THE KINK IS DEAD, LONG LIFE THE...wait a minute, new developments.


The upcoming challenge to affiliates has little or nothing to do with 'Black Friday'.


'Life is what happens to you while you're busy making other plans" John Lennon


OFFSHORE INTERNET poker sites seem to be taking a beating lately. I mean, deeper than usual. Everybody knows about Black Friday' (April 15 2011) when Full Tilt Poker. PokerStars and Absolute Poker were indicted by the prosecutors of the Southern (Federal) District of New York. But even then, there was a central, keel-plate assumption: however angry American authorities might be at the operator, his compliance with local laws would yield a certain degree of immunity. The host jurisdiction, after all. was not about to punish one of the home teams.

The whole system of 'offshore' Internet gaming is based on that. 'Offshore', after all, doesn't merely mean outside the USA; a given iGaming site can be effectively 'offshore' from Europe (e.g. Malta, Cyprus) or Asia (e.g. the Philippines). In return for the employment and infrastructure the site offers to the locals, the host country presumably provides a reasonable legal protection from prosecutors in the target markets.

But now, Full Tilt Poker is under full and formal interdict at its home base in Alderney as well as in the States. The Alderney government is investigating and, in the meantime, has suspended the FTP licence. Oops. I believe the Russian phrase for this is 'govno serioznii'. The whole idea of locating Internet gambling sites offshore was centred on the notion that the operator could play one jurisdiction off against the other, both ends against the middle. When that stops, he, the operator, IS the middle. With all that implies.

But for the affiliates who carry the gambling and links to online sites, this is not a major worry. If not Full Tilt, there'll be somebody else, and the game will go on... right? Well, to give a lawyer's favourite answer: 'yes and no'.

Yes, in the immediate sense. Online poker is an industry worth over $12 billion by itself, the US is the largest single market segment, so if one operator or set of operators is knocked out, nothing could be more certain than somebody else stepping up to take their place. And the need for affiliates to bring in the customers will remain.

No, in the sense that Internet gambling never stays the same, and this is no exception: as the online gambling industry mutates and thrives, the concerns of FTP, as it now exists, may become obsolescent. New concepts and new formats are making their way onto centre stage. In fact, a new business model for online and interactive gaming may be making its appearance. And the emergence of that new model means new opportunities - and new challenges -for online gaming affiliates.

New players, new attitudes

It is a given that new technologies are changing the rules for Internet gaming. What is not so immediately obvious is that the new players have different rules too. Their fundamental assumptions, their background music, if you will, are nothing like the stuff that the older folks use for underpinning.

"Predictions of the newest technology as the apocalypse are always wrong. The emergence of radio didn't destroy newspapers, radio was not destroyed by television, and TV was not destroyed by the Internet. But they all changed."The generations that went through the Depression, the Second World War and the Cold War came from a background of pay-as-you-go, no-free-lunch. Everything had to be paid for, to justify its costs. And rewards - gambling winnings for instance - had to be hard cash and tangible prizes; only things that made it worthwhile. On the business side, expenses must be justified. How much revenue do we get per advertising dollar? (Even the coffee shops in the Vegas resorts have to show a profit now.)

Generations X and Y and onward have always had computing power, storage capacity, and fast broadband so accessible and provided so cheaply that they might as well be free. That means that marketing and distribution are cheaper too and no longer under pressure to immediately justify the outlay. Entrepreneurs and even giants like Google are at liberty to offer free services to customers, to keep them coming back to the core business.

On the consumer side, too, things are different. Money is no longer the only yardstick of reward. The Internet did not begin as a commercial enterprise, after all. Social interaction and a sense of community are primary rewards in and of themselves, rated right alongside advertising and sales, particularly with new social media such as Facebook.

The premier example is the enterprise known as Zynga. Its social networking games include simplified SimCity-style offerings such as Farmville, competition games such as Mafia Wars and Texas Hold'em poker. One can play these games for free (thus eliminating the 'consideration' leg of the legal definition of gambling) but also to improve your performance with little boosters, available for straight purchase, for visiting a Zynga/

Facebook advertiser, or won in competition. The prizes are equally touchy-feely: one wins points that can be used to purchase icons. These are representations of bouquets of flowers, ice cream sodas, and so forth, which players can send to other players or acquaintances as tokens of esteem - digital greetings cards, in effect. The customers are paying genuine hard cash for, essentially, bragging rights.

To an old school gambling pro, this sounds profoundly silly, until we realise that Zynga has 320 million registered users, is worth about $20 billion dollars today, and just registered a seven figure IPO for release.

Old school or new, money talks.

Other companies using this model are sure to follow.

The shape of things to come?

Will social media-based games replace online gambling as we know it today? Of course not - predictions of the newest technology as the apocalypse are always wrong. The emergence of radio didn't destroy newspapers, radio was not destroyed by television, and TV was not destroyed by the Internet. But they all changed.

The social media format brings two big changes to the online and interactive gaming model. First, because it is legally classed as a non-gambling activity, it removes the threat of prosecution for violating gambling laws, and the attendant money transfer laws, from over the heads of the operators and their service providers, especially advertisers.

But second, it offers operators steady direct access to the players, which means that middlemen such as affiliates and advertisers will have to redefine their role in order to compete in this new format. In addition, they will need to re-examine their existing advertising model. For one thing, there will be more to advertise as various Internet gaming sites add or link to social media games and applications. For another, it might open a window to the licensing of Internet gambling activities by US state authorities. Washington DC is the first US jurisdiction to pass and then act on enabling legislation to permit licensed Internet gambling under the UIGEA.

But in a very significant move, the DC authorities are seriously examining skill-type games as well as Internet poker. Particularly in the advertising world, skill пames can go where gambling games fear to tread - across state lines. And this may be the newest niche for the affiliates, who have nationwide contacts. The more far-seeing state authorities already look forward to the day when states will pool their poker and other gambling customers, the same way they do lottery and horse betting customers now.

"Skill games can go where gambling games fear to tread - across state lines. And this may be the newest niche for the affiliates, who have nationwide contacts."Completely unexpected? In large part, yes. But the unexpected is part and parcel of Internet gambling, which can be relied on to re-invent itself about every two years or so (once upon a time there was no Zynga, before that no online poker, before that...).

It is very interesting to participate in the changes. And it can be very profitable to help make them happen.
 
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