To license or not to license: making the case for regulating UK affiliates

When chiefs from five leading UK operators were grilled by the House of Lords select committee on 4 February regarding the ‘social and economic impact of the gambling industry’, the role of affiliates and affiliate marketing in the online gambling ecosystem cropped up. More importantly, the thorny issue of whether affiliates should be licensed was broached. Interestingly, two CEOs in attendance vocally expressed their support for some kind of regulation for these third parties. GVC CEO Kenny Alexander stated: “Should they be licensed? Absolutely, by the Gambling Commission – they should be under the same controls and regulations as operators.”

Paddy Power Betfair (PPB) CEO Dan Taylor echoed these sentiments by saying he welcomed a licensing scheme to “ensure affiliates are held to the highest possible standards”. “It’s a hole that should be potentially looked at as part of this review,” he said referring to the planned government review of the 2005 Gambling Act. While their recommendations may appear logical and sensible moves on face value, cynics might otherwise accuse them of throwing affiliates under the bus when operators are in the spotlight like never before. “This industry has a track record of deflecting onto others rather than looking at where the faults might lie and responsibility for change ought to sit,” says Tom Galanis, director of egaming consultancy business TAG Media.

“Could affiliates be better at what they do? Yes, [but] to answer that point effectively you have to truly define an affiliate, and this has never happened at a board level, an operator level or a Gambling Commission level.” Galanis also questions what exactly these licences being suggested would allow affiliates to do. “Should affiliates be licensed? Licensed to do what? Again, how do you define an affiliate? The press – The Guardian, The Daily Mail – profit from gambling advertising on a performance basis, so should we license all forms of advertising? It is already regulated. And regulated quite stringently actually,” he stresses.

A tried and tested acquisition tool

Affiliate marketing is, of course, well and truly entrenched as an integral part of ecommerce, worth an estimated $12bn a year globally. For online gambling operators, relying upon third parties to promote their brand and offers with the aim of signing up new players is still a cost-effective and proven marketing method. In the last decade, though, the growth of social media marketing has given rise to a new breed of affiliate: the social media tipster dishing out sports betting advice and, in turn, receiving kickbacks from bookmakers. While many are genuine, the tactics of others aren’t everyone’s cup of tea,

Two examples are the so-called Boom! accounts recommending heavy odds-on shots and subsequently crowing about wins accompanied by flashing sirens or gold sacks emojis, as well as the ‘acca-backer’ tipsters encouraging followers to chase losses. Indeed, the role of social media tipping accounts was a facet of the industry Lord Smith on the select committee was keen to probe the operators on during questioning. He also said social media affiliates are not “required to comply with the watershed” and highlighted how they make money “if the person placing the bet loses”, which in reality is part and parcel of most gambling rev share models.

Despite a few bad apples having given this aspect of the affiliate business a bad name, including for deploying such underhand practices as doctoring betslips to fabricate winnings, Galanis insists most social media tipsters are reputable outfits. “A lot of them are digital marketing businesses that run multiple handles on twitter pushing out tips,” he says. “Are these guys acting irresponsibly? Occasionally, yes. And that brings rightful scrutiny but most who use that channel are doing so within the confines of the law.” He also adds: “Operators have tightened up in the past two and a half years [and] anyone found using doctored betting slips will have their affiliate accounts terminated.”

This increased monitoring and regulatory oversight of affiliates by operators is a view shared by Fintan Costello, MD of Amsterdam-headquartered digital marketing company Finder Media (BonusFinder.com). “UK-facing affiliates are already under close scrutiny by UK operators,” he tells EGR Marketing. “Every affiliate can tell you how much work they do with affiliate managers and compliance departments to make sure everything is compliant with UK market regulations. The complexity for affiliates is actually where operators have slightly different views on what is and isn’t compliant.”

Fintan Costello, Finder Media

Costello, who has in the past worked for the likes of Google, PokerStars and Paddy Power, also insists the mainstream media tends to magnify isolated incidents of misbehaviour. “Gambling regulation in the UK has been the hot topic of the past few years. It is super easy to take some edge cases – be it by affiliates, operators or even conferences – and to blow them way out of proportion.” He adds: “Being pragmatic, we believe at BonusFinder that affiliates and operators working closely together under a clear set of rules or guidelines is the long-term solution.”

