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Calvin Ayre

The Power of the Business Mode

3 December 2003

One of the questions we get asked most often by industry pundits is, "How can afford to give out such aggressive bonuses and still stay in business?" Some have even suggested that when combined with what they consider to be an aggressive marketing campaign these bonuses would cause us to be over-leveraged.

To give these persons their due, with some of our competitors this would in fact be a possible scenario, but we are extremely profitable and are in fact considered fiscally conservative for our industry by anyone that really takes the time to investigate our business. What is readily apparent to those who do their homework is what I call "the power of the business model."

The international wagering industry is the same as any other industry in that there is an infinite number of ways that you can structure yourself to get the necessary work done. I think we have a unique structure in our industry, and one that many used to consider a small negative.

Instead, over the last few years it has proven to be a huge positive.

What makes us different is how vertically integrated we are. We do nearly everything in house. We develop and support our own gaming platform. We design and support our networks internationally and support all of our servers in our wholly owned hosted environments. We do all our own creative for both digital and print publications and are the most prolific unique content generators in our industry. We process all our financial transactions in our own e-commerce companies located in Europe, and lastly, we do all our own marketing and business development and even our event management internally.

When we first got started as an organization back in the mid 1990s, there were not a lot of options for most of these things. The majority of the industry did not even exist, the only part that really existed was the bookmaking itself, and we had to invent all the rest as we went along.

This created a lot of work for us and many of our competitors chose to contract out large parts of this to third parties. Initially this let them focus more on core areas and gain advantage in the market place. We even had meetings internally and discussed us following others down this path, but I could never bring myself to agree to release the control of our own destiny to others. Consequently this may have been one of the best decisions I ever made.

What has been proven over time is that in an extremely volatile environment like we operate in, the ability to turn on a dime is a very valuable competitive edge.

Let's look at some of the pieces of the equation. Actually, let's cut to the chase and discuss e-commerce. We started out as a technology company offering e-commerce solutions. We are one of the most knowledgeable organizations in our industry in this area, and there is no way we could value this level of domain knowledge given how this area has evolved.

We have not been negatively impacted as change has occurred in how funds are sent to us and back to players. In fact, our payment and payout methods are good enough, and we can change them fast enough so that we have consistently gained market share even as this space becomes more volatile. The volatility that the industry is complaining about has increased our business.

Owning our own gaming platform has not had quite the impact on our competitiveness as having e-commerce competency in house, but it is easily a close second. Not only is our offering unique, but we can also change it rapidly having it work exactly as we want it to, and we are never going to be the same as anyone else in the industry. It is a great way to differentiate our offering from the rest of the industry.

We have a saying in our group: "Who here is involved in customer service?" -- the correct answer, of course, being "everyone." By owning our own gaming platform, we ensure that this philosophy extends to every contact point in the organization, and for a predominately Internet company, the customer service starts on our Web site.

Equally as important as the ability to control our own destiny technically is the fact that we don't have to pay royalties for the use of our gaming platform. When we were smaller this was not an advantage since we were burdened with a large development cost relative to our size. As we moved through the break-even stage, this turned into an ever-increasing advantage.

Many of our competitors pay a royalty that is a percentage of the volume of the business, meaning the technology service providers are essentially partners. It also means that as your business grows, the money going to pay for the gaming platform is scaling in some near linear fashion. Clearly, at some point it becomes much cheaper to possess your own development.

There are similar (but of lesser importance) advantages to all the other things we do in house. When you combine these advantages, especially our serious focus on the Internet as both the primary delivery channel for our services and also our main advertising vehicle, it makes us one of our industry's lowest cost operators. Though it looks like we are everywhere, when you are surfing around on the Net, we do not really spend much money on print or radio advertising and we do not have to support a huge wager center to handle the significantly larger phone-in business that this would cause. When we offer a bonus all we are doing is passing our low cost of operations on to our player base, while maintaining our financial ratios at the top level of any fiscally responsible organization in our industry. We can also offer a strong bonus program to our staff. In doing this, we are keeping the two groups that really matter in keeping the offering at the world-class level we demand happy.

It was a long road to get our operation to the level that it is at now, but we would not want to trade places with anyone else in the industry right now. With the way things change in this industry, we not only need the financial head room, but also the flexibility that we have built into our business model.

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The Power of the Business Mode is republished from
Calvin Ayre
Calvin Ayre