Affiliate Monitor - iGaming Business Intelligence... · affiliate sector’s development, with stakeholders dipping their toes in the US market where the sports betting expansion

Affiliate Monitor

August 2019

Written by Clear Concise Media

for iGB

Published August 2019

© 2019 iGaming Business Ltd

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Author: Scott Longley

Editor: Stephen Carter, Joanne Christie

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iGaming Business • Affiliate Monitor • August 2019 iii

Contents

Editor’s letter ................................................................................ 1

Executive summary .................................................................. 2

Part 1Results from the first quarter ..................................................... 3

Part 2: M&A update .................................................................................... 10

Part 3: A look ahead ....................................................................................13

Editors Letter

iGaming Business • Affiliate Monitor • August 2019 1

Editor’s letter

Welcome to iGB’s new Affiliate Monitor, a quarterly

companion to our popular Market Monitor. With the main

agents of the recent consolidation drive having followed

the trail blazed by XLMedia to the public markets, visibility of metrics

such as NDCs and the percentage of revenue gained via rev share

deals has enabled a more detailed view of how the top end of the

market is performing.

Generating a larger share of revenues from rev share as opposed

to CPA clearly increases the ability of these businesses not only to

plan but to grow revenues in a long-term sustainable manner, and the

comparative analysis in Part 1 exposes clear differences between the

leading listed players.

This Q1 review also falls within what feels like a defining period in the

affiliate sector’s development, with stakeholders dipping their toes in the US market where the sports

betting expansion looms large across the wider igaming space. The quarter also saw the transition from

dot.com to dot.country regulation in Sweden, a highly material market for several of these businesses.

While understandably bullish in the face of a bumpy transition into a heavily restricted bonusing

environment, author Scott Longley is not convinced by the affiliates’ arguments that regulated markets

such as these are “less risky” and “better structured for growth”, seeing these as more credible coming

from the mouths of operators.

“It is hard to see why the bigger affiliates need to follow the regulated mantra of the operators other

than as a sop to potentially nervous investors in Sweden, where most of the entities are listed”, he says.

The big listed players are of course only one part of the story. In addition to other big names being

privately held – such as Oddschecker, the Racing Post and Cherry’s Fortune Lounge – substantial traffic

and revenues are still driven by the long tail of affiliates working below the listed level. For many of

these, the benefits of working in regulated markets are “somewhat oversold” (see Part 3).

We hope you enjoy this new report and find it useful. Should you have any suggestions or feedback

please don’t hesitate to email me at [email protected]

Stephen CarteriGaming Business

Executive summary


Executive summary

The first quarter numbers from the leading

listed affiliate marketing providers –

Catena Media, Better Collective, Raketech,

Gaming Innovation Group, Net Gaming Europe

and Gambling.com Group – provided a broad

snapshot of how the top end of the market has

been performing.

They by no means represent the whole of the

super affiliate sector. Oddschecker, the Racing

Post and the Cherry Gaming-owned Fortune

Lounge all have claims to be counted among the

upper echelon, along with a number of others.

But they do provide enough data points to

gauge the temperature of the sector at what feels

like another important stage in its progress. With

the expansion of regulated US sports betting

looming large across the entire global gaming

scene, it is no surprise that the affiliate sector has

also been affected by the events of the last 12

months or more, and in a quite profound sense.

Most notably, first Catena Media and then Better

Collective have made significant acquisitions in the

US gaming space and both will be hoping their

bet pays off in the medium to long term. This will

be dealt with later in this report.

Meanwhile, the opening of the Swedish online

market in the first quarter, with all the restrictions

with regard to bonusing, has provided a challenge

for the entire sector. Taken with the advertising ban

in Italy it shows how, much as with the operators,

for affiliates the focus on regulated markets brings

with it negatives as well as positives.

Part 1: Results from the first quarter


Collective (41%), Raketech (21.5%) and Gambling.

com (50%) all seeing substantial progress while

Catena managed only an 8% rise and Net Gaming

Europe (-12%) again went backwards.

New depositing customersPerhaps the starkest metric is that of new

depositing customers (NDCs) and it is right

at the top of the tree where the battle gets

interesting. Arguably it is the total NDCs which

gives the simplest measure of the size of the

affiliate business and its relative health. Hence,

we can see that while Catena Media retains top

spot with more than 124,000 new depositing

customers in the first three months of the year,

Better Collective is hard on its heels with 116,000.

Moreover, while Better Collective enjoyed a

whopping 147% rise in NDC numbers year-on-

year, Catena Media actually saw a 7% drop in the

year-on-year total.

