Christian Strutt

Advice for iGaming Affiliate Businesses: New Start-Ups to Mature Companies

This article is for readers who may be interested in getting into the online gaming affiliate business. It specifically advises on the real-money online gaming business which includes online and mobile: bingo, casino, lottery, poker and sports betting. Within these real-money gaming niche markets are hundreds of small companies based all around the world run from people’s bedrooms and home offices, right up to larger iGaming affiliates with websites that have hundreds of people working on them. This article aims to explain how this affiliate marketing industry works, along with providing some helpful tips for new entrants to the online gaming affiliate marketing world. Marketing real-money gaming sites is already very competitive, but still very much a market experiencing growth every year, and there is a lot of space for new affiliates. We hope you find the advice useful.

What is an iGaming Affiliate Business?

An iGaming affiliate business is a company that essentially delivers new players to an online gaming business. iGaming affiliates generally drive new players to their client primarily using their own websites, social media and email or SMS data. There are also some offline iGaming affiliates that employ online marketing methods such as leaflet drops, magazines and newspapers, although this niche industry within gaming and leisure is heavily driven by internet marketing. By definition, iGaming affiliates work on a partnership and performance-basis, with most working on either a revenue share (split of players losses) or cost per acquisition basis (commission per new depositing player). This niche industry can be highly lucrative and many affiliates all around the world earn six figure salaries working from home.

So, what are the strategic and tactical processes and considerations that an affiliate iGaming business must consider throughout its business life-cycle? We have mapped this process from start-up through to growth and maturity.

Anyone looking to get into the iGaming affiliate business must first set up the company and consider factors such as banking, corporate structure, finances, investment and, of course, website development.

Advice for Gaming Business Affiliate Start-Ups

Anyone looking to get into the iGaming affiliate business must first set up the company and consider factors such as banking, corporate structure, finances, investment and, of course, website development. Many new affiliates find it tough to get bank accounts, credit or investment because many corporations take a negative view on the real-money gaming sector classifying gambling in the same blacklisted ballpark as sectors like escorting/adult entertainment and selling weapons. Many new affiliates get around this legitimately by declaring themselves advertising agencies.

One of the beautiful things about becoming a new iGaming affiliate is that you do not really need any investment, staff or major overhead. In fact, many of today’s biggest affiliates in the real-money gaming industry, started off working part-time as an affiliate from their own house/property with zero overhead.

Over the years, we have seen many newcomers to the gaming business start off with large overhead costs including staff, office space and big marketing budgets which they burn through erratically. Many of the new iGaming affiliate companies we see starting off with a big slice of investment – and big ambitions along with massive overhead from Day 1 –often get into financial trouble within three to six months and disappear. This is because they enter the gaming industry thinking it’s easy to make money. Their fixed costs drain their investment quickly and their investors soon run out of patience or further investment.

As a general rule, you can expect to see some ROI within six to 12 months on any new investment made into a successful new iGaming affiliate business. If you invest very wisely you will see much quicker returns. Conversely, if you gamble your marketing budgets speculatively you can expect to see much slower return and sometimes no ROI at all.

We strongly advise all affiliates to choose the operators they work with very carefully. Research the affiliate programs you promote, and do not necessarily believe that the bigger the brand, the safer the program. Many of the big companies have shareholders and investors to satisfy, and the top management is tiers away from the front-line staff managing affiliate relationships – often these are the ones to watch out for. Do frequent popular industry forums before you take on any new affiliate programs. Be sure to also research which affiliate software has historical patterns of rogue operator behavior. You might be surprised which affiliate software has de-tagging/affiliate shaving features. I am of the personal/professional opinion that operators only buy affiliate software with such features when they intend to use them.

My best advice to all new iGaming affiliates is to focus on your marketing plan. Most casinos have a very similar product and offer the same service to their consumers. Therefore, the B2C market in this industry is not very price sensitive, which means the way you market your brand is the key driver to how successful your iGaming affiliate business will be. So, plan your marketing very carefully. We advise a lot of acid and A/B testing on any marketing plans you do have. Do this before you quit your full-time job and go full steam ahead with your business plan, or throw your life savings into getting a big office and team of full-time staff. An effective marketing plan will spread risk by focusing on lots of different digital marketing channels, and also various suppliers within each marketing niche such as social media, email marketing and SEO.

The final piece of advice we would give to new iGaming affiliates is that, unlike other business models and industries, your projected business plan should be flexible and versatile. This industry moves very fast and has a lot of unpredictable factors such as:

  • Revenue share income – player wins/losses are highly erratic.
  • Changes in market – sometimes markets open/close with little warning.
  • Client market forces – sometimes operators go out of business, or operators close their affiliate programs (e.g. see Skybet and LeoVegas which recently closed down most of their UK affiliate accounts).

Advice for Gaming Affiliate Businesses in Growth

In the first six to 12 months of building a new affiliate business, it can be tough to turn a decent profit. If you do, rest assured that your business model and plans are effective.

