CEO interview: David Zerah, Dragonfish
David Zerah has big shoes to fill. In his first interview, the new managing director of Dragonfish tells eGaming Review just how he intends to take the business to new heights.
“It’s not that we’re disappointed with our share of the pie, but we would have loved that pie to be bigger,” Gigi Levy, CEO of 888 Holdings told eGaming Review in March this year, referring to the impressive 20%+ financial contribution Dragonfish, its business-to-business arm, made to the company’s annual operating income.
But this sound bite does not tell the whole story. Ever since 888 rebranded its B2B activities in the form of Dragonfish 18 months ago it has consistently performed and out-performed its older brother, while under the previous stewardship of the recently departed Gabi Campos, now the first ever CEO of PokerStars, is one of the leading B2B players in Europe. The trouble is Dragonfish is doing so well and newly regulated markets are opening up so rapidly that Levy knows full well it has the potential to do so much more.
So, when I meet David Zerah, Campos’s replacement in his first interview as managing director since his arrival on 1 August, he is understandably reluctant to specify a financial target, and would rather emphasise that to work for Dragonfish you must have ambitions to push the company to the next level. “What’s happening in the US, in Europe and other places with new markets… I’ll steal from Gigi’s words. Three years ago he said he did not apply for a single licence and in the past year he’s applied for 10. Need I say any more?” This will no doubt be music to the 888 Holdings board’s ears.
Making an impact
Zerah describes himself as a “builder”, an executive with a long-term vision and someone who, wherever he goes, initially identifies his “North Star”, outlines its trajectory and ensures he is always on course and bang on time. This may be but he has some big shoes to fill. Under Campos’s short-lived 18-month regime Dragonfish signed numerous large B2B deals providing a strategic combination of gaming software, payments processing, and back office and customer support services, seeing revenue soar by a third to US$51.3m at the beginning of this year, up from US$38.6m the year before.
Groundbreaking contracts included an e-payments deal with Linden Lab, the creator of the virtual world Second Life; its first foray into newly regulated markets with Bwin Italia; opening up new territories in South Africa, the Balkans and China, Central and South America; and the most high-profile of them all, a financially undisclosed contract with Harrah’s Interactive Entertainment, the online gambling arm of US casino giant Harrah’s, to deliver its poker and casino software, e-payments and customer support services to grow the online presence of the World Series of Poker (WSOP) and Caesars casino brands. Should the US regulate egaming in some form this potentially pioneering deal could pave the way for other European companies to get in on the act. But it also remains the subject of an ongoing investigation by Nevada regulators who, according to Zerah, have visited 888’s offices in Gibraltar and Israel. This is a long process, so a final decision is not expected anytime soon. Zerah describes it as “ongoing discussion” with Dragonfish “taking every step possible” to facilitate its progress.
“In the short-term Europe is the place to focus on. In the US every now and then there’s some progress. In Nevada we’re running a process that is smooth and is going well, we hope we will officially be okayed. They’re [Nevada regulators] steering this and we’re providing the information they need when it’s needed, they visited our facilities and we’re still optimistic.”
He calls the potential of the Harrah’s deal “huge”. “It’s not only the potential but also being a player in the US. We would like to believe that when the market opens it will also close itself to those that are taking advantage of the fact that crossing borders is easier than it should be in this respect,” he adds discreetly referring to PokerStars and Full Tilt. “Once regulation is permitted we think it will be all over pretty fast and then there’s going to be a race to see who gets to the sweet spots first.” Zerah adds that Dragonfish are a “very good partner” for US operators and even goes so far as to suggest that if it can’t get clearance from Nevada “no one else will”. “It’s in the benefit of the US bodies to use external expertise. There aren’t many global industries that Europe leads and egaming is one of those.”
Looking to the company’s future potential is clearly one of his main objectives and the new Dragonfish managing director tells me the work done before him has laid a successful platform for what is to come. “It’s no secret at 888 that we were the first ones to say the market was changing,” he boldly claims. “And Dragonfish is testimony to that. We had to prepare ourselves [888] to move from catering for one big global brand to taking advantage of our other assets and being able to partner and be a player that provides services.”
But while he keeps one eye firmly focused on existing partnerships and his hands close to his trusty new iPad, he is keen to move away from the past and instead focus on a series of future egaming matters that play right into the heart of his comfort zone, long-term vision for Dragonfish and could one day enable him to leave his own successful legacy “ he firmly believes that a combination of emerging technologies, and a growing interest in online gambling from the media sector could have huge implications for the fortunes of B2B egaming businesses in the next decade.
Zerah’s previous role as chief commercial officer at Israeli media company Vizrt, a business that creates content production tools for the digital media industry from 3D graphics to online publishing for the likes of CNN, the BBC and Sky, puts him and Dragonfish in the box seat to take advantage of the growing attention media players are paying to the potential of online gambling. Add this to his impressive contacts book of some of the world’s most senior media personnel; his reputation in the industry for taking Vizrt from US$17m a year in revenue to more than $100m in only a few years; and Dragonfish’s existing deal with Dutch media conglomerate Endemol in Italy to launch a gaming platform based on its brands such as Big Brother, and you have the ideal combination of talent, technology and contacts with which to take an egaming business to the next level.
