No one could deny the astounding rate of growth and development that is currently sweeping across many parts of Asia. As the world's largest continent, Asia contains more than 60 per cent of the world's human population. and while it is true that parts of the region are still extremely poor, the economies of many countries in the east are growing at a phenomenal rate, outstripping anywhere else in the world.

China, in particular, shines out as a striking example of just how quickly the tides are turning for some Asian countries. In 1978, the Chinese leadership started to reform the economy from a Soviet-style centrally planned economy to one that was more market-oriented. The government also began to focus more on foreign trade as a major vehicle for economic growth. This led to the creation of Special Economic Zones where investment laws were relaxed so as to attract foreign capital. The overall result - a massive six-fold increase in GDP in less than 30 years - has elevated China to the rank of an emerging superpower with the world’s fastest growing economy.

For investors focused on daily share and commodities prices, the China growth story is by no means a new phenomenon. And as the more than one billion Chinese continue to earn more and more, it is not hard to understand why so many investors from almost every global industry are so excited about the future of the Asian powerhouse; annual GDP growth has been lingering around the 10 per cent mark for several years, and is currently showing no real sign of slowing. Moreover, it must be remembered that China is just one example of this economic uprising. Similar, albeit slower, trends are occurring across Asia, including India, Thailand, South Korea and Vietnam.

But what effect, if any, will this growth have on the Asian online gaming industry? In the land-based sector, Macau has now symbolically overtaken Las Vegas as the gambling centre of the world, and gambling regulations in other countries are currently being reviewed in an effort to attract the tourist dollar. From an outsider’s perspective, then, it is perhaps surprising to learn that many within the industry believe this growth has not yet translated fully to the internet gaming sector.

“The rate of growth in Asia to date has been fairly slow in global internet gaming terms,” commented Ben McGill, business development manager for London-based web payment solutions firm Metacharge. Confirming this view, Adriaan Brink, chief executive of Genesis Consulting, said: “Growth in the online gaming world has been relatively slow.”

While this may not seem to bode well for operators, or indeed the Asian internet gaming industry as a whole, we must remember that web gaming has recently been developing at a phenomenal rate in the western world. As such, the comparable situation in Asia will inevitably seem slower. It will soon become apparent, however, that we are currently in the midst of a sea change, and therefore need to turn our attention to the future to gain a glimpse of the bigger picture.

Interestingly, those we spoke to who said growth in the Asian web gambling sector has been relatively slow actually expect this situation to change in the near future. When questioned over what will happen in Asia over the next five years, McGill said: “I expect significant growth. With huge marketing investment we will see the market develop and mature much quicker than one would have expected six months ago.”

According to Global Betting and Gaming Consultants, the compound average growth rate of online gaming gross win in Asia between 2001 and 2006 amounted to 91 per cent. The next five years, to the end of 2011, are expected to yield a compound average growth rate of 17 per cent. “Given the still attractive growth rates, Asia is set to become a more important target for online gaming companies in general,” said Bwin spokesperson Karin Klein, who cited the figures.

Opinion, however, remains uneven. While most agree that Asia is set to become a key player in the online gaming sector, there is a degree of contestation between the number of years it will take to develop. Brink remained slightly more conservative in his estimations, stating it would take 10 years for the online gaming market in Asia to rise up. After this point, however, he said it would be larger than any other region in the world.

What about the signing of the Unlawful Internet Gambling Enforcement Act in the US? According to press reports emerging from the region, Asian-based operators such as India’s 3Patti.com started to benefit immediately from the ban. Commenting on the effect of the prohibitive US legislation, Eugene Christiansen, chairman of Christiansen Capital Advisors, which provides gambling and entertainment-industry analysis and management services, said: “The [online gambling] companies, particularly the large ones with large resources, that have ceased operations in the US have all said that they would refocus their efforts on other markets, and particularly the Asian markets.” Adding to this point, McGill stated: “With the signing of the bill we will now see significant investment in the region as the big operators move to gain market share as quickly as possible.”

Others, however, have played down the potentially catalytic effects the shifting US regulations may have on growth in Asia, stating it goes without saying that operators who have pulled out of the US will shift their focus to Europe, Asia and South America. “The low hanging fruit has moved from the US to Europe, but I doubt many previously US-focused operators will want to be exposed to a single region again,” Brink carefully noted, implying that the effects of the US ban will be more evenly distributed across other markets and not just Asia.