Results analysisA look across the results from the six highlighted

companies for the first three months of the

year shows quite a contrast in top-line revenue

performances. On one hand, Better Collective,

Raketech and Gambling.com Group all achieved

significant increases in revenue, of 97%, 78%

and 52%, respectively. On the other, Gaming

Innovation Group’s affiliate arm and Catena

Media achieved relatively meagre 10% and 9%,

respective, year-on-year rises and Net Gaming

Europe actually fell by 6.4%, albeit this was due to

the ending of gaming operations and the move to

concentrate on affiliate operations.

Given the rate of M&A in the sector,

some of the differential can be explained by

recent acquisitions coming into the quarterly

calculations. However, the year-on-year organic

growth rates across five of the six (GIG’s was

undisclosed) shows a similar pattern, with Better

Part 1Results from the first quarter

Table 1: Listed affiliate 1Q19 results comparison table

Metric/companyCatena Media

Better Coll. Rtech

Gambling.com

GIG media serv.

Net Gaming Europe

Revenue (€m) 26.1 14.9 8.7 5.24 9 4.1

YoY revenue rise (%) 9 97 78 52 10 -6.4

Adjusted EBITDA (€m) 11.2 6.5 3.5 1.75 5.2 2.8

YoY adj. EBITDA increase (%) -10 212 38 33 18 -9

EBITDA margin (%) 43 44 54 33 58 63

Pre-tax profit (€m) 1.99 4.9 4.8 1 n/a 1.9

YoY organic growth rate (%) 8 41 21.5 50 Unkn. -12

NDCs 124,007 116,000 28,607 26,525 34,408 Unkn.

YoY NDCs % increase (%) -7 147 76 66 6.25 -15

Proportion of revenues from rev-share (%) 44 72 39 Unkn. 57 40

Source: Company reports



Chart 1: Better Collective’s focus on sport

Source: Company reports, Redeye

The NDC growth at Better Collective was also

impressive quarter-on-quarter, up 52% from

76,000. It is a growth path which suggests that if

the momentum continues into the second quarter

the company could well surpass Catena Media as

the largest listed affiliate by quarterly NDCs.

Proportion of revenues from revenue shareHowever, the issue with looking purely at NDCs

as a key metric is that it comes with no certainty

of quality of customer. Hence, it is worth looking

at the percentage of revenue gained via revenue-

share arrangements as a potential proxy for

long-term sustainable revenue prospects. In

this sense there is again a clear divide between

Better Collective, with 72% of total revenues

coming from revenue share, compared with 44%

at Catena. The only other affiliate that comes

close to this percentage is GIG’s media services

unit with 57%, though with in-house sign-ups

amounting to 13% of the total business, it might

not be the truest measure.

Analysts at Redeye in Stockholm said in a recent

coverage note for Better Collective they believe

the quality inherent in revenue-share arrangements

means that the company deserves a higher multiple

than any CPA-based business. This, the team wrote,

is because of the long tail of “loyal players which

continues to generate future revenues”, making it

more suitable for communities.

“There is a clear element of skill in sports betting,

making it suitable for interactions and tips sharing

between players,” the analysts added. “The sports

betting vertical is also more accepted by gambling

authorities, and there are several large operators

willing to lobby for online sports betting.”

Hence, in part the differential between Better

Collective and Catena Media can be explained

by way of the former’s greater focus on sports

betting compared to the more online casino-

focused Catena Media (where 41% is sport and

53% is casino).

Moreover, Catena also noted that CPA deals

are far more common in the US, so it might be

wise to temper the enthusiasm for the higher

percentage of revenue-share business at Better

Collective considering its recent acquisition in the

US market.

Sweden The debate around regulated and unregulated

markets – about revenue sustainability and what it

means to be grey in the affiliate space – has been

brought into sharp focus by the opening of the

Swedish market in January this year.

Sweden has been a foundation market

for many of the listed affiliates. For instance,

Catena Media has built up a substantial Swedish

and Scandinavian presence over a series of

acquisitions, including the deals for Wonko Media

in March 2016, Spelbloggare.se in July the same

year, Slotsia in February 2017 and Newcasinos.

com in May that year.

So the less than auspicious opening in the

Swedish regulated market will have been

disappointing to Catena, even as it has tried to

spin the poor opening months as being a long-

term positive.

“For the long term we expect this will prove

beneficial for us,” the company said in its results

statement. “Since operators will need even more

players, there should be even higher demand

for our services. Additionally, with Swedish

Sports betting 78%

Casino 20%

Other 2%



legislators considering restricting marketing

channels for online gambling, our offering will

grow even stronger.”

