Frank Disappoints Online Gambling Industry

After climbing steadily in recent weeks following news that Barney Frank was planning a bill to repeal the UIGEA, British online gambling shares tumbled from year highs as Frank announced he is tabling an alternative bill, which will require operators to apply for a license to run games in the US.

PartyGaming shares have fallen sharply in recent days following the introduction by the House Financial Services Committee chairman of the Internet Gambling Regulation and Enforcement Act of 2007 (IGREA). Analysts believe if this bill is successful, it will benefit US-based online gambling companies.

Shares in PartyGaming dropped 13% the day after it became apparent Frank would not be River Belle Casino trying to reverse the UIGEA. This was the biggest single day slide since October 16, 2006 – the day PartyGaming began trading again after pulling out of the US market following the signing of the UIGEA into law.

Shares of SportingBet and 888 also fell in trading, reflecting investor disappointment in the news. Many investors had high hopes Frank would be introducing a bill seeking to completely repeal the UIGEA and most online gambling stocks were artificially inflated by Frank’s strong comments in recent months. Frank had described the UIGEA as “one of the stupidest things” he had ever seen and wanted it “undone”, saying it was not the government’s job to protect people from themselves.

However, some analysts feel the market has over-reacted to the disappointment of the watered-down bill. A writer for suggested the market is misreading the situation, pointing out that the market appears not to be taking into account the fact that PartyGaming could still re-enter the US market in a joint-venture with a US-licensed entity, such as the Seminole Tribe of Florida (for example) should Frank’s bill be successful. Additionally, PartyGaming could become a prime takeover target for a US-based casino or company wishing to enter the global online poker arena.

Whether or not this means PartyGaming shares are currently under-valued following recent slides remains to be seen. The share price has risen spectacularly in the last month or two on not much else apart from Barney Frank-induced excitement. Indeed, there could be still more corrections as investors establish some level of agreed value for the high-variance PartyGaming shares.

PartyGaming closed at 46.25p today, down from a high of 58.5p a week ago.

Google & Yahoo Say No to Online Gambling Ads

Online search engines are caught in an ironic situation. News reports are stating that Google is not accepting paid search ads for online gambling companies, and that Yahoo has followed suit. Yet if you create hard-core pornography, you can easily buy paid advertisement on the world’s largest online search engines.

The search engines and the online gambling industries are growing so rapidly, executives in these companies are finding it hard to set a logical moral code, creating some bizarre contradictions.

Publicly-listed market leaders like PartyGaming and 888 cannot buy paid advertising on Google, but a backyard operation in Southeast Asia producing hard-core pornography is able 32 Vegas to list their products at the top of search results? What kind of world are we living in?

The reasoning behind the Google and Yahoo logic is unknown. Their policy of not accepting paid advertisements from online gambling companies does nothing to affect search engine optimization (SEO). With quality SEO, online gambling companies can still place themselves at the top of natural searches for selected keywords. All the nonsensical policy appears to achieve is removing a massive revenue stream for both the search engines and online gambling companies.

A final point to consider about the policy: If Google and Yahoo allowed paid search ads, these would mostly be snapped up by the largest, most respected online gambling companies. Without paid search ads for the online gambling industry, Google and Yahoo are (in effect) leveling the playing field, forcing the respected market leaders to compete in SEO terms with smaller, possibly unethical, online gambling companies. By not allowing the large online gambling companies to buy paid advertisement, customers who wish to gamble online are more likely to gamble with unreputable operators, if those fly-by-night operators place higher on the natural search lists through superior SEO.

Betfair’s Mark Davies made the obvious point: “It’s a curious place to draw the line if their reasoning is morality.”