Golden opportunity: How the US affiliate market is shaping up

Some industry folk have suggested affiliates stand to gain the most from the US betting market opening up as they face less regulatory restraint and significantly lower set-up and maintenance costs. And, in a similar wave to their operator peers, affiliates are now storming the land of opportunity via a myriad of methods.

It appears that, at such a nascent stage in the US market’s maturity, there is no single strategy for success within the affiliate space, and firms are trialing varied approaches to gain traction in the market and build up their portfolio of brands.

For European giants like Malta-based Catena Media and its Danish counterpart Better Collective, bullish M&A has been the order of the day thus far. The former most recently invested $15m to acquire a spate of US sites including playnj.com and other licensed sites in Nevada and Pennsylvania, while the latter acquired a $21m stake in leading DFS network RotoGrinders. Despite having stormed the market all guns blazing and hiring up to 35 local content producers, Catena Media has yet to establish a physical US base, although the firm’s US general manager Michael Daly admits it will likely do so in the next year in the country’s long-standing gambling hub of Las Vegas.

Better Collective, however, has made a swift entry into the US by securing an office space in New York to operate and coordinate both its sales and marketing teams. Keen to waste no time, it has also secured a unique partnership deal to provide content to New Jersey news site nj.com and signed an ambassador deal with former NFL player Morten Andersen.

“When combining our organic products and knowledge via the acquisition of local brands, we are creating a complementary environment where both strategic executions feed into each other to generate a collective success,” Better Collective VP of business development and sales Marc Pedersen tells EGR North America.

Making the move

Elsewhere, London-based odds comparison site Oddschecker is making a gradual and measured move into the US, with the five-month-old product to be grown out of the firm’s UK headquarters for the time being.

Oddschecker’s UK-facing product has gained widespread traction as a market leader, and new US chief Nick Wilby, who was recently poached from Catena to build a Stateside business, believes it can replicate its success through a number of different ways, including localizing its product and tapping into the US consumers’ hunger for data.

“We know that a US-facing brand is going to be absolutely vital and there is definitely going to have to be an Americanization of Oddschecker’s existing assets. We want to be the US’ number one odds comparison service and, like everybody else, we’re learning what that consumer looks like. It looks as though there is going to be a lot of pressure for us to give key data around the major [sporting] events and that is one key feature we are looking at,” Wilby notes.

The five-year plan focuses heavily on establishing its brand awareness and building out its content. In the five months its US site has been live, Oddschecker has integrated 10 operators on to its odds grids. Wilby is confident the brand’s hard-earned reputation in Europe has played a role in its US growth thus far, and believes there is huge value in patiently feeling out the market and focusing on growing organically, although he expects M&A to become increasingly important as it has done in other territories.

The value of local knowledge

Having taken an opposing approach, Catena’s venture into the States dates back to its acquisition of a host of sites owned by i15 Media in 2017, including the Online Poker Report and Legal Sports Report (LSR) brands.

For Chris Grove, founder of i15 and managing director of boutique research firm Eilers & Krejcik Gaming, local industry and consumer knowledge reigns, and he believes small local affiliates are at an advantage in understanding the local sports culture of any given state.

“In these acquisitions is the recognition that it is very difficult to come into the US market and thrive. You are almost certainly going to want to marry your existing operational expertise with this local expertise through acquisitions,” says Grove.

The entry of new affiliates into the country presents unmatched opportunities for local sites, and Grove anticipates many will be snapped up within the next two years. “Whatever’s left, and there aren’t a ton, will likely get snapped up by the second wave of companies coming from Europe into the US market or again by new companies coming into existence because of the affiliate opportunity they precede in the US market,” he adds.

Considering their value, Daly says the prices for such sites are rising and it is quickly becoming more difficult to justify M&A over organic growth. “We’ll continue to look and I continue to enjoy conversations with various opportunities out there. There are always those that have interesting technology variations or are market voices or types of sites that are worth us looking at. We will always do acquisitions, but it has become a much more strategic or slower strategic approach than just rushing in and buying something, because we already have something.”

Catena Media’s Michael Daly says the firm is likely to establish a physical US base in the coming months

DFS and poker affiliates are in prime position, having long-established the most desired content for consumers. The recently snapped up RotoGrinders is a testament to this notion, and one major benefit to sites like it is that 98% of DFS players can be converted into sports bettors, claims RotoGrinders co-founder and CEO Cal Spears.

Where small firms may struggle is in securing licenses in states where gaming and betting are legal. In addition to high licensing fees, they will face stringent background checks similar to those faced by operators. And for those seeking to be bought, proving how much of their revenues are clean and not derived from the offshore market will be crucial, as compliance-conscious companies will likely overlook those drawing income from illegal operators.

“It’s difficult to get a Catena or a Better Collective to pay a reasonable multiple on that revenue because they can’t use it. That is creating a bit of an impasse. When the market gets a little bigger, there is potential you will see a new company emerge from rolling up the firms that are still operating in the illegal market,” says Grove.