A more neutral tone came from Better

Collective, which itself established a greater

presence in Sweden via the €30m Ribacka

acquisition in December last year, right on the

cusp of the market opening.

The company said at the time of the deal

that it considered Sweden to be “one of the

most interesting markets for online sports

betting in Europe”, but like Catena Media it has

clearly to date been left disappointed by the

“report of decreased activity” on the part of the

operators. This left the company summing up the

performance there with the word “satisfactory”.

Similarly sitting on the fence was Raketech,

which said that it has managed the transition to

a regulated market successfully due to long-term

planning but that average player values have

decreased and added that it was difficult to predict

“when, and at what level, they will stabilise”.

Broader regulated market questionsA potentially contentious claim from Redeye

was that regulated and taxed markets were the

most suitable for betting. The “and taxed” part

of this is significant as this would cover Germany,

where many of the larger listed affiliates have a

presence. But, of course, the taxed element only

covers sports and not casino.

The argument cited by the team at Redeye

was somewhat thin. “Better Collective focus

on regulated markets as they provide the best

possible environment for betting behaviour,”

the analysts wrote. “The regulated markets are

also more transparent with predictable rules as

well as high awareness and demand. All in all,

the regulated markets are less risky and better

structured for growth.”

The suggestion that the environment for the

consumer is better in regulated jurisdictions

is potentially true and certainly the evidence

from many regulated territories is that a large

cohort of consumers would prefer to bet with

Chart 2: Catena Media share price, first half 2019

100

90

80

70

60

50

February 2019 April 2019 June 2019

Source: LSE via Google Finance

62.85 SEK Fri, 28 Jun

It is hard to see why the bigger affiliates need to follow the regulated mantra of the operators other than as a sop to potentially nervous investors in Sweden



a sop to potentially nervous investors in Sweden,

where most of the entities are listed.

In the case of Better Collective, there is also

a further twist to this. The company’s largest

client – at an estimated 25% of total revenues –

is bet365, which, as is well-known, is a privately

owned entity that plays on both sides of the

regulated/unregulated border.

Indeed, arguably a more worrying stat for

investors is the heavy reliance on one major

customer. The analysts at Redeye attempted to

dismiss the inherent risk due to the “sheer size

and diversity of bet365’s operations”. However, it

is far from clear how either necessarily mitigates

Better Collective’s reliance on it.

regulated operators. The hygiene factor does

have a place when it comes to transparency

and predictable rules.

But whether they are “less risky” and “better

structured for growth” is more open to debate.

Certainly, in Sweden as it stands this has not yet

proven to be true, though of course it remains

early days.

But these are arguments for operators,

not necessarily affiliates. There is an idea that

operators would prefer to work with affiliates

similarly committed to the regulated space and

therefore the latter should consider following

down the same pathway. But in truth it is hard to

see why the bigger affiliates need to follow the

regulated mantra of the operators other than as

Chart 3: XL Media share price – one year to end of June 2019

1 day 5 days 1 month 6 months YTD 1 year 5 years Max

120

100

80

60

40

September 2018 January 2019 May 2019

Source: Nasdaq First North via Google Finance

Chart 4: Better Collective share price performance, first half 2019

1 day 5 days 1 month 6 months YTD 1 year 5 years Max

90

80

70

60

50

September 2018 January 2019 May 2019

Source: Nasdaq First North via Google Finance

63.50 GBX 28 Jun 2019

80.50 SEK 28 Jun 2019



Italy banThe other problematic country is Italy. It was

Catena Media’s acquisition of ASAP Italia which,

arguably, marked the high point of the recent

wave of M&A as it was barely a month after the

deal was announced that the Italian authorities

unveiled their plans to put a halt to all advertising

and marketing of gambling within the country,

including affiliate marketing.

Catena itself tried to look on the bright side in

its first quarter results, and suggested that odds

comparison sites, where there isn’t any form of

invitation to play, “are not considered advertising”

provided they “comply with the principles of self-

restraint, truthfulness and transparency”.

Gambling.com Group also noted the “clarified”

news on “non-prospecting performance

marketing activities”, and added: “The affiliate’s

role in the gambling advertising ecosystem is a

value-add to the consumer and not the kind of

predatory marketing the Italian regulator was

aiming to stop.”

Summing up the pressures in Sweden, the

Netherlands (where the prosecutorial Dutch

gambling authority has had affiliates in its

crosshairs as much as errant operators) and

Italy, Net Gaming Europe said the “ongoing

restructuring” of the European gambling sector

would “continue to have an adverse effect

on our revenue in the short-term”. And chief

executive Marcus Teilman added: “The short-

term uncertainty does not change the long-term

market conditions, but at present it is too early

to say when there will be a lasting recovery in

Europe. Increased political risks lie ahead and are

something we have to live with.”

