Having played a number of vital roles in the industry since its launch, affiliates are arguably the backbone of the online gaming sector. Jenni Shuttleworth talks to several affiliates about the current state of their market and where it is headed

Affiliates have been playing a huge role in the online gaming industry since it launched in the late 1990s. For many companies, affiliate marketing was the main, if not the only acquisition tool and even though the trend evolved by adding SEO, social marketing, online and offline marketing, affiliates still continue to contribute to roughly one third of the gaming business.

Playing a variety of roles in i-gaming, they are an acquisition channel for gambling operators and also play a support role in retention strategies, particularly in terms of affiliates with player databases where they can run activation campaigns. “Affiliates are the backbone of the gambling industry and they can be credited for growing the industry to the levels today,” said Adnan Maslo, affiliate key account manager of ComeOn!, which launched its affiliate programme *earn* in autumn 2010.

“They are the ones that educate the customer, lure them in with hard work put into content and SEO and are sometimes even the only legal way to reach the customers in some markets.” He added: “No operator that I know of has reached the sky without the help of the affiliates.”

Helping increase the visibility of a brand quickly and allowing players to have access to valuable information and feedback about brands, it’s fair to say that affiliate marketing is the medium between the brand and the end user. Affiliates United’s programme manager, Eran Arad, spoke to iNTERGAMINGi: “In a world with no affiliates, players would most likely have less casino accounts and a greater loyalty to fewer brands.”

He added: “Affiliates can easily move traffic from one brand to another, which increases competition among operators and makes them work hard on the retention of their players, making sure that affiliates keep earning.” Established in 2008, Affiliates United brings together more than 15 brands in the fields of sports betting, casino, poker and bingo. These include names such as William Hill Online, EuroGrand, 21Nova and more.

In order to create sustainable income, affiliates need to promote a good brand that will ease acquisition efforts, a brand in which players trust and can rely on. Affiliates also need to feel confident that the brand is going to last and that their efforts will pay in the long run. “We have seen too many programmes closing down lately or changing their terms and conditions, leaving the affiliates with no choice other than to stop promoting that particular brand. This translates into a large loss of income for most,” Guru Play affiliate manager Christine Lamain told iNTERGAMINGi.

“On the other hand, affiliates are also very important to operators, but often, only a handful of big affiliates are running the show with the rule of the 20/80; in that case, it makes the operator very dependable on its relationship with these big affiliates, which can be dangerous if the relationship deteriorates for any reason,” she added. Launched in Malta in August 2010, Guru Revenue is the affiliate programme representing Guru Play, a gaming site focused on live dealer casino, RNG casino and poker.

The current market

The affiliate market has been continuously changing for years and today is no different.

“The good old days seem so far away and affiliates are faced with many different challenges nowadays,” said Maslo from ComeOn! “In times when competition among operators is fierce and affiliates are being lured in with lucrative commissions, it is always a gamble deciding where to send your traffic. You don’t know how they will convert and if they can be trusted or have the long-term backing,” Maslo added.

The affiliate market may well be in a state of constant change, development and transition but this is the healthiest state an industry can be in, according to Nicky Senyard, co-founder and CEO of Income Access.

“It implies healthy growth driven by the need to innovate. Presently, this change involves the emergence of new markets, increased regulation, better intelligence on performance and the integration of offline bricks and mortar entities.”

Income Access began in 2002 with the launch of its affiliate network, which is now home to more than 22,000 global gaming affiliates across all key verticals including casino, poker, sports betting, bingo, mobile and side games. It also developed and launched a software solution, which powers the affiliate programmes of more than 120 gaming operators, including Gala Coral, Sportingbet, Betfred, Stan James and Victor Chandler.

Senyard continued: “Additionally, the affiliate market is transitioning towards an increase reach to a mass audience through the use of traditional marketing channels such as television adverts, sponsorship of sports teams and venues and endorsement of celebrities.”

