Lust for acquisition: The changing affiliate operator relationship

The way in which affiliates go about their business has changed to varying degrees over the years, mirroring the ever-evolving egaming industry. Traditional preconceptions about the ‘typical’ affiliate have gone out the window to the point that for some time now there has been no standard one-size-fits-all. With cost control a major issue for operators as they spread their businesses into wider territories, and as more investment is directed in-house, smaller affiliates are beginning to feel the squeeze, while larger six-figure-a-month power players are continuing to expand, diversify their acquisition methods and pick up even more domains and brands both here and abroad. The relationship between operator and affiliate has never been more important.

To get a balanced perspective on what can often be a complex marriage, eGaming Review asked two senior industry figures on opposite sides of the acquisition fence to give their views. In the affiliate corner we have Arusha Iqbal, head of sales and account management for Easyodds.com, while in the operator corner we have Bwin’s head of affiliate management Gerhard Falb.

In the affiliate corner
Arusha Iqbal, head of sales and account management for Easyodds.com

The last few years within gambling have demonstrated a curious shift in power within the operator-affiliate partnership ““ a partnership covering, and bringing in, both sides of the lucrative gambling coin.

A relationship so reliant on trust and empathy is now careering into a virtual tug of war, battling to push ownership while drawing in power.

Affiliates are perceived as holding the power with tenancy deals, ‘forcing’ an operator to contend for space. Operators, driven by a lust for acquisition, seek to claim an infinite number of players while quashing their cost per acquisition. Surely that is a mark of profitability?

External factors help prove otherwise. The economic downturn in 2008 proved we were not recession proof but certainly resistant to the full extent of the blow. It affected turnover levels and combined with bad weather and a boom in new sportsbooks. Margins were squeezed as a competitive industry vied for lower-staking, savvier punters with best prices and bonuses.

The regulation of many territories ““ because of a need for tax funding to help cover national debt ““ meant that the cost of licensing provided another heavy burden on operators. Factor in localisation, technology, marketing campaigns and launches, and suddenly margins were painfully taut. Operators were looking at their targets and how this equated to return on investment, and figures did not match up. How could so many new players result in losses? Surely it must be the traffic, or perhaps even the affiliate?

Operators were calling out to affiliates to change deals that had been honoured for so long. A tremor rumbled through the affiliate world. Operators wanted to slash flat fees and CPAs in favour of reduced revenue share. Affiliates don’t work on these metrics out of greed ““ there’s integration, maintenance, technological advances and innovations, content, SEO ““ all of which help to bring and retain quality traffic.

As affiliates, we can’t guarantee an operator’s reliability of infrastructure, player experience, usability, CRM and risk management. Are operators doing enough to factor bets and minimise damage before their profits are sucked dry by savvy punters?

So, what effect does this have on the affiliate world, and what has it inspired?

It has brought about a savvier type of affiliate who knows the value of their traffic. Affiliates can tell you where in the world your traffic is coming from, what links provide the sign ups, and how much traffic the affiliate sends the operator that the operator does not convert into a loyal bettor. The onus lies with the operator to ensure the traffic the affiliate sends is caught in the operator’s net. In the operator’s defence it is a fierce market, and the magic formula of conversion is frustratingly elusive.

Affiliates are certainly becoming more powerful as a means of adapting to the new rules set by operators. Gone are the days when reporting on three elements was enough to gauge performance. As affiliates, we want to know every breadth of betting behaviour. Without tracking, what chance does the affiliate have? At Easyodds we have developed an in-house system that shows where every click leaves us and goes to the operator. This system has uncovered many genuine anomalies. Why should the affiliate have to rely solely on one-sided data?

The power lies with the operator, affecting metrics, contracts and perceptions, but the affiliate is steadily rising up to challenge that perception and display our strength in this tug of war. Affiliates and operators face the same issues with savvy punters and bonus hunters. It’s time to drop the rope, quit the blame game and find a way.

Who says the customer always has to be right?

In the operator corner
Gerhard Falb, head of affiliate management at Bwin

There may be a perception that the affiliate holds the power in its relationship with an operator, but this really depends on sort of strength of brand that will appeal across a much larger demographic of potential consumers.

Trust plays a genuine role in inspiring consumer confidence in committing their money online. Let’s not forget that, although much safer with better anti-fraud and money-laundering measures in place, the internet still represents a potential minefield for many people. So, the better one can trust a brand, the easier it will be to trust it with one’s money.

Other operators are strongly dependable on a few, large affiliates. In this case the power is more on their side. In both cases, affiliates and operators have to be satisfied and the power has to be balanced.

As far as I can tell there is no relationship between economic conditions and the partnership between affiliates and operators. However, affiliation is a substantial part of every operator’s income ecosystem, and operators still need to adapt to economic and market conditions.

That is why PartyGaming and Bwin merged to form bwin.party. We believe we have entered at a time when the affiliate market is in a state of transition and maturity, and we are committed to becoming the world’s leading online gaming affiliate programme that our partners trust. In the past operators were responsible for customer loyalty, and we are good at this.

We could end up seeing accountability shift more towards larger affiliates in the short and medium term, and we will do everything to support our affiliates to do so. If you were to ask me how I believe operators and affiliates can have a more balanced partnership, I would say it is all about the sharing of information, sharing of success in terms of revenues, equality and seriousness.

Our affiliate programme is better equipped than ever to accommodate the challenges, as well as being able to meet the demands of the growing egaming business. The challenge is to leverage an increasing number of affiliates operating in each product vertical, as well as a new wave of affiliates creating new business opportunities for operators in new geographic markets.