The share price performancesThe uncertainty is certainly reflected in the share

price performances across the listed affiliate

space. Most clearly suffering is Catena Media,

which has seen its share price more than halve

since its peak in November 2018 – from SEK128 to

a low in May of SEK50 before recovering slightly

to end June at the SEK62 mark.

Also in the doghouse is XL Media, which has

suffered a series of precipitate drops in the past

year. Such is its unloved status that between

late December and early May the company has

bought more than 10 million shares as part of its

share buyback operation for a total of £6.4m.

This has, to date, had only a mild effect (see

share price chart). The programme continued

throughout May and June. As can be seen, the

share price has covered some ground from its late

May lows of 49p.

It’s an altogether different story with Better

Collective, where the shares have enjoyed a

reasonable price performance since floating last

June. Largely due to the prolonged slump in the

value of Catena’s share price, Better Collective

now has a broadly equivalent market cap of

SEK3.4bn, compared to about SEK3.56bn for

Catena.

Better Collective

• Revenues up 97% to €14.9m;

organic growth 41%

• NDCs up 147% to 116,000

• Q1 EBITDA up 212% to €6.5m

• Pre-tax profit €4.9m, up from €1.5m

Revenue share remains the majority of total

revenues at 72%, down from 80% this time

last year. Of the remainder of its revenues, 18%

came from CPA and 10% from other income.

The company noted that beginning in late 2018,

PPC campaigns had been initiated.

Company-by-company results takeaways



Raketech

• Total revenues up 78% to €8.7m – this

included a €2.3m ‘waived liability’ regarding

a related party. Excluding this, revenues rose

32% to €6.5m

• Organic growth was 21.5%. (It should be

noted that QoQ, revenue excluding the

waived liability fell 15%)

• Adjusted EBITDA was up 38% to €3.5m

• NDCs up 76% to 28,600

Raketech also made much of its continued

M&A ambitions. It mentioned the TVMatsit deal

in Finland as a “good example” of its strategy

of adding in new markets and buying in the

best entrepreneurial talent. The company said

its Finnish casino operations were a strong

contributor to YoY growth.

Catena Media

• Revenues up 9% – without any large

acquisitions, it is fair to say revenue growth

is anaemic. The company said revenues were

“below expectations”

• Costs rose by more than double the rate of

growth in revenues (up 19.9%)

• Adjusted EBITDA down 10%

• New depositing customers (NDCs) were

down 7% to 124,000

• Profit: Alongside the increase in personnel

costs (up 36% to €5.6m), other operating

costs also rose 44% to €5.9m and

depreciation and amortisation rose 85%

to €3.4m. While interest on borrowings

fell by more than half, other finance costs

more than doubled. This all helps explain

the 60% fall in pre-tax profit. The company

blamed the investment in the US market and

financials for the rise in operating expenses.

• Abandoning of 2020 EBITDA target: Significantly, the company has given up

on achieving its target of hitting €100m in

EBITDA by 2020, delaying it to 2021. The

company blamed the lack of progress in the

US rollout and its concentration on organic

growth over acquisitions.

• Financials: Without mentioning the

restrictions on the part of the European

Securities and Markets Authority on the

marketing of CFDs, the financials unit

at Catena clearly suffered, with revenue

dropping back from €1.5m to €1.16m. The

company blamed “historic low market

volatility”. This doesn’t sit with the recent

results from the retail financial trading

sector, where operators have blamed

revenue reverses on the new regulatory

restrictions.



Gaming Innovation Group (GIG)

• Total revenues down 13% due to issues in the

Swedish market

• Media services saw a record amount of €9m

for the second quarter in a row

• Growth of 10% was purely organic

Media servicesAnalysts from SEB said the performance of

the media services unit was a positive surprise

given the backdrop in Sweden.

The company said that the media

department was the “main contributor” to

profits. Total EBITDA for the quarter came in

at €4.1m (down from €4.3m in Q1 2018) but

€5.2m came from media services (losses came

in other B2B areas).

First-time depositors stood at 34,408

compared with 32,382 during the same period

last year. Of the FTD total, 7% were referred

to GIG’s own brands, 6% to platform services

clients and 87% to other operators. The

company said the “demand and value from

external partners remained high in the quarter”.

TrendsThe company said it saw growth opportunities,

in particular in North America and Asia.

GoogleThe company said that as of 29 April Google

had begun accepting advertising from gaming

operators in Sweden. However it added that the

new PPC advertising policy in Sweden “does

not allow for the affiliate model at this time”

but the company said it was “hopeful” this

could be a revenue channel in the future.