After that initial 12 months, you should find you have enough of a player base and well-optimized acquisition marketing campaigns to cover your overhead and start making a profit on a regular basis. If not, we suggest that you review your business plans and strategies and try something new. Also, speak with your casino/bingo/sportsbook/poker affiliate managers as they are generally very experienced, and manage hundreds of accounts for affiliate business just like yours. Providing affiliates with expert support and advice is standard practice for all decent affiliate managers.

As your business grows you will have to consider expansion plans such as taking on extra staff. We advise that you recruit your staff effectively, and be very up-front about how the industry is frankly top heavy with dominant, sometimes aggressive, personalities. Just walk into any gaming conference, and you can see a good portion of the attendees fancy themselves as Tony Montana in the making. It is fair to say around 25% of the fresh faces coming into gaming from other industries drop out within a few months never to return. This is a pretty cut-throat industry. It’s not for the meek or light-hearted – which translates into a recruiting challenge. The industry is growing very quickly, and there is a clear shortage of experienced staff, so expect to pay top dollar to recruit quality industry veterans with clean reputations.

As your iGaming affiliate business grows, there inherently comes risk. You will need to further branch out into new marketing channels, test out new marketing suppliers and basically burn through marketing budget to find profitable ways of driving traffic to your site. When testing new media buys, do not be surprised if only one in 10 are successful. You must plan your marketing budgets carefully and shrewdly. Also, be wary of pre-paid media buys, and incentivized traffic – both types of media buy can be considered high-risk. As you scale up your media buys, expect some wastage – with your now well-optimized media plan, you cannot expect a directly proportional ratio of marketing spend to revenue.

We strongly advise that iGaming affiliates consider brand diversification as one of the most cost-effective ways of scaling your business in its growth period. Of course, you cannot simply cut and paste your current marketing plan to a near-identical iGaming brand and website – it’s not as easy as that, right? But in analyzing the market and looking at the most successful companies in this business over the last 20 years, that is precisely what many of the most profitable companies have done. They simply create new brands and transpose the most successful business processes and marketing plans to new brands. It is arguably a lot easier to scale up an affiliate business this way versus testing new marketing channels and suppliers with existing brands.

Advice for Mature Gaming Affiliate Businesses

Once your iGaming affiliate business has expanded to the point of maturity, it can be hard to find new ways to increase profitability.

We would strongly advise that affiliates consider moving up higher in the food chain and becoming white-label casino/bingo site owners. This was a natural transition that Lucky Media made in 2014, and frankly speaking it was the best move of my entire career. In the late 1990s and early 2000s, the barriers to entry for new iGaming operators were massive. There were not too many operators offering white-label businesses like this, and usually one had to acquire your own separate license to start up your own online/mobile casino. With very few players in the market offering such a business solution, set-up costs were usually six figures and you had to commit to seven-figure marketing budgets in Year 1. These days there are lots of players in the iGaming business that offer low-risk, low-cost operator set-ups. This niche market has become very competitive, and you can set up your own online bingo/casino site with a modest budget of <€10,000. If negotiated well, you do not have to commit to major player quotas or monthly marketing budgets to operate a profitable site.

At the point of saturation, when you feel that you can’t profitably expand your business any more, it is time to either think about kicking back a bit and living the easy life or considering an exit strategy. The demand for profitable affiliate businesses is very strong currently, with companies such as Catena Media and Playtech clearly being pro-active and aggressive in acquisitions. As always, when demand exceeds supply, market conditions are favorable to sell. Generally, affiliate businesses have been selling for 2X-8X their Annual Net Profit. Subjective factors that influence the purchase price include:

Staff: Some buyers value staff as an asset. Other buyers prefer to have their own staff adopt the work of the current team to reduce costs.

Marketing: Some buyers value your marketing plan as they would like to use it for their other brands. Other buyers have their own marketing plans they would want to use on your affiliate sites.

Player Base: Some buyers recognize the value of your current player base on revenue share while others – particularly those with little gaming experience – do not.

Data: Most buyers recognize the value of any data you hold. Data value is mainly judged by freshness and proven responsive. Also, strongly bear in mind your opt-in terms upon data collection. If those few paragraphs of text are not completely clean and legitimate, it could heavily devalue your data. If you have email data, strongly consider data correlation with other valuable bits of data like SMS. Many big data companies can take your email/postal data for instance, and cross-reference that with their own in-house databases to provide you with SMS data in a hugely cost-effective fashion.

Technology: Proprietary technology exclusive to your business is a hugely valuable asset in today’s iGaming industry. Bear in mind that the value of the technology to your business is directly proportional to the size of your player database and traffic volumes to your website. So, if your technology makes your business 10k of profit monthly, and you sell that same technology to a company with a player database 100 times the size of yours, they can easily begin making 1m/month using the same technology – often with very little operation costs.

Christian Strutt first worked in iGaming in 2004 working for CNN as their exclusive iGaming Media Man. Christian worked for several digital media agencies including the likes of bet365, bwin and Ladbrokes before becoming a full-time iGaming affiliate in 2009. He then established Lucky Media Ltd and has been a full-time bingo and casino operator and brand owner since 2013.