Friday, February 25, 2005

Sooooooo much to blog about, so little time. Busy as hell.

My humble apologies for another news article, but it's all I've time for tonight. And hell, this is pretty interesting, imho. I'm a big fan of guerrilla marketing.

Also, I learned a new word today.

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Online Gambling Sites Get Creative To Beat Advertising Restrictions

In the 1980s, Alex Czajkowski penned a weekly computer column for his college newspaper at Carnegie Mellon University dubbed "Beating the System."

Today, that title neatly describes his job. As a marketing executive for an offshore Internet gambling company, he and his business rivals are drawing from an ever-expanding bag of tricks to promote online betting in the U.S. -- where the casinos and the advertising of them are considered illegal by the government.

Shut out by most mainstream media outlets, Mr. Czajkowski's company, Sportingbet PLC, which runs Sportsbook.com, has sponsored a top American bull rider, a professional women's volleyball duo and an Arena Football League team. It has also placed full-page ads in two airline frequent-flier magazines, and its racy billboard-style ads featuring Playboy model Brooke Burke are displayed on the sides of trucks parked at National Football League games.

"Why can't I advertise on ESPN? Sports Illustrated? Those are the [viewers] that care about my product," said Mr. Czajkowski, marketing director for the Americas region for London-based Sportingbet, which is publicly traded in the United Kingdom and lets people bet on sporting events and play casino games.

With online gambling booming in popularity and poker, in particular, enjoying a newfound fan base, the companies behind Internet casinos have grown increasingly creative in their efforts to promote their products. Most print and broadcast outlets refuse to accept ads explicitly for Internet gambling, citing the government's assertion that it is illegal for U.S. residents to gamble on offshore sites. But that view is based on a 40-year-old law that some legal experts say is vague and might not stand up to a court challenge, and the gambling sites argue that refusal to take their ads is a freedom of speech issue.

PartyGaming PLC, a large online gaming company based in Gibraltar, has been credited by its rivals for making shrewd end runs around the advertising restrictions in the U.S. The company runs ads on cable news channel CNBC for a Web site that teaches people how to play poker, but does not allow actual gambling. The advertised site, PartyPoker.net, makes no mention of the company's popular gambling site, PartyPoker.com, though it would be easy for someone to make a typing error and land on the betting site. PokerStars, based in Costa Rica, employs a similar strategy and has run ads on NBC and the cable game-show network GSN.

Another company, Golden Palace Ltd., based on the Caribbean island of Antigua, has used an assortment of marketing stunts to attract bettors. It recently spent $15,099 on eBay for the right to temporarily display the name of its Web site, GoldenPalace.com, on the chest of swimsuit model Shaune Bagwell. Earlier this year, it coughed up $4,050 on eBay to garner advertising space on a pregnant woman's stomach. And the company spent $28,000 on an eBay auction last year for a 10-year-old grilled-cheese sandwich that appeared to bear an image of the Virgin Mary.

Big Business

This year, revenue for the roughly 2,000 gambling Web sites will reach $9.8 billion, up from $7.5 billion last year and $5.7 billion two years ago, according to Christiansen Capital Advisors, a research firm. About half of the revenue comes from U.S. bettors, the firm said. Poker enjoys increasing popularity in the U.S., in part because of cable network ESPN's World Series of Poker coverage and Bravo's "Celebrity Poker Showdown." On a recent weekday afternoon, more than 29,000 people were gambling on PartyPoker.com, according to PokerPulse.com, a Web site that tracks online poker activity.

Bodog.com ran a 12-page ad in Esquire magazine featuring a "gentleman's guide" to poker and screenshots of its online poker tables.

The surge in gambling comes despite the government's efforts to keep U.S. customers away. In the summer of 2003, the Justice Department sent letters to U.S. media companies warning them they might be prosecuted for running ads by online casinos, because they would be "aiding and abetting" an illegal pursuit. Federal prosecutors also began a grand jury investigation into companies doing business with online casinos. The Justice Department has not commented on its grand jury investigation, and a spokesman for the department said he would not discuss issues surrounding advertising by Internet casinos.

The government's actions had a dramatic effect on the advertising of Internet gaming companies, at least at first. In late 2003, large media firms such as Discovery Communications Inc.'s Discovery Networks, Viacom Inc.'s Infinity Broadcasting Corp. and Clear Channel Communications Inc. stopped accepting the ads. But an even bigger blow to online casinos came in April 2004, when Yahoo Inc. and Google Inc. stopped accepting ads, including the sponsored search listings that casinos relied on for a big chunk of their traffic.

Some legal experts, however, question the Justice Department's contention that media companies might be violating the law when they run ads from online gaming concerns. The legality of online gambling has been a matter of some debate. The government argues that the 1961 Federal Wire Act, which outlawed sports betting over state and international lines, makes all Internet casinos illegal. But several federal courts have said that law is limited to sports betting.

John Kyl, a Republican senator from Arizona, has tried unsuccessfully to pass legislation that would formally make Internet casino operations illegal. The measures have been opposed by lawmakers questioning whether a ban could be enforced and also by some gambling lobbying groups. A spokesman for Mr. Kyl said the senator plans to introduce another bill this year. Wagering on the Internet is permitted in many other countries, including much of Europe, and the offshore sites that draw bets from Americans are legal in the jurisdictions they call home.