Net Gaming Europe

• Revenue down more than 6% to €4.1m

• EBITDA was also down 9% to €2.6m

• NDCs were also down 15% to around 110,000

The company blamed the issues with regulation

in Europe for the revenue decline, despite growth

(up 42%) seen in the US (mainly via PokerListings.

com). The US was worth 24% of total revenue in

the first quarter. The company said the negative

organic growth was caused by the phasing out

of paid media operations, along with the move

towards revenue share versus CPAs.

Gambling.com Group• Revenue rose 52% to €5.2m – organic

growth was more than 50%

• Adjusted EBITDA rose 33% to €1.75m

• NDCs were up 66% to 26,525

• Net borrowings now total €15.6m

Gambling.com is trying to make an impression

in New Jersey; it has a licence to cover revenue

share in New Jersey and has launched its own

American Gambling Awards. However, its

comments paint a less than positive picture

about when the US might be profitable: “The

Group has seen strong recent growth in traffic

from the US market but from a relatively small

base and the US market remains a source of

growth for the mid and long term rather than a

major revenue generator at present.”

Part 2: M&A update


The flow of deals in the affiliate space in

the past three or more years has clearly

slowed. According to the deal tally

between January and June 2018, 18 deals were

completed in the space involving 10 acquiring

entities. The pace of deals at points was

dizzying; in April 2018 alone there were six deals,

for instance.

In comparison, in the year between June 2018

and July 2019 there have been just six deals

involving four acquirers and while both the Better

Collective deals notably came with reasonably

high ticket prices, the others were presumably far

less pricey.

Part 2: M&A update

The wild frontierThe most significant deal in recent months was

Better Collective’s big move in the US. In snapping

up the RotoGrinders business, Better Collective

has augmented its existing US-facing offering and

placed itself right at the heart of the battle for the

US sports betting customer.

The RotoGrinders sites:

• rotogrinders.com

• pocketfives.com

• sportshandle.com

• usbets.com

• pennbets.com

Table 1: Acquisitions in the affiliate space, Jan-Jun 2018

Date Acquirer Target Market focus Initial price Total w/ earnout

Jan-18 XL Media Good Game Finland €7m €15m

Jan-18 Cherry/Game Lounge Slot Tracker Scandinavia €1m €1.2m

Jan-18 Catena Media Dreamworx Germany €9.5m

Feb-18 Meta Gambling Afiliados Gaming Latin America Unknown

Mar-18 1st Leads Bingoport.co.uk UK £2m £2.4m

Mar-18 Catena Media BonusSeeker.com US/New jersey $6.5m $16m

Mar-18 Gambling.com Group Bookies.com UK £2m £6.5m

Apr-18 Better Collective Xpertan/Xpert Denmark UD UD

Apr-18 Cherry/Game Lounge TodaysWeb SEO specialist SEK14m

Apr-18 Catena Media BrokerDeal.deGermany - financial services €1.2m €3.6m

Apr-18 Catena Media ParisSportifs.com France €8.2m €13.7m

Apr-18 Catena Media gg.co.uk UK £2m

Apr-18 XL Media WhichBingo UK

May-18 Racing Post Apsley Group UK UD UD

May-18 Raketech Casinofeber.se Sweden UD UD

May-18 Net Gaming Webwiser Germany €2.29m €3.5m

Jun-18 Raketech Shogun Media Scandinavia Unknown Unknown

Jun-18 Catena Media ASAP Italia Italy €12.5m €22m

Source: Company releases

Part 2: M&A update


$21m for 60% of the RotoGrinders business, with

the remaining 40% to be bought between 2022-

24 at a multiple of between five- and 10-times

EBITDA. The company said the valuation will be

determined by the future growth and profitability

of RotoGrinders and Better Collective’s other

business in the US.

Still SwedenAmong the remaining acquisitions, the ones

that stick out are again Better Collective with its

Ribacka deal at the end of last year, and the much

more recent deal from Net Gaming Europe for the

BettingGuide.se business.

Most obviously with the Ribacka deal, which

saw Better Collective lay out an initial €15m

with a further possible €15m dependent on

the subsequent trading performance, it shows

a degree of faith in the potential in Sweden

ahead of launch. Indeed, the deal made the

point about the long-term view of the Swedish

market much more than the comments from the

various operators and affiliates about the revenue

performance in the regulated space since January.

The slowing pace of M&AIn a comment about the recent paucity of

transactions in the affiliate space, the analysts at

Redeye noted that many of Better Collective’s

competitors “have paused their acquisition

expansion strategies due to financials limitations”.

