8 May 2012
Global i-Gaming Summit & Expo 2012 - San Francisco
Finally, it's here - the Casinomeister 2012 report on the GiGSE. If reading about San Francisco crackheads, sushi, and the future of online gaming floats yer boat - then read on...
Complaints? Kudos? Please let me know.
GiGSE 2012 - San Francisco
California Trek 2012:
What a long strange trip it's been...
It's been two years since I've been to the GiGSE - the annual "not to be missed" iGaming conference that was massively attended until the North American iGaming market imploded several years ago. I felt it was time to revisit this conference, especially since it was being held in my true native stomping ground: San Francisco.
My childhood home was in the South Bay - Los Altos, Mountain View. I lived there before there was a "Silicon Valley". There were orchards, non-tech businesses, drive-in movie theaters, normal priced homes. But that was a long time ago. To me, many areas are unrecognizable after a several decade absence. But there are some spots that remain the same. It's always a little bittersweet when I return to my old turf.
This time was a bit different - I was on business. San Francisco is a fantastic venue - and yes, it's always been a bit quirky. (You should have been there in the 60s and 70s.) I was staying at the relatively inexpensive boutique hotel The Hotel Palomar just a block over from the conference hotel. I was happy to find that the hotel had a very nice lounge and restaurant. Free wine from 5-6 pm daily - and free coffee in the morning. That was a nice touch. Two thumbs up from me.
This year's GiGSE appeared to be well attended. It was held at the Westin Hotel, which was a five minute walk from mine. But a five minute walk on Market street means saying "no" to at least five agressive panhandlers and displaced opportunist. Sign of the times I guess.
I entered the conference floor and picked up my badge. I greeted a few familiar faces and made way to the presentation room. I grabbed a seat near the front of the conference room; it was standing room only as the panel discussions commenced.
My main interest was of how pending legality in the US will affect players and affiliates alike. Since the US laws are still convoluted - not everything is yet in place, legally or infrastructure-wise. It may still be some time before we see any US licensed online poker or casinos.
The opening panel discussions were very informative. There were no sales pitches or agenda laden presentations which I found quite refreshing. The first panel was moderated by John Ford, CEO of BAM Software who had assembled the CEOs form Bwin (Jim Ryan), Pkr (Malcolm Graham), Betsson (Pontus Lindwall), and Virgin Games (Simon Burridge). Entitled "Learning from the pioneers – how to successfully operate an online gaming business" - it gave a very in depth perspective into the online casino industry. The first question: "What is one lesson learned that enabled you to stay competitive and successful in this business?"
(my succinct notes - the answers were longer, but you should be able to grasp the gist of it)
A: Betsson: Perfect service. Pkr: Differentiation. Bwin: Sophisticated technical platform integrated with marketing. Virgin: Putting the customer first (ed. note: excellent answer).
Q: What can be outsourced?
A: Well, there was a general consensus of what cannot be outsourced: customer acquisition. Customer acquisition is the heart of any company.
Another general consensus was that within the next couple of years companies will be grappling with social games; making their sites more social. Poker and bingo already have a social element; casino games don't. It's up to casino operators and software developers to crack that egg. And perhaps me to hand over a chisel.
Q: Since you've been in the industry, what has been the biggest surprise?
A: Betsson: that the business didn't take off in the beginning - regulation - that the EU hasn't come further than it has in the past 15 years - politicians can't agree on how to regulate (ed. note: he's surprised?). Bwin: UIGEA was a big surprise. (ed. note: the chicanery of how this bill was passed was rather shocking to most Europeans - or to anyone who believes in a true democracy.) Black Friday also blew him away. Virgin: why regulation has been dragging its feet. Pkr: Surprised on what regulators may or may not do. He mentioned Denmark as an example - Denmark uses a third party company for fraud detection which seems rather odd.
