know when to hold 'em

The potential profits offered by online gambling are phenomenal and, over the past few years, the smart money has turned to poker.

This trend has resulted in a boom that has transformed the game's traditional Cincinnati Kid image and turned it into an industry that rivals the early days of the dotcom gold rush.

According to Ladbrokes, an estimated £36m was staked on online poker sites every day in 2005, up 89 per cent year on year. Those who got in early are getting their share of that money, but for the 'Johnny come lately' it may already be too late.

"Launching early was a key critical advantage," said Albert Tapper, general manager at Ladbrokes Poker.

"We launched in May 2002 and we were the first big name betting brand to launch online poker. We established 'liquidity' early on, which is the word used in the industry for having lots of players.

"Lots of players is critical because it means you can offer a range of tournaments and a good choice of cash games."

However, Tapper maintained that it is unfair to talk of online poker in terms of a boom which implies a bust just around the corner. Ladbroke's research suggests that the future for the market is bright, as its main audience is young players.

The company's report from January 2006 shows that 60 per cent of players are under 30 years old and the average age is just 32. There are more 19 year olds than any other age year.

"I don't think it's right to say that poker is a bubble about to burst. There are a huge number of people playing; at peak times we'll be dealing 15,000 hands an hour and that's a lot of games," said Tapper.

"The internet bubble was more speculative. There is more substance to the online poker business in that it's happening for real."

Lee Ferris, poker marketing manager at sports betting firm Victor Chandler, backs up the argument that demand is leading the success and not the other way around.

"Some of the greatest dotcom successes - eBay, Amazon, online poker - have been as a result of the clever reinvention of a product or service repositioned properly for the online consumer," he said.

"Based on my experience, a large factor in the dotcom bust was companies foisting products and services on consumers for which no demand existed.

"This was under the assumption that the internet as the platform would drive the demand. Unless it's a killer application, technology alone does not drive the demand."

However, online gambling is not all plain sailing and a licence to print money - there are some problems on the horizon.

Ladbrokes estimates that the American market accounts for approximately 70 per cent of the global marketplace in online poker. Unfortunately, the interpretation of the Wire Act in current US law suggests that it is illegal for Americans to play poker online.

"I don't know that the precedent has been set at this point to fully establish whether it is illegal or not," said Ferris.

"Online poker was not envisioned when the Wire Act was drafted and that act is the current basis for establishing illegality for US consumers.

"Legal experts have weighed up the pros and cons, and there's a very tenable argument that poker is a skill game and as such falls outside the boundaries of the Wire Act."

Whether it's illegal or not, the worry for the industry is that the only person trying to get something concrete onto the statute books is a senator who wants to close it down.

"In the US at the moment the position is unclear. Senator John Kyl has been trying for several years to introduce legislation that would effectively make it illegal for operators to provide banking. But he hasn't been successful and there's no reason to believe he will be," Tapper stated.

Ferris also believes that if America looks to its past it will stop short of prohibition, although some legislation is likely.

"I daresay there's not a strong historical record for taking a prohibition stance towards something that the American public so obviously desires," he said.

"I think regulation of the US market is inevitable, but unlikely within the current climate of conservatism that exists stateside.

"The US Department of Justice has now taken the approach of trying to curtail the industry through payment restrictions and aggressive posturing towards companies keen to advertise with offshore gaming operators.

"Bullying global jurisdictions outside their direct purview to take on a prohibitionist stance has not worked out particularly well for the US government thus far, and why would it?

"Gaming has been a tremendous boon to the economy of the vast majority of the jurisdictions involved."

Meanwhile, the cards keep being dealt and the players keep stacking their virtual chips, and with so many people meeting up in cyber card rooms the technology that handles it has to be up to scratch.

Tapper believes this to be one of the factors for poker's popularity with internet players.

"You can have 20,000 people sat down on a site playing against each other anywhere in the world, and one central server is providing them with banking, dealing and all the rest of it," he explained.

"It takes less than a twentieth of a second for a message to get from Aberdeen to our servers in Gibraltar and back again, and obviously that has opened it up.

"The systems are very powerful and we've now got to a point where we just need to add hardware and scale up."

So where does the market go from here? Tapper feels that there are still unexplored avenues for the game, especially as no-one expected the internet version to be leading the way.

"I started at Ladbrokes right at the beginning of our online experiment back in 1999 and everyone thought it would be interactive TV, and it wasn't. Then they thought it would be mobile phones and it really wasn't. It might still be mobiles, but not yet.

"But the internet has been huge. Even though we're the world's biggest bookmaker, [in our online business] it is poker that has really exploded."