The UK online gambling industry has seen a flurry of activity lately.  Some highlights: PartyGaming is touted to float with a value of up to £5 billion. Betfair and 888.com are also considering floating. IG Group, owners of spread trading site IG Index, also want to float the company. According to The Guardian, discussing gambling sites:

They are based almost without exception in tax havens and are wildly profitable. What's more, they are only at the foothills of a growth curve that could soar, over the next five years, to unimaginable heights.

That is as may be, but the industry will miss out by focusing on transferring the core gambling (sports and casinos) online, and not looking at the new opportunities and audiences which the Internet makes possible. Additionally, while The Guardian claims that a website such as PartyPoker has 5 million users, these are distributed around the world (in the online casinos where I play poker, 80-90% of players are US-based). In the UK, Internet gambling claims a tiny market share of online activities.

Is the betting industry floating because it wants to cash in on its growth so far, or in order to expand? It is expansion. Online gambling remains, despite recent growth, a minority activity (dominated by men) so it would be foolish to cash in, this early on in the game. In the UK, the National Lottery site is by far the most popular gambling website, with other popular sites being William Hill, PartyPoker and Ladbrokes (it can be argued that the National Lottery site should be taken out of the equation as it is not fair comparison). William Hill is the only non-National-Lottery site to get a significant number of visitors: below WIlliam Hill, visitor numbers are very limited.

The UK is not even the European leader in online gambling. France's gambling websites reach a far bigger percentage of the online population. Whereas in the UK, only the National Lottery and William Hill attract a significant number of users, in France, a dozen gambling websites command significant audiences (for example, Francaise des Jeux, Koodpo, Prizee, Casino Partouche and Bananalotto). In Germany, there are around ten websites with good market share (for example, Tipp24, Planetwin, Win-a-beetle, Profiwin and JAXX).

So where can the UK market expand? Online gambling can be split into distinct sectors - betting (sports and financial spread trading), casinos (poker, roulette, blackjack) and sweepstakes. A key difference between the UK online gambling industry and that in France, and Europe more generally, is the lack of gambling based on casual gaming and sweepstakes, i.e. not the more traditional sports-based gambling. These websites are not only a source of gambling income for the industry but are also a good way to reach out to the masses, who are not accustomed to the more "hard core" betting perceived to take place at sites like William Hill and 888. Attracting a mass audience not accustomed to betting is important not just for its own sake, but because otherwise the online revenues will to some extent be a mirage, as they will be merely a transfer of offline revenues from the same users who would place their bets at the bookie's.

In this context, it is interesting that Yahoo! has started a betting exchange, with Betfair. This is a good step in bringing Internet betting to a mass audience, but is not enough. The Yahoo! betting exchange still focuses on core betting markets (sports, finance). As such, it will not attract virgin gamblers. Nor will it attract large numbers of women, who as Desperate Housewives and Sex and the City suggest, can be just as keen gamblers. More useful for getting non-gamblers started is something like Yahoo! US's partnership with Worldwinner, given the affinity of women Internet users for casual games.

Online gambling sites are, despite the relative lack of popularity, solidly on their way to attracting users who are already offline gamblers. This is well enough, but it does raise the issue of cannibalisation and cuts off the potentially larger revenues available from the wider public. Additionally, online gambling companies should:

• Target women and non-gamblers through casual gambling and sweepstake websites (the popularity of the National Lottery website provides a hint).
• Strike deals with major portals (as Betfair has done with Yahoo). Bend the gambling product into what the portal thinks will attract its audience, rather than providing an as-is offer. Portals like Yahoo!, AOL and Wanadoo know exactly what the Joe Online Bloggs likes to use. The elections provide a good excuse to get a press-release story into the BBC about fun political bets that anyone can place.
• Make gambling into a back-end addition for activities that are already mainstream, such as casual games (which are popular with women), or even news. Allow small wagers to be placed, in games where the main focus remains the game and not the bet. A large number of users who have not gambled yet will be happier placing bets as a side-activity.
• Don't forget that for people not accustomed to betting, and for whom betting is still often tinged with immorality, risk or the perception of smoke-filled dingy basements, £10 can seem too big a stake. Promote the "£1 bet", which has the additional advantage of competing for psychological mindshare with the seemingly morality-free, risk-free, smoke-free National Lottery.

And now, a personal request, I have 34 online betting accounts, which I only use for arbitrage every four years when the World Cup comes round, could someone quickly design a website that allows me to manage everything from one central location? Maybe link it to oddschecker. Thank you kindly.