Voice from the past
- GiGSE 2002 - Toronto
The next presentation was on Online Casino Marketing by Nancy Krause from The River City Group. She covered the basics of online marketing which was very informative, and she presented some surprising statistics. According to the River City Gambler Monitor, about 87% of Europeans own cell phones (in Germany we call them Handys) compared to 70% of North Americans (excluding Mexicans). 13% of these Europeans connect to the Internet via their cell-phones compared to about 7% of the American/Canadians. Some brain candy there for you marketing people. Also she mentioned that to successfully market a casino, you need to start with a minimum of $40,000 per month for the first six months for advertising. A quarter of this should be allocated to Casinomeister (this was in my notes, hmm...).
There was a presentation on taxes which I pulled the following information from: in order for online casinos to be "legal" in the States, there needs to be state legislation. At the moment, it's going rather slow. For non-US entities to be involved, they must have something in the States - a company/partner - and each and every state has or will have a different set of rules.
When will winnings be taxable? That is a question that still needs answering. It could be possible that a resident of a state, let's say California, would be liable for State taxes if he or she is playing at a Californian intrastate casino. But there is a good chance that if there are winnings of any kind, they may be reportable to the IRS. It could be that a player would be required to provide a SSN# upon sign up (not likely), or provide it when cashing out a large sum (more than likely). No one knows for sure what is going to happen; it's all speculation.
I spoke to an attorney during a break and I explained that many gamblers enjoy the anonymity of online gambling - it's what appeals to many online gamblers. Many players are reluctant to let the feds or their state government know when and where and how much they gamble. It's no ones business but their own. But if they are gambling at a US licensed casino, these gambling records are subject to being subpoenaed just like anything else that falls under federal or state regulation. It just depends on how far the "nanny" states want to go. Just an observance.
The expo hall was rather spartan; there were just a handful of exhibitors which is somewhat of a shame since this has always been a great opportunity to see a lot of showcasing and pick up a lot of freebies. In the days of yore, the GiGSE expo hall would be a few football fields in size. <sigh> - another sign of changing times.
Marketing Strategy Discussions:
Further dialogue via presentations and panel groups:
Q: How are smaller casinos going to be able to compete against the big Vegas strip casino brands? A: They need to have the ability to be flexible with strong PR (ed. note: think 32Red).
Trust will be the key for being successful (as it always has been). Google has been important for European based casinos - (Google Ad-Words, etc.) and it will be just as important to US firms. Affiliate marketing has been extremely important for Euro casinos - 25% of Pkr's players are affiliate driven. I believe Party Gaming is close to 30%.
Affiliate marketing may be problematic for about 99% of affiliates. As it looks now, affiliates will have to be licensed and the expenses for licensing may be beyond what most affiliates can afford. It includes a complete background check of not only the affiliate, but of the relatives of the affiliate. If any offices need to be visited (like the one you have in Gibraltar), guess who pays for the flight and hotel stay for these government licensing auditors? The affiliate.
Another thing that is on potential operators' minds is how to deal with the "black market" (non-licensed casinos that participate in the US market). Will there be laws enacted that prohibit this? How will this be dealt with?
Voice from the past
- GiGSE 2005 - Montreal
On the flipside, Frank Fahrenkopf spoke of the problems facing the US market stating that the biggest obstacle for legislation against online gaming is the 10th amendment which guarantees sovereign rights of the states. States are to be able to make their own choices without the US government stepping in. This is why the US has all but 2 states with some sort of regulated gaming (Utah and Hawaii have none). Even though there seems to be a strong push to ban online gaming, 80-85% of the American public don't see a problem with it. 15% are opposed. Well who are these 15%? Well the lawmakers who are banding together are an odd sorts - it's the far right who feel that gambling is morally wrong (yet their mothers probably play bingo online), and the far left who feel that people are too stupid to make decisions on their own. They need the government to protect them from themselves.
So there is a new bill on the horizon - it's an "enforcement bill" that will make it illegal to participate in illegal activities and is geared towards the credit card companies (again). He doubts that it will pass, but you never know... What is obvious is the two differing philosophies of European and US lawmakers. US citizens need to keep their representatives in check by popping them an email or writing them a letter every so often. US citizens take note: don't let your representatives in Washington forget that political extremists (far left and right) should not be allowed to infringe on your rights to make decisions for yourself.
