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Gambling on Youbet.com Success Beginning to Pay Off

Gambling on Youbet.com Success Beginning to Pay Off By CARLOS MARTINEZ Staff Reporter Amid the rubble of the dot-com crash of 2001, Youbet.com didn’t figure to last long. But today, the online horse wagering company is on the Deloitte & Touche Fast 50 list, made up of the 50 fastest growing technology companies in the Los Angeles area, The company’s ranking in the Fast 50 won’t be known until Sept. 9 when an awards ceremony is held at the Skirball Cultural Center in West Los Angeles. Twenty six of the 50 firms on the list come from the Tech 101 Corridor extending from the San Fernando Valley and into Camarillo. Among the firms are Capstone Turbine Corp., California Amplifier, Amgen, Digital Insight, Ixia, North American Scientific, and THQ among others. “It’s great to be considered one of the fastest growing companies, but it’s really about being able to develop the business,” said Charles Champion, Youbet’s CEO and chairman. In 2001, the company was suffering through one of its worst years ever, before eventually losing $14.8 million after having lost just $1.7 million a year earlier. All seemed pointing toward a banner year when the dot-com boom became a bust and any business associated with a dot-com name took a big hit from investors and consumers alike. So Youbet began to reorganize and it started to work. Plans to restrict its Web site to paying subscribers only along with deals with all the major tracks around the country for live feeds of its races on the site were helping turn things around for the beleaguered company. “We knew that after putting all these MBAs and all these experts together in a room that something good would eventually happen,” Champion said, referring to the consultants and experts the company used to direct its reorganization. Youbet’s revenues went from $6.3 million in 2001 to $25.9 million last year, quadrupling its sales in just one year. Although the company still lost money $9 million in the interim, it was able to improve its overall operation with more subscribers and a greater share of the market which had been dominated by offshore companies which skirted U.S. laws on wagering. “It just became easier and cheaper to use us than to go to some offshore operation that you didn’t know much about,” Champion said. “We were more reliable and people knew who they were dealing with.” Word of mouth By instituting its paid subscriber service through an easier to use Web site, visitors could bet on races on 80 tracks around the country and watch them via streaming video on the Youbet Web site. “A lot of what we accomplished, we accomplished by word of mouth from our customers,” Champion said. Amir Ecker, an analyst from Philadelphia Brokerage Corp., said the company’s efforts will be enhanced by its wireless betting system now undergoing final testing before rolling it out this fall. “As people see how easy it is to put the bets in wireless, once you did a wireless bet, why would you stand in line again?” he said. Ecker, however, sees much potential on the international market, especially in Asia where race tracks are filled to capacity on a regular basis. “The international market just dwarfs ours,” he said. But Champion said Youbet will continue to focus on the American market although he hopes at some point to enter the overseas market at some point. Although the horse racing industry has continued to suffer due to increased pressure from other forms of gambling, like state lotteries, Indian gaming and card clubs, Champion sees Youbet as pivotal to the industry’s survival. “There’s a lot of peril in the industry so the challenge for us is to introduce horse racing to new fans and make sure that we have the features and things they need to attract them,” Champion said. Subscriber base rises And so far, the company has been attracting many to its Web site. Youbet has doubled its subscriber base to 80,000 in less than a year and in particular, has handled a record $73.3 million in bets during the quarter ending June 30. During the same period last year, Youbet handled $39.6 million in wagers. But more importantly, the company’s latest quarterly figures show it inching toward profitability for the first time. For the quarter ending June 30, the company reported a $982,000 loss or $0.04 per share on $13.8 million in revenue compared to a year earlier when it lost $2.6 million or $0.13 per share on $6 million in revenue. The company’s stock reached its 52-week high on July 30 when it hit $4.48 per share before coming back down to $3.20 last week. Its 52-week low was $0.44 per share, reached on Oct. 11. “Growth is very difficult in this business,” Champion said. “It’s a highly regulated industry with constant regulations being enacted throughout the country that we have to adapt to.”

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