The spate of M&A was largely funded by bank

debt and bond issuance and, particularly with

Catena Media, highly rated shares. Indeed, an

In the US Better Collective is up against some

familiar competitors. Catena Media has previously

established a strong presence in the US via

the acquisition of the NJplay assets back in

December 2016 (when the Supreme Court

decision on PASPA was but a pipe dream).

Catena Media US-facing sites:

• PlayUSA

• PlayNJ

• LegalSportsReport.com

• OnlinePokerReport.com

• NJgamblingsites.com

• Bonusseeker.com

• PlayPicks.com

• TheLines.com

The pair are now talking up the prospects of

what the expanded regulated US sports betting

market might mean for their businesses. Catena

Media said it was “happy” with what its US

business achieved in the first quarter, albeit the

delays in the US roll-out meant the company had

abandoned its 2020 EBITDA target. Suggesting

that the “talk of new states has now turned to

action”, the company said it was likely that US

revenues would double in the second half of 2019

(though it failed to say what its US earnings were

in the first quarter).

Better Collective also, obviously, struck a

positive tone when it announced its RotoGrinders

acquisition, and said it was “preparing for the

next states to open”. The bolstered US capability

certainly came at a price; Better Collective paid

Table 2: Acquisitions in the affiliate space, Jun18-Jun19

Date Acquirer Target Market focus Initial price Total w/ earnout

Dec-18 Better Collective Ribacka Sweden €15m €15m

Mar-19 Natural Intelligence Sidelines US sports UNK UNK

May-19 Better Collective RotoGrinders US sports $21m

Jun-19 Raketech CasinoFever.ca Canada UNK UNK

Jun-19 Net Gaming Europe BettingGuide.se Sweden UNK UNK

Jul-19 Net Gaming Europe BettingOnline.co.uk UK £1.6m £0.6m

Source: Company releases

Part 2: M&A update


important element of the deals Catena has done

have been shares-based, particularly when it comes

to earnouts. Hence the share price slide has come

at an inopportune moment and its attractiveness to

potential targets has been diminished.

Of course, the other reading of the M&A lull is

that the low-hanging fruit has been snapped up.

According to this analysis, the larger listed affiliate

entities no longer see the same benefits from

adding acquired assets as was the case a few

years ago. This would seem to be the case with

Catena, which has suggested recently that it has

been closing sites acquired in recent years.

But the Redeye analysts are not convinced.

“We believe it has made too many acquisitions to

be able to handle them in a constructive fashion,”

they wrote. “Its low organic growth is evidence

of this, and only 50% of its revenues comes from

revenue-share agreements.”

A smaller poolCatena Media is merely the most obvious

example of a company that has gorged itself on

acquisitions in recent years but others have joined

the fray with equal enthusiasm, if not quite the

same appetite.

One obvious consequence of the M&A splurge

in recent years – and a partial explanation for the

relative slowdown in activity in recent months – is

that the more obvious targets have all now been

snapped up.

“Many of the choice opportunities have

been picked off already,” says Charles Gillespie,

chief executive at Gambling.com Group. “The

bigger deals that do happen make sense as the

corporate affiliates now need to do bigger M&A

than ever to continue to move the needle and

hit growth targets. What used to be big is now

considered small.”

One company which has been active in the

past year is Raketech, which has made three

deals in the past 18 months (the most recent deal,

casinoFever.ca in Canada, Shogun Media a year

ago and casinoFeber.se in May last year).

“We will continue to look for companies that

complement our current business,” says Scott

Collins, head of communications and corporate

responsibility at Raketech. “We are experienced

in the process, know what we want and do not

want to rush into anything without finding the

right fit; the right people behind the company

and on fair terms.”

For Collins there are three factors which play into the M&A slowdown:

• There are few remaining high-quality

companies out there willing to sell;

• Prices are too high. The higher competition

increases the price expected by sellers.

Also, past acquisitions might have been too

expensive, and as the current expectations are

based on past overestimated multiples, we are

seeing greatly inflated prices. As such, fewer

buyers are willing to pay high prices;

• The bigger affiliates are now listed companies

and have an added responsibility to make sure

an acquisition will be able to deliver long-term

results. Buyers are therefore more cautious

when evaluating potential M&A targets.

Another company which has also recently been

making acquisitions in the space is Net Gaming

Europe and its chief executive Marcus Teilman

says there are “some qualitative prospects

out there still and we will continue to see new,

innovative ones popping up”.