“In the short-term the money is still in traditional egaming and that’s part of the problem because there’s still plenty of money on the table for grabs that you can’t ignore. And you have to go for that. In the longer term we see potential in social gaming and participation and new types of solutions in regulated markets,” he explains.
“This is very similar to the beginning of reality shows. At first they were shooting for ratings bringing in short-term revenue from commercials but as people got used to voting and prime SMSs, that part became the real money-maker. After that they realised that the assets they built through these shows were even bigger because they had created brands names.”
A potential partnership
From speaking to Zerah you know that a Dragonfish-media partnership, or perhaps even a strategic partnership with Vizrt, is just around the corner, however he is keen to downplay in what shape or form this could materialise, principally because he still believes it is too early to say to what extent technology will influence the way media and egaming tie-up in the future. “TV and media guys are going to play a big role in regulated markets because their assets are going to be very relevant. There will be some very interesting developments happening in the coming years on what media people will be using. Next year, for example 23% of TVs will be sold with connectivity to the internet and in the future in regulated markets technology will create new platforms that will be very interesting place for us. I want Dragonfish to become media savvy. We don’t want to dilute these long-term plans with plans for the short-term but this ought to be and is becoming the vision of the company and was one of the reasons why I and the board felt I could contribute and be a good addition to the company.
“Coming from this market I know how they [media sector] think, how they make decisions and from looking from their position Dragonfish must seem like a very interesting partner.
“Until now we haven’t done a deal but there are a few out there. MTV, Virgin and Sky, for example have all done some things. We know that certain media groups in France and Italy are interested. But we also know it’s going to be a while until they fully understand that this could be a very interesting world for them.”
Without giving too much away he adds that in five years he would like to see Dragonfish “powering several successful partnerships around the globe” with a number of local organisations able to support a strong central operation. This, he explains, will include the US and also Asia, a continent 888 Holdings B2B division entered in July last year by signing a deal in China to provide business development, marketing, and contract management expertise to Probability’s mobile gaming platforms.
“The next two to three years will be focused on Europe and the US, but in two or three years, I would like to see us also become a leader in Asia. It is maturing very fast. Having spent three years there I know things take time but there is also a very big benefit to Asia because it has a clean slate. I see Dragonfish as a strong provider of total gaming platform, the core strength that we have chosen are ones that I strongly believe in, and I believe we’re a very good partner for governments. B2G is going to be a core focus and we’re looking at different creative ways with which to partner with government bodies or provide services where interested.”
Plans for expansion
But with regulated markets due to open up in Denmark, the Netherlands, Greece, Spain, Germany and Belgium to name a few, in the coming years, can operators and service providers really handle such rapid expansion and focus their attention on so many territories? Zerah remains realistic suggesting new markets will “command a lot of attention” saying many industry players face spreading themselves too thinly. But for Dragonfish he adds there will be no respite and that he is determined to make sure they are in “every new territory”.
“We’re looking at all these markets with a magnifying glass, we have lawyers sitting on it, and we want to be the ones who know the most about it. Whatever happens regulation-wise is pivotal to our progress. But I believe in choosing your fights wisely. It’s a time the industry must ask itself “what am I going to lose and what am I going to fight for’.”
One thing that could happen before these markets open up, however, is further industry consolidation including a long-rumoured sale of 888 Holdings or perhaps even a Dragonfish/888 Holdings split. Zerah, however, downplays any M&A talk suggesting that Dragonfish’s B2C arm has not been sold until now because the owners value it far higher than the market. “This is a consolidating time, but for the foreseeable future it’s beneficial we stay together and I think we’ll depend on one another for a long time. I don’t see the advantage of breaking up. Part of the assets that Dragonfish have are because it has 888 Holdings as a core strength and I don’t see why we’d want to part from that.”
One thing is certain. If Dragonfish continues to grow, break new ground in deals, territories and technology under Zerah’s guidance then his superior may well have to revise his previous statement.
Zerah’s three-stage plan
Short-term: Making sure all existing customers are optimised, from a technology and marketing perspective. The second is to make sure we continue to evolve our partnerships, create new offerings and improve things we don’t have and want to offer to partners. We want to realise and harvest our bingo offering. We think we have the best bingo offer out there from a technology, back-office, and chat moderation perspective and we want to take advantage of that. In parallel we want to take advantage of any regulated market, offering online players and newcomers complementary deals, be it GSP casinos, we want to play a role in those European regulated markets and do everything we can to ensure the activation of these accounts is as successful and fast as possible.
Medium-term: B2G strategy: Be able to attract government bodies, we want to create larger scale partnerships and joint ventures in regulated markets and, over time, build local operations in those regulated markets that have enough scale.
Long-term: We would like to partner with large media players and have a distributed operation with a very strong and unique offering from a technology product standpoint. We cannot afford not to take advantage of knowledge of our people, and how pivotal Israel is in the world of media. On the other hand I don’t want to be naive and the core business is very much the core business. We have to be very professional and have the best bingo platform and have the best technology to service poker and casino and know every aspect of what that means.