An evolving relationship
With the rise of the super affiliate and a greater willingness to test new revenue models, EGR Marketing looks at how the affiliate-operator relationship is changing
Ever since the online gambling sector first emerged nearly 20 years ago, affiliates have been one of the biggest driving forces behind the growth of the sector. And while regulatory updates and occasional squeezes to operator marketing budgets might put a strain on this partnership, there is as yet no sign operators will ever deem affiliates anything over than an essential tool for driving customer acquisition.
Over time, the relationship between affiliates and operators have become much more reciprocal – a better appreciated partnership where both parties understand each other’s respective business needs. As a result, affiliates are no longer seen solely as an acquisition channel, but increasingly as an additional voice to brands which are focused more on product and open to testing new ideas.
“At Punters.com.au, for example, we’re getting questions about how we can better serve other KPIs, such as re-activation or retention,” Luc Pettett, CEO of the Australia-facing affiliate, claims. “This is perfectly understandable – the market is sophisticated and everybody is looking to leverage their key partnerships.”
However, while the affiliate side of the egaming industry is in many ways as healthy as ever, this is largely down to the trade’s ability to adapt to changes impacting the needs and budgets of their operator partners. In addition, the recent rise of the so-called super affiliate has also led to a significant shift in the affiliate-operator relationship.
Driving force
Smaller egaming affiliates continue to be swallowed up by big performance marketing and digital media houses, leading to a maturity in the sector not previously seen. For instance, lead generation company Catena Media has acquired a vast number of affiliate assets this year, including a €15m deal to buy popular online casino site AskGamblers. But this heightened M&A activity is just the tip of the iceberg.
“These changes emulate what we’re seeing on the operator side, with consolidation creating mega-mergers and adding value to multi-brand organisations,” Ryan Henderson, head of affiliates at Unibet Group, claims. “From our side, there are clear synergies in operators joining forces in an attempt to deal with the increased costs of regulation.
“Undoubtedly, the main changes to our relationship are the rise of the super affiliate and super affiliate networks. While there have been a few big affiliate players in one or some of our product verticals over the 12 years I’ve been in the business, we’re now seeing these big players consolidating, or purchasing smaller affiliates to create super affiliate networks.”
This emergence of the super affiliate has impacted the relationship between affiliate and operator in a number of ways. Most notably, the ownership of large-scale, multi-brand affiliate networks enable these performance marketing businesses to squeeze operators for higher CPA and revenue shares deals. After all, affiliate managers are no longer just negotiating with one-man affiliate brands, but increasingly with publicly-listed companies which could own a sizeable size of the market via thousands of differnet sites. Simply put, super affiliates have a much stronger hand when it comes to negotiating terms of a deal.
Some operators claim that while this tactic improves short-term cash ï¬ow, it is doing little to improve overall player value. And this trend could soon have a knock-on effect on smaller affiliates as well, which may begin to see their own agreements become less attractive as operators look to save costs elsewhere by altering the commission percentage.
In mature egaming markets, such revenue models will likely become far more competitive, with affiliates offered diverse performance upsides to hit higher targets. And Henderson believes the industry is now having to be far more creative with affiliate deals in general as regulation, consolidation and taxation continues to reduce margins. “While we pass some of these costs on to affiliates, serving players is becoming more expensive,” he explains. “So yes, revenue share deals aren’t as commonplace as they were as operators try and own more of the player.”
Money talks
But it’s not all bad news for affiliates. The rise of programmatic advertising, pixel tracking and attribution modelling is enabling operators to get more creative in rewarding affiliates for reactivating dormant players, in addition to acquisition. Whether these new digital marketing tools become more widely used across the whole industry, however, remains to be seen.
What is becoming a more commonplace aspect of egaming affiliation, according to WhichBingo commercial director Simon Jones, is a willingness from operators to try different revenue models. This is despite resistance from some of the bigger companies where affiliates might not be as high on their radar. Hybrid structures, for example, are being used far more often as a compromise between a revenue share deal and certain acquisition performance targets.
Pettett predicts such structures will become even more common: “This gives the affiliate even more upside to deliver big numbers and some immediate cash cow which is super important in a growing business while mindful that they need to keep the acquisition costs low, which feels like a nice balance for everybody,” he says.
“I would personally love to see operators embrace an alternative model such as a clip-on-bet model, or a retention model, on top of the current referral models,” Pettett adds. “Over the next few years I believe there will be some key innovations across the way we wager itself and the operator that marries up a performance model, along with API access for affiliates will reap the rewards. Along with this, giving affiliates access to more data and live streams and content will give us much more of an arsenal of inventory to work with.”
WhichBingo’s Jones also claims the hybrid-tenancy deal a tenancy deal with a revenue share attached is also on the rise. So will the traditional affiliate revenue model still be in place in a few years’ time? The answer from most experts seems to be a resounding yes. Affiliate models have a proven track record as successful acquisition strategies and across many industries remain vital for marketers to target much broader audiences. Ecommerce giant Amazon, for example, launched its affiliate programme way back in 2003 and it still forms a core part of its business today. If it’s good enough for Amazon it’s probably good enough for egaming.
Personal touch
Other areas of affiliate-operator partnerships are also being tested. Personal relationships have long been the very foundation of what has kept the relationship between affiliate and operator ticking along so successfully over the years. It’s no coincidence that industry events continue to attract hundreds of affiliate delegates; this is where many long-term lucrative deals are first initiated. The biggest challenge to this is technology and the advent of new forms of online communication including Skype, WhatsApp and FaceTime.
Maintaining face-to-face dialogue is arguably beneficial to both parties. And Henderson says he hopes the personal aspect of the industry stays front and centre for a long time due to the mutual advantages such a partnership can accrue. With this in mind, Unibet’s affiliate team recently hosted 35 of its key partners on a two-day trip to Iceland. The feedback and increased business Unibet obtained following the event underlines the benefits of this approach.
But technological advances may not necessarily be at the expense of personal relationships. “Most of us work here because we have a passion for sports, gaming and networking and I’d hate to see that lost,” he says. “I think we will see technology become an increasingly important part of the relationship. Hopefully this will be in a positive way to drive deeper integration between operators and affiliates and to develop new channels of acquisition. I’m old enough to remember mobile marketing before the iPhone in 2007 and things have definitely improved since then.”
There are no technology products that can replace real face-to-face conversations between affiliate and operator. And while it appears that change is afoot in the egaming affiliate sector with regards to consolidation, the demonstrable ability of both operator and affiliate to adapt to the times means there is no reason these partnerships can’t be strengthened further in the years to come.