Empire Online's opportunities and risks

The amazing profitability and the consistent growth shown by Empire Online are apparently as naught compared with company could achieve in the coming years. In a presentation the company distributed to investors as part of its road show, it quotes figures from the Global Gambling Report according to which gambling on the Internet accounts for 3.9% of the global gambling market.
Empire Online is in essence a company that generates surfer traffic for the various kinds of gambling sites. It mediates between the sites and the gamblers, and uses various advertising means, such as banners, to capture gamblers and bring them to the gambling sites with which it has cooperation agreements.

Empire Online benefits from a substantial percentage cut of the revenue the gambling sites make as a result of the links to them. The percentage also includes the rake that the sites charge each player.

Empire Online's business is almost entirely based on two gambling site operators. The most important is PartyGaming, which accounted for 72% of Empire Online's 2004 revenue, which amounted to $65 million. The second is Cassava, controlled by Ari and Aharon Shaked and Shai and Ron Ben Yitzhak, which accounts for 27% of Empire Online's revenue. According to recent reports, Cassava too has begun a flotation process, and is expected to list on London's main market at the fantastic value of $1.6 billion.

The risk of being based on these two operators is pretty big considering that Empire's collaboration with both could be ended quite suddenly. In its prospect, Empire online states that the contract with Cassava could be ended by either party for any reason, and that the contract with PartyGaming could also be ended at short notice for a wide variety of reasons.

Empire points out that, during 2004, 37,000 new gamblers who actively used the gambling sites with "real money" signed up for its services. Another 4,000 a month joined during the first quarter of this year. Most of the company's revenue derives from referrals of gamblers to poker games.

The prospectus also reveals that most of the gamblers are from the US. At the end of March 2005, there were 186,000 players from the US, representing 70.8% of the company's customers.

http://www.globes.co.il/serveen - 2005-06-02 03:16:06