YOUBET.COM POSTS HUGE TURNAROUND.

Byline: KEVIN MODESTI Horse Racing 

WOODLAND HILLS - Executives of Youbet.com, the e-betting giant, tell the story of a young customer who hit a $300,000 pick-six through his on line account and phoned to ask - nervously - if he could drop by to collect his winnings.

Of course you can, the Youbet.com operator said.

``Tomorrow?'' the man said.

Sure.

The man brought a friend along, as if he'd need protection. When he walked into the Youbet.com building, he was surprised to find 30,000 square feet of discretely decorated office space quietly run by a professional staff of 80. He picked up a check in a transaction no scarier than a bank withdrawal.

``This wasn't what I expected at all,'' the customer is said to have remarked. ``I expected two guys in a garage. I wasn't sure I'd get my money.''

Though Youbet.com never operated out of a garage, the company did face doubts about its place in the gambling industry when it began taking horse-race bets online and over the phone in 1997.

Would it prove to be more than another dot-com mirage? Would it compete with rivals like TVG and XpressBet that are tied into their own television channels? Would it help to promote horse racing instead of just leeching customers away from the tracks?

Youbet's leaders are more confident than ever that the answers are ``yes'' after reporting a veritable trifecta of good news this month: The company recorded its first annual profit in 2004, earnings of $4.6 million that reflect an $8.6 million turnaround. Its wagering handle for early 2005 reflects 25-percent growth in a year. And it recently went over the $1 billion mark in processed bets.

Chairman, president and CEO Charles F. Champion called Youbet's profit ``a real come-from-behind accomplishment for a dot-com survivor'' and noted proudly that more than 70 percent of that $1 billion came in since the 2002 installation of the management team he leads.

Racing traditionalists worry that on-line betting contributes to the constant erosion of track attendance. They argue that nobody ever became a racing fan because of the sights, sounds and smells of a computer keyboard.

But Youbet executives believe their product makes the game more convenient and appealing to a young, tech-savvy audience through on-screen odds displays, scratch updates, handicapper-helper statistics, streaming race video and mouse-click wagering. They point to in-house data indicating that of its 21- to 30-year-old customers, 40 percent go to the track at least four times a month.

``If we play our cards right - that's a bad analogy - I can see a resurgence in the sport, like poker's and NASCAR's,'' said Champion, a former executive with several newspapers (including the Daily News). ``When horses turn into the stretch, that's an exciting moment. ... We are trying to get people to the racetracks. We need to work harder to do that.''

Jeff Franklin, a former jockeys' agent who is Youbet's vice president of product development, said of the push and pull between e-betting sites and racetracks: ''We want to end the Clampetts-and-McCoys thing.''

Youbet's headquarters in the West San Fernando Valley is an obscure one-story building between a day-care center and a business college on De Soto Avenue. The lobby coffee table offers waiting visitors a choice of the Daily Racing Form, American Turf Monthly magazine, and ``Seabiscuit.''

A recent Tuesday - the slowest day of the North American racing week - found action from 15 tracks being pulled down by six satellite dishes on the roof and flashed across 50 television and computer screens in the glass-walled ``racing operation center.'' Separate TVs showed a winner's-circle ceremony at Turf Paradise in Phoenix, pick-seven carryover numbers from the Western Fair in Canada, scratches from the harness races at Freehold in New Jersey, and a paddock scene from a track in South Africa. The only noise came from muted race play-by-play and the computers' low hum.

The pictures and data were being sent out to the approximately 1,500 bettors online at that moment, relatively few compared to the 8,000 common on big-race days and 12,000 on Kentucky Derby day. Users pay a $17.50 monthly subscription fee. And Youbet collects a percentage of each dollar bet.

In the ``network operation center'' down the hall, wagers stream down a computer screen line by line, a NASDAQ ticker for equine investors.

A generation ago, when racing was front-page sports news, a behind-the- scenes glimpse meant watching Doc Robbins feel a colt's ankles. Now, it's about gambling more than ever, and backstage is the data center at Youbet.com.

A billion dollars in wagers suggest it will be a long time before that data center is located in somebody's garage.

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BY KEVIN MODESTI