The entrepreneurial nature of the affiliate space

means it is never static. New sites are cropping

up all the time, enticing new players with newer,

potentially more mobile-based offerings. And

with an obvious pathway through to a potential

sale, it seems unlikely this will be a river that will

necessarily dry up any time soon, regardless of

the regulatory backdrop for gambling.

Part 3: A look ahead


The vibrancy of the entire affiliate space

is worthy of note. A point to make about

the affiliate market is that we tend to hear

about what is happening within the sector from

the top end. By their nature, the listed players

tend to be the larger organisations.

Of course, there are, as mentioned earlier

in this report, some notable big names which

are privately held and therefore less willing to

participate in the wider debate. It means that

what we hear about what is going on in the

affiliate sector is necessarily skewed to the views

of the larger players while the long tail of affiliates

gets somewhat sidelined.

This has particular relevance to the debate about

affiliates and regulated gambling markets. As

hinted at earlier in this report, with the exception

of the US, the focus of the larger affiliates on

regulated markets arguably makes less sense for

the affiliates than it does for the operators.

While there are undoubtedly benefits to

working within regulated markets, for affiliates

at least they might be somewhat oversold. Such

is the view of some affiliates working below the

listed level, such as Feda Mecan, a long-standing

affiliate expert who works with Kafe Rocks.

“I think in many cases there was simply a very

blind bet on regulated markets and an unprepared


one,” he says. “No one really investigated the

regulation (or) how the regulation would look.

Of course, it makes sense to stick to regulated

markets, but they are, and will be, tricky. Super

affiliates and all other affiliates simply need to be

more than a one-trick-bonus-listing-pony.”

The oft-heard phrase when it comes to the

debate around regulated jurisdictions, whether

on the operator or affiliate side, is the return to

grey markets. This is clearly a loaded phrase; to

call it a return would presume that operators and

affiliates left in the first place. This obviously isn’t

necessarily the case.

But what we can say is that a refocusing

has become the order of the day with some

elements of the affiliate sector. While for some

in more open and well-regulated jurisdictions,

the prospects of being able to generate business

outside of the regulated regime are very slim

(the UK, Denmark, increasingly Spain and over

time Sweden), the more protracted regulatory

timelines or less-than-perfect regulatory

structures in countries such as the Netherlands,

Germany and Poland make potentially fertile

ground for affiliates.

“I think there could be a pivot back toward grey

markets in general but particularly for smaller

affiliates,” says Gillespie at Gambling.com Group.

I think there could be a pivot back toward grey markets in general but particularly for smaller affiliatesCharles Gillespie, Gambling.com Group



“Everyone has been pivoting toward the regulated

markets for years, but the reality is not as rosy

as many expected. To hit their goals, I could see

many companies in the sector reconsidering their

priorities and more heavily targeting markets

which are ‘pre-regulation.’”

The smaller affiliates are very focused on

bringing in leads, and this might be detrimental

when it comes to issues of compliance, suggests

Collins at Raketech.

“For smaller affiliates, whose main focus is to

generate as many leads as possible, compliance

may not be on top of their agenda,” he says.

“These companies will have a harder time

operating in strictly regulated markets and may

therefore choose to focus more on non-regulated

markets with less restrictions.”

However, depending on the operator, the

affiliate and the nature of the relationship

between the two, this might be unsustainable in

the medium to long term.

“It is becoming increasingly important for

affiliates to maintain an image as a trusted

marketing channel that takes compliance seriously,”

he says. “Bigger gambling operators are starting to

roll out compliance rules that need to be followed

regardless of the region, so there is less room for

affiliates to avoid having to follow guidelines.”

According to this analysis, operators who have

the ultimate responsibility for the management

of their brand in multiple territories will only be

interested in working with “trustworthy” affiliates

that will, as Collins suggests, “do the right thing”.

“Therefore, the smaller affiliates who do not

comply with the rules laid out by legislators and

operators will not last long in regulated markets.”

But it might be a different story in some

unregulated territories. Mecan makes the point

that with the bigger affiliates “running down the

same (regulated market) channels”, it leaves behind

something of a vacuum in the greyer markets.

“A big run to the regulated markets by the big

affiliates is the ideal situation for some under-the-

radar small and mid-sized affiliates,” he says. “The

methods most of the smaller affiliates use are still

fine in a lot of unregulated markets and they have

a way easier time flying under the radar.”

A movable feastA longer-term issue for the industry is the rise

of mobile and what that might mean for the

affiliate sector. Mobile in gambling is not a new

phenomenon, of course, but particularly with the

advent of newer regulated states in the US there

is evidence that, if mobile is available, then the

consumer will find their choice of betting app

In the US there is evidence that, if mobile is available, then the consumer will find their choice of betting app without reference to their desktop

A big run to the regulated markets by the big affiliates is the ideal situation for some under-the-radar small and mid-sized affiliatesFeda Mecan, Kafe Rocks



without reference to their desktop.