For Arad from Affiliates United, the affiliate market nowadays consists of a few giant affiliates who are making more money than a number of the operators put together. “Affiliate marketing has become a more professional and knowledge-intensive discipline,” said Arad. “It’s a dynamic industry subject to legislation changes, where affiliates need to stay in tune and if needed, move traffic from one country to another due to new regulations. Tough competition between operators who are offering promotions to their players and affiliates, forums where affiliates can discuss with others about issues related to specific programmes, all these can easily make affiliates shift traffic from one product to another.”

Lamain from Guru Play believes that affiliate marketing plays an invaluable role in the marketing mix. “The current affiliate market is performing very well and the forecast is that affiliate revenues will increase by 30 per cent in Europe in 2011, compared to 2010.”

According to the European landscape report 2011, compiled by WebGains’ affiliate network and Affiliates4u, affiliates have become internet marketing professionals, with 51.72 per cent owning a registered company where in almost 80 per cent of cases, there are one to four full-time employees.

Affiliate activity that is focused on gambling accounts for 24.52 per cent and content sites represent 21.04 per cent of the models affiliates work with. More than 50 per cent of affiliates work on a CPA plan, while around 15 per cent work with revshare deals.

Of the revenues generated monthly, 19.6 per cent average between £1,000 (US$1,648) and £5,000, 29 per cent between £5,000 and £250,000 and 3.79 per cent over £250,000. Affiliate marketing represents around 26 per cent of companies’ turnover.

Lamain continued: “The majority of the traffic to an affiliate site is generated by SEO, followed by paid search advertising and social media and this is why affiliates are so concerned about Google updates. This provides a great snapshot of the current state of the affiliate market although the data does not only include exclusively gambling affiliation but affiliation in general in Europe.”

Legislation

Legislation can have a positive or negative impact on affiliates depending on the territory being analysed. Lamain from Guru Play commented: “Regulating the gambling market in the UK has allowed affiliates to promote different verticals including casino, poker, sports, bingo without few restrictions. It has even allowed Google to open Adwords, which affiliates can use as an acquisition tool with brands that are white listed. On the other hand, regulating gambling in France has resulted in a struggle for affiliates to compete because of different factors: first, the gambling licence and the taxation level are a big burden on the operator side so they cannot be so flexible with the deals offered to affiliates since the profit margins are very low.”

She added: “Operators also need large advertising budgets to compete so this cuts into the budget allocated to affiliates. Television advertising is driving huge amounts of traffic to operators compared to the number of players a small affiliate can bring to the point that some operators only want to work with super affiliates, leaving behind the smaller players.”

“Second of all,” Lamain continued, “not all verticals can be promoted, only poker and sports, so this represents a loss for affiliates who were focusing on casino promotions. Finally, the uncertainty of the market when the law was put in place scared off affiliates who requested to work mainly on CPA deals, so they could be incentivised right away for their player acquisition efforts and not rely on revshare income in case something would go wrong. However, CPA offers had to be drastically lowered in order for the operator to keep a sustainable profit margin. In territories like the US, UIGEA has forced affiliates to review their strategy and drive traffic to their site from other territories, so basically to focus on localised markets, which requires much more effort.”

As well as protecting affiliates, operators and customers, legislation has helped the industry open up the marketing channels available to them, including traditional means such as radio, television, newspaper, billboards, etc and via online channels such as sponsored links on search engines.

“On the other hand,” commented Senyard from Income Access, “legislation has resulted in increased costs for operators via higher taxation, expensive licences and increased legal costs. As such, operators have less revenue that they are able to share with their affiliates and are therefore reducing the offerings previously seen in the industry.”

As the industry becomes increasingly regulated, operators can advertise offline, gaining much more local exposure without the need to rely on affiliates. Furthermore, operators pay more tax, making it less profitable to work with affiliates, so they are seeing smaller deals being offered to them. “In a market with no regulations, affiliates have a substantial role as the operators’ advertising options are very limited,” said Arad from Affiliates United.

Maslo from ComeOn! agrees, stating that legislation leaves affiliates with fewer options of where to send their traffic because the operators are limited in certain markets. “Last year alone has been very turbulent for many affiliates that used to perform well in the past and now are faced with the challenge of new legislation,” he remarked.

