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XLMedia, a digital media group that creates traffic for online gambling companies, hopes to raise up to $40m in a float that will gauge investor interest in the fast growing but often volatile internet gaming industry.
The Israeli group, which has signed up former Ladbrokes chief executive Christopher Bell as chairman, generates online traffic for gambling firms through its own network of thousands of websites.
These sites, which are geared to appear at the top of gambling-related search results, contain things such as articles on poker or a short guide to casinos in a particular country, as well as links to XLMedia’s clients, including
William Hill and 888.
XLMedia also buys adverts on social media platforms such as Facebook. A small minority of adverts also appear on pornography and file sharing websites, which are often dominated by adverts for gambling companies.
These websites are a fraction of the group’s business, said Ory Weihs, chief executive of the group. “We don’t want to sell [clients] players that are not good value.”
Website referrals are a key part of gaining potential gambling customers online, because of the intense competition of the medium. “There are an almost infinite number of online [gaming] brand names,” said one gambling analyst not working on the float. “If you hope people will come to you through natural search, it will be a lonely website. You either have to pay for it, or optimise.”
XLMedia’s revenues jumped from $11.2m in 2010 to $26.1m in 2012. Earnings before interest, tax, depreciation and amortisation grew from $8.8m in 2011 to $12.5m in 2012. Ebitda was $6.9m at the half year point in 2013.
Internet gambling companies have had a mixed history on the public markets, with regulation playing havoc with the profitability of some companies. PartyGaming, the former FTSE 100 online poker group, was hit after regulators cracked down on online poker in the US, which wiped out much of the group’s revenues.
But companies such as 888 have fared well during the industry’s move from “grey” unregulated markets into regulated ones. 888’s shares rallied by a third last year.
The gradual thawing of regulations in the US has provided an opportunity for European gaming groups, which are hoping to gain access to the market through the three states – Nevada, Delaware and New Jersey – that now allow some forms of online gambling.