• by Kate Kaye , April 9, 2004

When Web gambling industry insiders flock to this week's Casino Affiliate Convention in Amsterdam, discussion is bound to surface over recent decisions by Google and Yahoo! to stop accepting Internet gambling ads. Internet gambling received the blessing of the World Trade Organization last month, yet it remains a no-no throughout most of the United States.

Despite growing pressure from the federal government on media outlets that aid in the promotion of virtual wagering, some in the online gambling business were caught off guard by the Google and Yahoo! announcements, both made on Friday, April 2.

"Everybody was shocked on Friday," says Chris Costigan, president of gaming industry news and information site Sports911.com. "Nobody saw this coming."

Costigan received an email from Yahoo!'s Overture search division on April 2 notifying him that more than 50 listing terms he had submitted in the past--including "book gambling online sports," "baseball gambling," and "college football wagering"--had been removed because they did not meet the company's editorial guidelines.

Both Web media titans say they will eliminate online gambling ads, including paid search listings, by the end of April. Neither will comment as to whether they've received specific legal notices regarding Web gambling advertising.

However, in the past year, it's been reported that a number of companies--including Clear Channel Communications, as well as at least one Web portal--have been issued subpoenas by the U.S. Justice Department regarding Internet gambling ads. Essentially, the Department contends that because Internet gambling is illegal throughout most of the United States, running ads for these operations is akin to running ads for illegal drugs or prostitution.

Although media outfits such as Clear Channel, Discovery Networks, and Infinity Broadcasting have also put an end to ads for Web gambling companies of late, the fact that search industry rivals Google and Yahoo! dropped the bomb on the same day has given rise to speculation regarding the timing of the announcements.

"It has a lot to do with the fact that March Madness has ended and it's a slow season," Sports911.com's Costigan opines. He believes that the search players coupled their announcements with the end of the college basketball betting season, since most online gambling sites reduce their search marketing spending during the subsequent months.

"Wait until the beginning of the football season," says Marc Lesnick, conference organizer for the Casino Affiliate Convention (CAC) and operator of StartCasino.com, an information site for Web gambling entrepreneurs. Lesnick and others in the industry argue that online gambling advertiser dollars account for too much of Google's and Yahoo!'s search revenues to shrug off so easily. He considers the companys' actions to be mere pacification intended to ease the government squeeze. "They're going to reevaluate this--I guarantee it," he predicts.

When asked about the possibility of a March Madness connection, Jennifer Stephens, senior director of communications for Yahoo!-owned Overture, which provides search listings to search engines like Lycos and MSN.com, responded that March Madness was "absolutely not" a factor. A Google spokesperson refused to comment on the inquiry specifically.

Considering the March Madness theory, Jupiter Research analyst Niki Scevak concludes: "In the larger picture, that would be inflating the importance of online gambling revenues to Yahoo! and Google." Although he admits that Web gambling keyword bids can go as high as around $20 per click, the percentage of online ad impressions for these sorts of advertisers has declined since the end of 2001, when it hit the 12 percent mark, according to Jupiter.

An April 8 Wall Street Journal article reported that the top per-click bid for keyword "casino" was $14.97 on April 7, compared to the top bid of $70.24 for "Mesothelioma attorney."

Conspiracy theories aside, the more common assumption is that the search companies' decisions were made in response to the Justice Department's crackdown.

Other search engines could stand to gain from Google's and Yahoo!'s policy change. According to CAC's Lesnick, who often conducts conference-related business with search engines, other search firms "will gladly accept the money." Both Ask Jeeves and Kanoodle, for example, continue to run sponsored listings for Web gambling advertisers. While neither will comment regarding their future policies on online gambling ads, Colby Zintl, communications manager at Ask Jeeves, remarks: "Just because they did something doesn't mean we'll go ahead and do it."

It's doubtful that Internet gambling advertisers will find something as effective as search marketing, asserts Jupiter's Scevak, who admits: "It's not a death knell for the casinos."

Lesnick, who sees this as another in a series of setbacks experienced by Internet gambling outfits, goes one step further by declaring: "This is a very resilient industry."