In other words, one of the main routes for

affiliate traffic is effectively bypassed. “This is

again something that was lurking around the

corner for a long time,” says Mecan. “Mobile… will

make the life of many affiliates a bit trickier.”

But still evolution will mean that new

opportunities arise even as others bemoan a

passing business environment. “What is more of

a concern is how some companies are dealing

with mobile tracking and when some of them

try to trick the players around our lead,” Mecan

points out.

“But, you know ,‘history doesn’t repeat itself

but it often rhymes’ and we were always dealing

with issues as an industry. At the end, if you look

into details, most of the complaints from affiliates

(and operators) can be translated to: ‘oh no, we

need to evolve and change, but we loved the

good old times.’”

Such might be the conclusion when it comes to

the vexed issue of gambling advertising. As noted

earlier in this report, Italy’s ban on advertising has

left the affiliate sector wondering to what extent

affiliate marketing is – or isn’t – affected.

Collins points out that any attack on the

advertising of gambling is never good news,

suggesting a censoriousness on the part of the

Advertising restrictions might benefit affiliates, as it could potentially increase our share of advertising spendScott Collins, Raketech

The Italian test case

The test case for what advertising restrictions

might mean for the affiliate sector will be

Italy where, to put it politely, the situation is

about as clear as mud. Simone Cabib is the

chief executive of affiliate aggregator AffilROI,

which works largely in the Italian market. He

says that the lack of clarity is leaving affiliates

“suspicious” and many are taking a wait-and-

see attitude.

“The Italian authority failed in explaining

in a clear way its practical implications, and

there even was a later correction to the initial

regulation proposal,” he says. “Most of the

local operators’ legal offices – bookmakers and

major affiliates – are trying to figure a practical

interpretation of the new law. Rumours are

running wild, and the result is that from one

side affiliates don’t want to take chances in

putting efforts in new projects (or even in

existing ones), and from the other some of the

bookmakers are not opening new affiliation

accounts or even closing some low-performing

ones, until the situation will be clear.”

But as with the threat of advertising

restrictions elsewhere, Cabib is keen to view the

upside for the current situation. “Basically we

believe that in the long run the new regulation

will be a positive thing for affiliate marketing,”

he says. “The fact that other channels of

acquisition will be very limited, will make some

operators leave the market from one side, but

those who will remain in the game will probably

invest more in legal channels. We strongly

believe that affiliation, made in the right and

regulation-compliant way, will benefit from the

new situation.”



authorities in any particular jurisdiction that can

bring no good.

“Attacks on gambling advertising aren’t good

news for the igaming industry as a whole,” he

says. “Strict advertising restrictions may lead to

a less competitive industry, with fewer operators,

and players will ultimately lose out as there are

fewer innovative products to choose from. These

attacks also shed a negative light on the industry,

turning gaming into a taboo subject rather than

an entertainment industry that is enjoyed by most

people in moderation.”

However, the effect of bans around above-

the-line advertising are muted at worst and in

a more positive scenario might actually leave

affiliates in a decent position to take advantage

of the restrictions as operators seek alternative

routes to market.

“Advertising restrictions might benefit

affiliates, as it could potentially increase our

share of advertising spend,” says Collins. “In an

We believe that in the long run the new [Italian] regulation will be a positive thing for affiliate marketingSimone Cabib, AffilROI

environment where other advertising options

have been strictly restricted, affiliate media

products that deliver high-quality content would

come out on top.”

Gillespie agrees: “Not only is only good for

affiliates, it is a double-win for affiliates,” he

says. “The fact that operators have fewer viable

channels but the same marketing budget simply

means they have to spend cash somewhere else.

“In comparison to TV, radio and outdoor, people

visiting an affiliate site are actively seeking out

the site at that time,” he adds. “They are not being

hit out of the blue with a gambling ad. The other

win is less of a chance of additional blowback and

over-regulation. The cutback in advertising will

ease the pressure on the sector generally from

the regulators and politicians.”

With regulators generally seeing affiliates as a

benign form of advertising – or frankly not even

considering the sector in the first place – it means

blanket bans are unlikely.

iGaming Business Fulham Green, Bedford House

69 - 79 Fulham High StreetLondon, SW6 3JW

Tel: +44 (0) 207 384 7700

www.igamingbusiness.com

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Affiliate Monitor - iGaming Business Intelligence... · affiliate sector’s development, with stakeholders dipping their toes in the US market where the sports betting expansion