Trimming the numbers

In the past couple of years certain UK operators have made overt moves to slash their number of affiliate partners and/or the reliance upon these third parties. In September 2017, Sky Betting & Gaming (SB&G) controversially scrapped its affiliate programme, suddenly bringing historical rev share agreements to an abrupt halt. However, much to the dismay of those affiliates given the cold shoulder, the Yorkshire-based operator signed up a select handful of larger partners. SB&G COO Conor Grant told the select committee that the online firm currently has 12 deals with media partners who are multi-million-pound businesses, as he described them, all on CPA agreements.

PPB’s Taylor divulged that his business had culled 50% of its affiliates in the last 12 months and has a ‘one strike and you’re out’ policy as a deterrent for misbehaviour. Meanwhile, Ulrik Bengtsson, CEO of William Hill, said while his firm had experienced “problems with affiliates historically”, this area had been “cleaned up”. He added that Hills’ current affiliate partners were remunerated by a mixture of CPA and rev share deals, though he stressed there were no lifetime rev share arrangements.

The Swede was also at pains to stress that “most of the qualified affiliates these days are real professional content providers”. “You would use Booking.com for booking your hotel – many of our players will check Oddschecker for the best prices,” he said. Indeed, the trend seems to be that operators have put their affiliate partners on a far tighter leash. They are clear as to what affiliates can and cannot do. And by letting those go that don’t adhere to regulatory standards, it’s been some time now since we’ve seen unsavoury headlines exposing egregious behaviour on the part of affiliates, though there were incidents recently of rogue offshore affiliates targeting GamStop self-exclusion keywords on Google. “I’m not going to call them affiliates,” says Galanis. “They are, quite frankly, scumbags.”

On the whole, the affiliate space has matured a great deal in the past four or five years, with the top of the pyramid dominated by publicly listed, digital marketing outfits with hundreds of employees and offices dotted across the globe. With shareholders to answer to and reputations on the line, these affiliates cannot afford to act in an irresponsible way or chase and convert traffic with scant regard to regulations and responsible gambling. There’s also now a trade body (set up in May 2019) promoting the industry’s interests and defending its corner: Responsible Affiliates in Gambling (RAIG). Founding members include Better Collective, Oddschecker and Racing Post. So, it’s all a far cry from the Wild West days of the so-called ‘bedroom affiliate’.

Jumping through hoops

Across the pond, US state legislators have gone against the grain and tended to adopt a licensing model for affiliates. With the associated application fees, legal costs and other red tape, it has led to states like New Jersey and Pennsylvania being dominated by the industry’s biggest players, such as Better Collective and Catena Media. These guys are willing to shell out significant upfront costs to be able to get in early and control competitive markets like New Jersey where CPA rates are now in the high three figures. The larger companies may well welcome some kind of similar regulation in the UK as it would certainly thin the field, yet is it really the best solution?

Galanis was on a panel earlier this month at the London Affiliate Conference alongside EasyOdds CEO David Da Silva. Da Silva holds a personal management licence (PML) with the Gambling Commission and Galanis believes a version of a PML for senior personnel and key shareholders could be an alternative solution. “I do wonder if that might be a far better route for senior people or owners of affiliate businesses to go down so they can fully understand the responsible aspect of running betting operations. It might be a far better way of going about further regulating affiliates.”

Tom Galanis, TAG Media director

Indeed, it’s a suggestion shared by egaming professional Shane Stafford, who has held senior brand and marketing roles for the likes of Matchbook and BetVictor. “I think it would be a good thing to have regulations and licences for affiliates as it would balance the responsibility for both parties to be compliant. I think something like a quick amendment to the personal management licence from the Gambling Commission to incorporate affiliates could be a possible solution, but regulations would be welcomed.”

Whether the review will investigate the practices of affiliates and their role in the industry isn’t clear at this stage. Affiliate marketing could be lumped in with an examination of gambling advertising, or simply ignored altogether in favour of more pressing concerns. And as to whether the government would want to licence them – bearing in mind it wouldn’t be easy to define what they would be licensed to do – it seems just as likely affiliates end up banned than regulated. If that did turn out to be a reality, some affiliates would probably end up promoting offshore sites not regulated by the UK Gambling Commission.

Galanis fears operators will acquiesce, or even willingly accept, potential moves by the government to outlaw the practice of affiliate gambling marketing. “I do think the way the emotions are being drilled in parliament, affiliates will be like credit cards [recently banned by the Gambling Commission] that operators give up to save their own skins, largely because they see it as a good thing to ditch, ironically,” he asserts. “The truth of the matter is I think that would be a huge mistake. Not just because they remain the most important acquisition channel, no matter what perceived pains they might cause operators, but because affiliates will not go away.”