Whether affected by the UIGEA or not, it cannot be denied that all eyes are on Asia. And a great number of observers believe the continent is set to become a dominant player in the internet gaming sector in the very near future. But where will this growth come from? According to David Szetela, chief marketing officer for CyberArts Licensing, the San Francisco-based gaming software development company, “growth will be most evident in Asia-specific games and game variations, and from mobile gaming, since mobile devices and networks deliver sufficient broadband for sophisticated games and rich user experiences.”

One online software developer, Playtech, has already adopted this strategy. The London-listed firm is currently devoting significant resources to the development and launch of online games in the Asian market. With the launch of Pachinko during the fourth quarter of 2006, along with Solo Mahjong, Solo Mahjong Pro, and a new version of the live gaming software and functionality at the end of the same year, Playtech said its penetration of the Asian market will be greatly accelerated. During the course of 2007, the company also plans to roll-out other Mahjong products, such as the Duo and Full Mahjong tournaments, alongside the launch of other Asian card games.

While gearing specific software platforms and formats towards a target audience is certainly a good starting point for any operator, it will become clear that this is merely the tip of the iceberg when it comes to ‘setting up shop’ in Asia.

Ben McGill from Metacharge said: “Operators need to be able to find a successful and cost effective means to acquire customers in a relatively new market, while we as payment operators do our best to make sure that what the consumer has in his wallet can be used to fund his account. Payment providers see this as their greatest challenge, as the market is very fragmented, while there are alternative payment methods very specific to local markets.”

While economic fragmentation can, and will, cause numerous headaches for transaction processors, it is the often-overlooked cultural fragmentation in Asia that proves to be the biggest hurdle. As the world’s largest continent, Asia is a veritable melting pot of different languages, religions and ideologies. And internal diversity merely serves to heighten this further. Take Thailand, for example, from the Buddhist north to the Muslim south. From the hustle and bustle of the hazy Bangkok metropolis to the more sparsely populated towns along the Andaman coast. It is all too easy to think of Asian cultures as monolithic when looking in from the outside. In reality, however, we should think of the sheer diversity that occurs in a country as small as the UK, for example. Only then will we begin to realise the scale of difference that runs through the land of the east.

Brink elaborates: “There is a very different culture and far less western influence than one would initially think in the heart of Asia. There is a tendency to think that Singapore or Hong Kong are symptomatic of the Chinese side of Asia - take a trip to Beijing and you will see your perceptions change. China on its own blows the mind.” Taking this further, Szetela noted that these formidable barriers can hinder sales, marketing, advertising and localisation efforts. “Asian infrastructures are less mature, so simply setting up an office can require an extraordinary time and capital investment,” he said. McGill said that in order to overcome this, it is perhaps more frugal to initially focus on individual markets or niches.

When it comes to exploring potential growth in Asia, many industry figures have stressed the importance of finding the right entry tools for successfully breaking into this diverse and enigmatic market. Bwin’s Karin Klein said that an ‘outside-in’ approach simply will not work. Instead, she said efforts should be focused upon forming successful partnerships. Szetela also carries this view, recommending that clients look for strong marketing and branding partners - specifically, established Asian companies who already have recognisable brands and marketing infrastructure. 

One shining example of this partnership strategy occurred in December 2006, with Playtech’s announcement that it had agreed to a landmark five-year software licensing agreement with China’s leading gaming group, Sino Strategic International. As a diversified investment holding company, SSI’s primary operations are in the large and fast growing Chinese gaming, internet and mobile media markets. Playtech and SSI will be the first major distributor and promoter of Texas Hold’em Poker in the Chinese market. “The Chinese market is a vast and incredibly exciting marketplace and Playtech is extremely well positioned to assist operators such as SSI in rolling out new gaming products in a phased manner in accordance with Chinese regulations,” commented Playtech chief executive Avigur Zmora.

Importantly, while forming a partnership does seem the logical first step in establishing a presence in Asia, operators must be careful to choose their partners carefully. Granted, the online gaming industry is different in many ways from traditional business, but one need only look to the Nike ‘sweatshop’ scandal to see how a potentially money-saving foreign venture turned into a PR nightmare - and this was all down to a poor outsourcing decision.

Any company looking seriously towards international expansion - whether web-based or not - must be prepared to maintain a physical presence in the target market in order to cut down risks to a minimum. Indeed, although Asia certainly holds tremendous promise for those involved in the online gaming sector, operators should not gamble with the future of their business in the east, and decisions must not be taken lightly. This duality is perhaps best summed up by Brink, who concluded: “It is not only language, there are cultural differences. And also one tends to have preconceptions as a westerner that may well be wrong…The risk is that we tend to think as westerners. Go live in your target country, enlist the locals, and perhaps you will have a chance of success.”