New Jersey regulator the DGE has already established a hard-line approach to affiliates targeting illegal sites and sent out a very clear message when it shut down OddsShark in February. The DGE subsequently sent a letter to local operators and affiliates warning them to cut ties with the site or risk being frozen out of the New Jersey market.

Vegasinsider received a similar warning from the DGE, insisting it stopped working with illegal operators or face criminal penalty. It seems the regulator is not afraid to make an example of such sites and Catena’s Daly applauds the move as it clears the way for those strictly adhering to local regulations.

RotoGrinders’ co-founder and CEO Spears is of the opinion that these offshore-facing sites will either fade away in time or be purchased and cleansed by legitimate affiliates. Grove questions whether or not a sale will be enough to cleanse the sites of their past sins but admits they hold significant traffic volume across the US, particularly in the poker space.

“I think at some point leverage and opportunity will be too significant to ignore, and someone will take a run at that class of sites,” he says. It stands to be seen how state regulators approach the matter but undoubtedly it will deal some damage to a firm’s reputation in the eyes of its operator partners.

What came first: content or consumer?

Perhaps the most crucial facet of establishing a brand stateside is securing the right local knowledge to target a sports betting consumer that largely does not yet know what kind of content it wants to consume.

“The US is probably too nascent a market to really be able to engage players in the same way as a saturated environment like Europe where players have been advertised to and understand the terminology of betting much better than they do in the US,” says Daly.

“Over here, we see players are more about education and reviews and understanding the safety and security of what they’re getting involved with and how it all works, and there are lots of different approaches affiliates can take.”

Grove estimates that, with widespread regulation, over 70% of the US market would be made up entirely of new consumers that have not yet been converted over from the illegal market. It is seemingly up to the affiliates to establish what their consumers really want in terms of content.

With this in mind, Catena has taken a slightly nuanced approach to its US content, compared to the UK and other parts of Europe, in that it is also catering to industry enthusiasts and stakeholders via its Legal Sports Report brand which covers the regulatory landscape and operational movements being made by operators and suppliers.

“It helps when we talk to the operators, as many of them follow LSR,” Daly adds. “We do the same things on our consumer-facing sites so operators become comfortable with the fact that we’re not just a fake news outlet and they can feel credible when they have their name associated with a site we use to talk to players.

“Ours is a multi-pronged approach and some of our sites started out as more industry news. What we discovered going forward with that is it’s not just of interest to the actual operators, it’s actually engaging to the current player base.”

Like poker, Grove predicts sports betting affiliates will take time to establish the most appropriate models and many sites will likely fail after throwing too much money in the wrong direction, hence Oddschecker’s measured approach to the market.

Both Catena and Oddschecker have also seen the value in adapting their European businesses to fit into a new market like America, especially considering each state is a market in and of itself. In Catena’s case, the move is part of a group-wide consolidation of brands to leverage its well-established knowledge. Part of the initiative involves launching BettingPro and AskGamblers sites in North America.

Daly comments: “We are still heavily on a tiering strategy of the primary brands, the Play (US, NJ) brands and a myriad of other sites that are focused on what consumers are searching for and the niches that we are still trying to figure out are the most valuable for consumers and operators.”

A bad rap

In addition to new regulations, consumers and additions to the group, stateside affiliates face lingering apprehension from operators wary of the rocky relationships affiliates experienced with European operators in 2017 and 2018. At the time, a spate of bad press and marketing fines caused a handful of leading operators to cut ties with some of their affiliate partners.

Daly says numerous operators, including new Pennsylvania casinos, have said the European affiliate approach is not favorable to them and their initial stance was not to do affiliate marketing in the US. But, as Daly and others champion the cause for affiliates and strive to educate the masses via industry events and conferences, many operators now have come around to the value of their affiliate peers.

Daly’s argument in favor of affiliate marketing touches on the early adoption by FanDuel and DraftKings when New Jersey launched back in June 2018, and how it has played a role in elevating them to the top of the state’s betting revenues rankings.

“Another question they have,” Daly says of unconvinced operators, “is why are there affiliates in the online space but not the land-based? That’s a very interesting one to explore. In my view there should be affiliates focusing on the land-based space at this point.

“Who knows, we may go there at some point. In the online space, you had to have the technology for tracking players and where they came from but in land-based they didn’t for a long time. Nowadays with the benefits of player loyalty programs, etc., there are lots of new ways you can use and tell exactly when a player who is registered online plays in a physical casino. So, there are ways affiliates should be playing there.”

On the operator side, affiliate software provider Income Access has ongoing deals with the likes of Rush Street Interactive, Kindred and Caesars, all of which have invested heavily in affiliate marketing in New Jersey and are looking to Pennsylvania to do the same.

Income Access VP strategy Sarafina Wolde Gabriel says that while movement of affiliates into the US has been slower than Europe, online operators are acknowledging the necessity for this type of marketing. And despite egaming having been legal in New Jersey for years, online marketing restrictions are only just opening up the state to a much friendlier marketing approach. Only three weeks ago a paid search ban was lifted for operators.

As this approach expands into other states, and affiliates are granted full rev-share licensing agreements, the market will likely become much more appealing to both European giants and niche independent affiliates.