Online Gambling Still Flush with Potential

The number of e-gaming sites has risen to more than 650 and it continues to grow, according to a report by Bear Stearns, but the online gambling industry is not without its share questions.

Along with the growth in the number of sites that offer online gaming, their profits are also rising, Bear Stearns found. Expected revenues for the online gaming industry totaled $1.2 billion in 1999, and could grow to more than $3 billion by 2002.

“It is clear the dynamics are there for this industry to succeed,” said Bear Stearns gaming analyst Jason Adler. “People are spending more time online, they are becoming more comfortable with e-commerce and they love games of chance. Just look at the recent success of TV shows like Who Wants to be a Millionaire? and Greed. It is clear games of chance with the potential for big payoffs attract a huge audience.”

Online gaming sites are not lacking innovation, either. Some sites allow consumers to play traditional casino games, bingo, bet on sporting events and horse racing, or play in lotteries. Online casinos have also taken up celebrity pitchmen, or billed themselves as community sites as well as gaming sites.

“E-gaming has the potential to be everywhere on the Web,” Ader said. “It is not unrealistic to believe that someday when you buy a CD online, you will also get a chance to spin a roulette wheel for extra discounts.”

Despite its upside potential, the legality of e-gaming in the US remains unclear. As a result of the uncertainty, many e-gaming companies have located their operations outside the US. Consumer confidence, an issue that has been at the forefront of more traditional forms of e-commerce, is another factor that must be considered when evaluating the potential of the industry.

“Some people are a bit skeptical betting on cards and slots that they cannot feel and touch,” said Marc Falcone, a Bear Stearns analyst. “Ultimately, trust will play a large role in whether these companies are successful, so they would be well advised to make sure security is tight and that they are offering fair and reliable odds.”

While online casinos that could cost consumers a large sum of money are a growing industry, free sweepstakes and gaming sites are all the rage. According to the study “What Are the Odds?” by Greenfield Online, 81 percent of gamblers only play online for free, and of those who are willing to play for money, 66 percent are willing to spend only $10 or less per visit.

By comparison, the Greenfield study found that when respondents gambled in a casino, most are willing to risk an average of $300 per visit. Almost one-quarter of the respondents said casino gambling is more fun than online gambling, nearly 17 percent enjoy the social interaction of casino gambling, and only 2 percent stated online gambling is fun. Despite these findings, Greenfield found online gambling sites are visited an average of three times more often than casinos annually. Greenfield’s study was conducted among a sample of 1,000 respondents over 21 in November of 1999.

Clearly consumers’ concerns with online gambling opens an opportunity for Web sweepstakes and free gaming sites. According to the measurement of home Internet users by PC Data Online in the month of January 2000, freelotto.com was the top sweepstakes site of the month, and the Web’s 26th most popular site overall with 10.4 million unique visitors. IWon.com was the 27thsite overall with 10.3 million unique visitors.

Other sweepstakes sites in PC Data’s Top 100 for January include webstakes.com (No. 56 overall), treeloot.com (No. 65), iwin.com (No. 71), pch.com (No. 74), prizecentral.com (No. 83) and Luckysurf.com (No. 91).

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