Internet Gambling Giant 888's Hard Work Reflects Increased Profits

FinanceWeek reported yesterday that “While online gambling firm Party Gaming has warned that its performance is likely to be way below expectations as it struggles to come to terms with the loss of the US market, rival company 888 has enjoyed increased profits.”

“Party Gaming reported that the resources it was putting in to the drumming up of new players amounted to between 43% and 45% of its total revenue… Mitch Garber, CEO of Party Gaming, said that the marketing costs would “affect our profit in the short term”, though added that “the prospects for the longer term will be materially enhanced, particularly as we move towards a more even playing field with competitor sites who continue to take bets from US players”…

Shares in the firm have fallen by almost 70% over the last 12 months as analysts feared that it would struggle to cope with the loss of the US market… Garber said that 230,000 new players signed up over the first three months of 2007, as a result of the increased marketing activity, compared to 156,200 in the last three months of the previous year” but that “the firm was making less from these new members because of the “increasingly casual nature of new player sign-ups in the quarter”.

The warning from Party Gaming formed a stark comparison to the results of rival firm 888, which last week beat analysts’ forecasts, posting an increase in profits of almost a third…

…following the acquisition of Globalcom’s bingo business at the beginning on 2007, the negotiation of a gaming license in Italy and a deal with the Rileys snooker and pool club chain… The company said it lost 55% of its gaming market when the US law changed… “The enactment of this law radically altered the landscape of the online gaming industry and had a significant impact on 888’s business performance,” they said, concluding with “…the broad international reach of the group’s business, especially in Europe, meant that the impact of our withdrawal from the US market left us with a viable cash flow positive business on which we have built significantly.”

You can read the complete Finance Week article here