Trends

Affiliate marketing has taken a predominant place in companies’ marketing strategies, with affiliates becoming increasingly internet-savvy, focusing on content, SEO and social media, reinvesting their earnings into more advanced marketing techniques.

Lamain from Guru Play commented: “The trend is to work more on CPA deals and tenancy deals rather than on pure revshare deals and also to focus more on regional marketing rather than on .com where the competition is becoming really fierce. It is also becoming tougher and tougher for small affiliates to acquire new players, while bigger affiliates are growing even more.”

According to Senyard from Income Access, more marketing channels are now available to both affiliates and operators, enabling them to reach a larger audience.” She added: “Another key trend in the sector is the push for more intelligent data and a consistent measure of ROI and performance across various online and offline channels. Similarly, there is also a push for converting offline audiences to become online consumers. As a result, this is also increasing the demand for a single system that is capable of tracking and measuring ROI to accommodate this need. In terms of marketing, affiliate marketing is expanding its reach to market through the use of newer technologies such as social media and mobile marketing, which are tipped to continue growing in the coming years. As such, both operators and affiliates are developing strategies around these mediums.”

Recent developments in poker have really stirred things up in the affiliate sector too. More affiliates are using what they have learned so far to branch out into other products, diversifying and not putting all their eggs into one basket. “The only thing is that it can be a long process to get traction on these new sites because there are so many existing sites to compete against,” said Maslo from ComeOn!

The future

As it has been since its inception, the affiliate sector is constantly changing and adapting, which is mainly driven by environmental factors, technological advances and consumer behavioural changes.

“An anticipated change,” said Senyard from Income Access, “is the definition of an affiliate. Previously this was categorised as individuals or groups of individuals who turned to affiliate marketing to supplement their income or to demonstrate their passion for the internet and online games. In today’s world of affiliate marketing, however, affiliates are not only the individuals and students, but they are also corporations, media agencies and bricks and mortar organisations.”

Another possible affiliate sector change for Senyard is the shift in commission structures due to the increased regulation of i-gaming. “With tighter margins and higher operating costs, operators and affiliates may have to adapt to different ways of sharing revenue. Additionally, this will lead to a higher volume of mergers and acquisitions, which will also affect the ways in which affiliates and operators share revenue,” she commented.

As technology advances, other changes will occur that involve adapting new technology and media. The use of social media for affiliates is only going to increase and the use of mobile phones in affiliate marketing is also going to be a major change, and one that is easily tied in with the growing importance of social media.

Tenancy deals too are becoming more common especially with big affiliates and affiliates are requesting more tailor-made deals because one offer for all doesn’t cut it anymore. “Affiliates want a personalised service where they feel they have the support they need at any given time to make their business a success, which in turn makes the affiliate programme successful as well,” said Lamain from Guru Play.

“The affiliate business is way past the stage where a site displays a banner for a specific brand,” said Lamain. “Consumers don’t believe solely in the message communicated by a brand. They also listen to their peers who have been buying and using specific products or services to the point that word of mouth is becoming the most powerful marketing tool. Affiliates are creating communities of followers and serve as the spokespersons or representatives of brands providing users with objective and trustful reviews, pinpointing the positive and negative aspects of the products/services those brands offer. Therefore, affiliates will be all about unique content, reviews and feedback, tailor-made promotions to their consumers, which is already happening, gaining their trust while keeping them loyal. Affiliates will also have to adapt to the mobile technology to monetise their sites with consumers accessing the web through such devices.”

Looking ahead, Lamain believes that super affiliates may merge to have access to bigger budgets, which will allow them to expand further and compete on the .com and on localised markets. She added: “Affiliate marketing is here to stay and will play an increasing role in generating sales for companies and this is shown by the increasing number of affiliate programmes offered on affiliate networks. Transparency and cutting-edge reporting will also become the norm for affiliates to decide if they want to work with a certain programme or not.”