Amid the U.S.-driven economic gloom and doom that seems to have a stranglehold on much of the global business community, I was pleasantly surprised with the enthusiasm and all-around positive vibe at the seventh annual European iGaming Congress & Expo.

For those not familiar with the event, EiG is the largest conference and trade show geared toward the interactive gambling industries, and the most recent EiG, held in September in Barcelona, re-emphasized that Europe is the center of the i-gaming universe.

Following are some observations taken from conference sessions as well as private discussions throughout the week.

Always on My Mind

Considering that operators in the i-gaming space have done a terrific job investing their resources in non-U.S. markets in the prohibition era, I’m amazed at the undying European interest in what’s transpiring in the States.

The Unlawful Internet Gambling Enforcement Act crept into discussion throughout the week—in conference sessions, on the expo floor and during networking events. Most of the curiosity revolved around the upcoming election and its implications on the industry; the topic first surfaced during the suppliers’ CEO panel, during which CryptoLogic CEO Brian Hadfield explained that for the United States to become a viable market, much more needs to happen than a change in leadership.

And of course, a longstanding EiG tradition is that something major happens in the United States prior to or during the conference. This year it was the seizure of 141 i-gaming domain names in Kentucky the night before the event was to commence—a development that diverted much attention away from European matters.

Consolidation Is Here… Again

Talk of consolidation dominated the financial discussions throughout the event. Analysts have been saying for the past five years that consolidation is finally upon the industry; they are right, but I’d add the word “again” to that notion, as it comes in phases.

Companies were buying up one another during the growth spurt prior to the bursting of the internet bubble in the early part of the decade. Then there was the gobbling up of fading companies post-burst. And now we’re seeing a post-UIGEA adjustment period that’s full of M&A activity.

Moderator Sue Schneider, consultant to Clarion Gaming and former CEO of River City Group, asked panelists during the operators debate whether they expected a wave of privatization, and the overall sentiment was that valuation issues and large companies’ limited ability to fund privatization make this unlikely. Malcolm Graham of PKR reminded the audience, however, that this could still be an option for small to medium companies.

One of the most interesting debates stemming from the operators session was whether the right model at this point is to focus on market share or profitability. The consensus among the panelists was that profitability is now the way to go. Market share, they agreed, was important for a young industry, but the shift to profitability has been made. They also agreed that bwin—the privately held Austrian bookmaker—has nailed the shift brilliantly, and panelist Mark Blandford of Valhalla Investments pointed out that bwin was afforded the luxury of taking this route by avoiding the short-term profitability demands experienced by public companies.

PartyGaming CEO Jim Ryan suggested that a balance between market share and profitability was essential, at least in the poker space, where liquidity is so important. “I think if you choose one versus the other,” he said, “it’s going to be a painful year.”

Diversification Wins

Diversification vs. specialization is apparently no longer a debate in the i-gaming space, as an overriding theme of the entire conference was that the more you diversify the better off you are. Martin Lerby, head of games B2B for Ongame Network, stressed during the suppliers debate that “the survivors are the full-service agencies.”

It is evident that the supply side has become crowded in this industry and as a consequence the lines between operator and supplier are blurring more by the day—a trend the industry moved away from early in the decade, when suppliers got out of operations to eliminate competition between provider and licensee and operators got out of supply to maximize liquidity. 888 CEO Gigi Levy suggested during the operators debate that there may be no pure suppliers with no links to operations, and he and Jim Ryan called for more transparency so that all suppliers can be upfront with licensees.

And finally, an interesting byproduct of the diversification trend is a heavy thirst for new products and services, which oddly enough translates to a favorable climate for startups during a period of consolidation. Blandford and his fellow panelists during and after the Launchpad session—in which representatives from five startups had 10 minutes each to pitch their concepts—confirmed that new and fresh products are indeed in high demand right now, as did members of the operators panel.

Web 2.0 a Focal Point

Content is still king, and “Web 2.0” was a common buzzword at EiG 2008.

While the emergence of gambling within the Web 2.0 environment is an exciting concept, the real emphasis has been put on Web 2.0 marketing initiatives, and this was touched upon throughout the conference.

Wired magazine’s David Kushner added an exclamation point on Web 2.0 during his day-three presentation, which focused on the convergence of gaming and gambling and the massive population of gamers ready to be “entertained” by gambling providers.

“It’s not enough to just play a game anymore,” Kushner told the audience. “There has to be sharing.”

Mark Balestra is the director of publishing for Clarion Gaming. A veteran of 11 years in the online gambling business, Balestra is the editor and co-creator of Interactive Gaming News (www.iGamingNews.com) as well as the editor and co-author of Internet Gambling Report, a legal guide to interactive gambling.

By Mark Balestra

Mark Balestra is the director of publishing for Clarion Gaming. A veteran of 11 years in the online gambling business, Balestra is the editor and co-creator of Interactive Gaming News (www.iGamingNews.com) as well as the editor and co-author of Internet Gambling Report, a legal guide to interactive gambling.