Being a native Californian, and growing up in the Bay Area during the hippy surge, the post-Vietnam War era, and Jesus freaks, I am accustomed to odd folks. But walking just north of Market street was surreal. It seemed as though the looney farm had just dropped off several bus-loads of patients without their meds. About twenty crackheads and other reality challenged individuals were arguing and shouting at one another in the street. Some had set up a crazyland flea market of sorts selling empty dirty buckets and old clothing. I changed my mind about walking to Golden Gate park and headed back to the conference.
This is the future of the online casino. And everyone needs to start reading the writing on the wall - not my wall at Facebook, but the proverbial wall that spells out what is taking place in our industry. You'd have to be a nit wit not to notice the implementation of socialness in everything we do. Do you remember what I talked about after my Macau trip in March? I spoke about how the Chinese have millions of computers and hand held devices that are driven by social games. Technology is becoming social - and it's happening all over the world.
As I mentioned, poker and bingo have social elements - but what about traditional casino games? Slots, roulette, video poker, etc., how do they engage social activity? At the moment, they don't. This seems to be a major challenge for operators and software developers.
Kevin Flood from Gameinlane gave few pointers during a panel discussion that focused on social games - about adding social mechanics to non-social games.
+ It's a game that encourages others to play.
+ It allows people to communicate in the context of the game.
+ People like to brag - so they like to post big wins.
+ And there needs to be live components within the game.
Seems like a good checklist to me. Personally, I think that operators have a lot to learn from social gaming and networking; I hope they have their thinking caps on.
There was a discussion on the failure rate of companies - and the sage advice for failing is: fail well, fail quickly, fail cheaply. This pertains to any business - online or off. Purple Lounge could have used this advice. They are failing badly here.
One thing that should be taken away from this conference and placed in the back of one's head - a big name does not guarantee success.
Voice from the past
- GiGSE 2007 - Montreal
The keynote speaker, internationally renowned scholar and online gambling expert Professor I. Nelson Rose took the podium, and gave a very insightful presentation on the history and present state of legalities on gambling in the US. He discussed on how the laws have changed over the past three hundred years. Lotteries funded the colonies, and most of the states after the American Revolution, but it all came crashing down in the 1820's when they were rife with scandal. Some guys decided to have lotteries without paying anyone. It was so bad, that the people said "We will never
have lotteries again." These prohibitions were placed in State constitutions, and as new states appeared, they copied these laws into them. In fact, Nevada still has a constitutional law against playing the lottery...
One thing he touched on at the end, was that he predicted in two years, California will legalize online poker. It would be limited to licensed card clubs and Indian casinos located in California, and taxed at 25%. I emailed him later about this (there wasn't much time for Q&A afterwards) and he said that the poker clubs have wanted this for years. "Now it seems clear under federal law that Internet gambling is legal, so long as it is legal under state law and kept 100% in-state." The UIGEA does allow "intrastate" betting. The biggest problem will be working out the details on how this will come about.
Some final thoughts...
As the GiGSE came to an end, it was really apparent on how much this industry has changed over the past decade. No longer the care-free laid back "we're on top of the wave" conglomeration of party folk - it's officially über corporate. At least it is in the US. From my observations at the conference - the newbies outnumber the industry veterans by a very high margin. I met a lot of people I've never met before, and yet the industry is 15 years old. Personally I find it hard to fathom that most US companies have been ignoring the presence of online gaming even though it's been a part of daily life for millions of Americans. It's as if these companies have only now been given permission to pay attention and take notes. That's not being proactive; it's an ingredient written on a recipe of failure. Looking into my crystal ball, I see many board room faceplants and unnecessary screwups in the upcoming future. It's not going to be a smooth ride for the US market. But I guess time will give us all the answers we seek.
Thanks to Clarion Events. I feel that it was a very successful conference - the food was great, and the discussions were intelligent and illuminating. It was well worth the trip.
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