Now what the hell do I do - Post UIGEA

by inga posted Jun 18th 2007 at 22:00PM

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It was not lost on me the effect of the UIGEA immediately; I knew that the industry would get leaner and fast. Smaller operators were going to panic and sell to bigger operators, couple that with the fact that they weren’t particularly anxious to explore the opportunities that existed elsewhere and you realize where we are at. The big guys are buying the little guys so how do you and more importantly how do I stay relevant in this market? The answer is both simple and complex at the same time so I will dissect different parts.

If you are looking to acquire more websites you have to ask yourself are you relevant in the markets that exist for them. If you are a bonus site and information portal developing a high end brand won’t make sense. You have to appeal to the masses and provide them with information multiple times a day, keep them engaged. If your portal is about VIP and high end clientele then advertising bonuses is almost irrelevant. It has always struck me that sites allow people to dip into both pools from the same brand, inherently customers want what they see, and so if you offer free items but also offer VIP/Comps isn’t the customer that got the free item eventually going to want the VIP too?

Let me use an analogy, you are going through the grocery store and you are offered a sample of cheese so you eat it. As you come back because you forgot the bread a new lady is offering that same great tasting cheese, do you say “no, I just had some of that great tasting cheese that made my mouth water but I would feel guilty taking more”, you actually might because in the real world of retail you might feel someone saw you or your guilt will overwhelm you. That doesn’t happen on the internet, all of the nasty little things you wouldn’t do in public you would do on the internet. I doubt I have to get to graphic with this idea.But none of that answers the question of what you do, it only points out that you are getting the shaft while others benefit.

The answer is quite simple. Do the opposite. If the industry is headed to big behemoths that acquire companies and retain some of the previous owners you have an advantage. Those previous owners aren’t motivated the same way they used to be. The new owners have built a huge machine and it will be impossible for them to micromanage every facet in the way that someone who is more invested could. Being small and agile is your competitive advantage.

So if you are a free chip set site, the bigger company will beat you unless you do something they wouldn’t even bother trying. I have consulted on a number of businesses some of which did some interesting things. One rakeback company differentiated themselves in the market by paying players upfront, almost no one has copied this model, its intense and very time consuming but it certainly was different (though in this environment I doubt it is smart any longer and you see sites administering a lot of the payments now). For free money sites the US market was cluttered so I suggested Sweden and Germany and bam, the money flowed in (this was a while ago, now those markets are being tapped). So if you are a free chip set site developing a retention model with one partner is certainly different, though not particularly original, there is a big company out of the UK using this model with a great deal of success.

I willingly throw out a lot of ideas because I like seeing my ideas happen even if I am not the one that benefits. Ultimately though I think if you copy too much you don’t have a business. If you are trying to out do ipod good luck. Second market positions are for the birds in my opinion; you should try and be something not follow the trails others have blazed. By the time you catch up to speed they are already 2-3 years ahead of you.

Make no mistake about it, the business is getting tougher and as it gets more competitive, which means you will make less money while continuing to build your business. Ultimately that is why so many companies are selling. To be fair not all of them had a real business, if they had, that business would likely translate to other markets.

The long and short of this story is that if you aren’t willing to up the ante you will lose. You don’t need to be bigger necessarily but you need to be smarter and you may need to take more risks, which admittedly is tough in this environment. I am very interested in two new markets and I am very excited about the prospect of pursuing those opportunities. If you were in my shoes would you be? Are you a gambler at heart because that is what being an entrepreneur is about, finding opportunity and adjusting to it.