No major media companies have challenged the Justice Department's stance on advertising for online casinos. A small company, Casino City Inc., which operates an Internet portal for casinos, sued the department in August, asking a Louisiana federal court to issue a declaratory judgment that ads for Internet gaming companies are protected under the Constitution. But a judge last week ruled that the company did not have legal standing to bring the case, in part because it was not among companies that received a letter from the Justice Department warning that media firms might be aiding illegal activity. Casino City's chief executive, Michael Corfman, said the company plans to appeal the ruling.

Lawrence G. Walters, a Florida lawyer who represents some large offshore Internet casinos, said he expects further legal challenges of the ad restrictions. "The bottom line here is the supposed crackdown [by the Justice Department] never happened," said Mr. Walters. "There was a grand jury investigation, and no one was ever charged. It's been almost two years now."

It might be acceptable for broadcasters and other media companies to take advertising from offshore online gambling companies if the advertising is for activity other than sports betting, said I. Nelson Rose, a law professor at Whittier Law School in Costa Mesa, Calif. Three federal courts, he said, have held that the Wire Act is limited to outlawing online sports wagering. The Justice Department would have a "much weaker" argument in contending that ads for, say, poker Web sites are aiding and abetting an illegal activity. "The DOJ has taken the position that they basically don't care what the courts have said," Mr. Rose said.

In North Dakota, meanwhile, the state Senate is set to vote on a measure that has already passed the House that would help pave the way for legal online poker operations in the state. Proponents argue it could attract more businesses to the rural state.

'Educational' Sites

A spokeswoman for NBC -- which, like CNBC, is owned by General Electric Co. -- said the broadcaster is open to ads for "educational, nongambling sites" on its networks. The company fully vets any such ads to "ensure that there are no links from the accepted educational site to any online gambling sites." (Dow Jones & Co. provides news content to, and derives revenue from, CNBC.)

Despite the government's warnings, straightforward ads for the casinos have occasionally appeared on television and in magazines. The March issue of the men's magazine Esquire features a 12-page advertising campaign by Bodog.com, a gaming site based in Costa Rica. The ad includes a "gentleman's guide" to playing poker, replete with instructions on strategy, and offers this nugget of advice: "As with a fine wine or a beautiful woman, remember this … Know when to hold 'em, know when to fold 'em."

Esquire declined to discuss the Bodog.com ads in particular. "Esquire has no involvement in any legal issues surrounding online gaming or the companies that offer it," said a spokesman for the magazine, which is owned by Hearst Corp. "We evaluate advertisements for our magazine on a case-by-case basis to make sure they are appropriate for our readership and will continue to do so."

Other companies are more strict: Walt Disney Co.'s ESPN cable network won't take ads from Internet casinos, a spokeswoman said. She said the network will take ads from land-based casinos, "but the content of the commercial must focus on their resorts, sports, eating and entertainment."

ESPN the Magazine and ESPN.com won't accept ads from Internet gaming companies, with one exception. On its Soccernet.com, it will take ads from sports-betting concerns, but the ads are seen only by people who view that site from the United Kingdom or Canada, said a spokesman. A lot of ESPN's partners, which include major professional sports leagues, "are extremely important to us and they don't feel comfortable with" advertising by Internet gambling firms, he added.

Calvin Ayre, the founder and chief executive of Bodog, which also allows sports wagering and casino games like roulette, said there's "really no legal basis to say it is illegal" to run the ads. The multimillion-dollar campaign, he said, is turning heads in the media. "We have negotiations under way with 20 magazines," he said. He declined to name them.

He contends the Justice Department's efforts to stifle advertising have been politically motivated. Questions about the legality of Internet gambling in the U.S. should be decided in Congress, he said. "I don't think U.S. citizens think that big brother telling people what to do is good policy."

A competitor, David Carruthers, chief executive of BetOnSports PLC, which is publicly traded in London, complained that the Justice Department's actions "weren't really grounded in law" but rather the "personal feelings of John Ashcroft," who was the nation's attorney general at the time the crackdown began.

From NFL to Rodeos

Online casinos want to be connected with sports to stay close to what they see as their target demographic. Sportsbook.com's typical customer is a man in his early 30s with an annual income of more than $70,000, Mr. Czajkowski said. He has tried to reach such people by putting up posters in bars during events such as the NFL playoffs, running billboard ads during the men's college basketball tournament, and running ads in the in-flight magazines for Continental Airlines Inc. and American Eagle Airlines, the commuter carrier for AMR Corp.'s American Airlines. His company also sponsors prizefights on cable TV's Home Box Office, and he has tried to woo fans of minor sports such as rodeo, where Sportsbook.com sponsors top bull rider Dustin Elliott. Mr. Czajkowski said his annual marketing budget is more than $10 million.

Sportsbook.com made a splash last year when it signed a promotional deal with Ms. Burke, the model who has appeared in Playboy and has hosted cable TV shows. "That was something new and got a lot of attention on the posting forums [for online gamblers]," said John Vega, founder and CEO of Dimebetting.com, a rival site. But Mr. Vega, who relies primarily on e-mail marketing, search-engine directories and word-of-mouth to promote his site, said he wonders whether many of the marketing tactics used lately by Internet casino companies mostly amount to "hype" and have little impact on revenue.

However, because of the restrictions on mainstream advertising, Mr. Czajkowski said, it's hard to turn any one campaign into a smash hit. Instead, he tries to have his brand show up in so many places that it leaves an indelible mark on bettors' minds. In the days leading up to the Super Bowl, he said, sign-ups by users of Sportsbook.com doubled from a year earlier, and he credited his wide variety of strategies. "If you ask anyone … what works," he said, "the answer is that we do 100 little things. That's our mantra."

All Content Copyright Iggy 2003-2007
Information on this site is intended for news and entertainment purposes only.

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