If Congress succeeds in passing its anti-gambling bill, odds are good several Web sites will lose a lucrative source of advertising revenue.
Though the moralists cheered as Congress last week took a major step toward banning online gambling, the end result will simply be to chase it offshore, where it already thrives.
After all, what influence does the United States have over the more than 25 offshore Internet casinos based in Antigua, the Caribbean nation that’s shaping up as the online equivalent of the Las Vegas strip?
No, if Congress succeeds in passing the bill, the damage may end up closer to home—and hit such unlikely victims as portal sites Excite and AltaVista, as well as a handicapping site operated by SportsLine USA.
These Web sites, which regularly run ads for online casinos, might lose out on a small but quickly expanding revenue stream—one that grew at a rate of more than 1,000 percent last year, by one estimate.
Not Illegal, Just Awkward
The risks arise in the wake of a 90-10 Senate vote last week to outlaw Internet gambling. The bill—which hasn’t passed the House yet—doesn’t specifically prohibit virtual casino advertising. But it will be, shall we say, slightly awkward for companies to advertise a service deemed illegal under U.S. law.
An estimate by InterMedia Advertising Solutions, which tracks online ad spending in its InterWatch report, says online casinos spent nearly $2 million on online advertising last year. Although that amount is small in comparison to the $544 million InterMedia estimates was spent on online advertising last year, company president Joe Philport says it’s still significant.
For purposes of comparison, InterMedia says hotels and resorts spent only $2.5 million on online ads in 1997. And the growth of that spending—from not much more than $100,000 in 1996 to roughly $2 million the following year—has been phenomenal.
“The dollar level is relatively sizable at this stage of the medium’s growth,” Philport says. “Without the legislation, who knows where it would have been next year?” Two of the biggest sites, Acropolis Casinos and InterCasino, spent a total of $1.2 million on advertising in 1997.
Ad Dollars Will Be Missed
In other words, it’s a market segment that promises to grow as fast as the online gambling action that the Senate legislation spearheaded by Jon Kyl, R-Ariz., aims to stop.
Sebastian Sinclair, an analyst with the gambling management consulting firm Christiansen/Cummings, says the value of Internet betting went from “minute” amounts in 1996 to more than $4 billion in 1997. The loss of ads linked to the fast-growing industry won’t cripple any mainstream site—but the business will be missed.
Ads on search engines, which Philport says is where most of the ads typically run, are often linked to the key words that a visitor types into a Web site’s search form. So someone who types in “slots,” “blackjack” or “gambling” on certain sites is likely to see an ad for an online casino on the page delivering the results of the search.
Search engines can charge advertisers more for linking ads to particular words, and for granting advertisers exclusive links to those words.
“This is the way the search engines make money,” says Evan Neufeld, a senior analyst who follows advertising for Jupiter. “They make money on key words.”
As part of the process of estimating ad spending, InterMedia tracks which ads pop up on search engine sites when people type in commonly searched key words.
Excite,Yahoo! Stand to Lose
One of the biggest losers if ads for online gaming dry up is likely to be Excite, where searching for the word “slots” recently called up an advertisement for an online gaming outfit called Casino-on-Net.
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In 1997, Excite sold $375,000 worth of advertising space—out of a total of $50.2 million in revenue—to two online gamers, according to InterMedia.
A spokeswoman for Excite says the company doesn’t discuss pending legislation or talk about specific advertisers.
A spokeswoman for Yahoo!, which didn’t register as a top gambling ad site in InterMedia’s report, says it doesn’t carry gambling ads.
But the site does currently link to a site named GalaxiWorld, where British Virgin Islands-based Gaming Lottery hopes to establish an online casino but is encountering delays.
Yahoo! also links to a site called CasinoMasters, billed as an online gambling school. But when the CasinoMasters site loads on a user’s computer, a second window pops up on-screen, labeled “CasinoMasters On-Line School Choice,” with an arrow pointing at the words “Enter Now!” Click on that, and you’re transported to Casino-on-Net.
Some Portals Do, Some Don’t
AltaVista, owned by Compaq Computer following the PC giant’s acquisition of Digital Equipment, runs online gambling ads, linking many gambling-related key words to the site of the Golden Chips Casino 789.
A spokeswoman for DoubleClick, AltaVista’s advertising sales representative, says the choice to run gambling ads was AltaVista’s. A Compaq spokesman says the company obeys “all applicable laws in all jurisdictions in which we do business.”
Among other major portal sites, neither Lycos nor InfoSeek appears to run gambling-related ads, judging from recent tests of its site.
Gambling Bucks Benefit SportsLine
But online gambling sites appear to be substantial advertisers on Vegas Insider, a handicapping site filled with odds and other information for sports bettors that SportsLine USA operates along with its better-known CBS SportsLine site.
According to one analyst, the Vegas Insider site will generate $1.7 million of an estimated $32 million in revenue for SportsLine USA in 1998. How much of that $1.7 million comes from advertising is unclear—the company charges subscribers as much as $600 a year for access to real-time Vegas odds information.
“We’re going to take a wait-and-see attitude on the Kyl bill,” says SportsLine USA CEO Michael Levy. “I feel very comfortable with the analysts’ numbers, whether we continue taking ads on Vegas Insider or not.”
Ad Ban Trailing Gambling Ban?
If the House does pass an anti-Internet gambling bill, and if President Clinton signs it into law, it’s not a stretch to imagine that ads for Internet gambling may be illegal, too, says Leonard Orkin, a partner in the law firm Kay Collyer & Boose.
“Having said that you cannot use the Internet for gambling, I see no reason why they could not prohibit advertising of gambling,” says Orkin, who specializes in advertising law.
Even if advertising weren’t illegal, Jupiter’s Neufeld says advertising gambling sites might not look good.
“I think there will be pressure” to end it, he says. “And what I hope is that there will be more internal pressure before there will be any public or governmental pressure.”
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