Current Spanish market for iGaming affiliates.

IN ORDER TO talk about gambling/ gaming affiliates in Spain it is probably useful to outline a few facts about the general online trends of the country itself.

The main audiences for online gaming in general are the so called 'x-generation'; born between the 70s and 80s and typically between 30 and 40 years old. This age group usually represents between 35 and 40 percent of the overall market and is essentially the primary target audience. The *y-generation', typically born after :: m accounts for roughly 25 percent, even though almost half of this age bracket are restricted from registering due to the fact that they are not yet old enough. The 'baby boomers', referred to as those born before 1970, usually account for 30 percent of the overall market with the exception of less developed countries.

There are a few factors which make the msh gaming market different and these mainly consist of the following:

• A less developed' online country in general. Users are less trusting of registering personal details online. Lower conversion rates. High impact of branding and on national and celebrity advertising.
• The level of users whereby the provider of the family is male and holds most of bank accounts credit cards is higher man in mature online markets. Due to this key factor, the audience now and for the next two to three years will have a male/female ratio of 70/30. Male players in Spain tend to be less profitable in nature as they target games/bets with less risk. Male players deposit far more than female players (roughly on a 3/1 ratio) although female players are much more profitable in terms of win ratio. This mix would suggest that, in theory, our target audience are males and females alike, on a roughly 50/50 basis. However, even though females target games with higher risk, the sheer volume of deposits from males currently outweighs any notion that our primary targets should be an equal split.

The proposed legislation will bring about a number of different factors which will directly affect the active operators in the industry. A proposed 25% tax induces a high barrier to entry in the market and this, in turn, will affect how affiliates prioritise their efforts going forward. They will no longer have the luxury of promoting just any operator and may have to succumb to the operator's terms in contrast to the current trends.

The new legislation caters for operators who are primarily focused on sportsbetting as a product. Rumour has it that legislation on the various iGaming products will slowly unfold as the year progresses in 2012, however, for the time being, slots, which for non-sportsbetting operators currently account for as much as 85% of overall revenue, are prohibited.

Unlike mature online markets such as the UK, gaming affiliates are far scarcer in terms of numbers, and it would be safe to say that the top 50 affiliates in this category represent over 80 percent of the affiliate business in Spain. The number of sportsbetting affiliates in comparison to iGaming affiliates (promoting products like casino, bingo and especially slots) are at an average 3/1 ratio, meaning that for every three sportsbetting affiliates out there, there is only one promoting iGaming.

Nevertheless, to date, the small number of iGaming affiliates has thrived in this niche market and now stand to lose much of what they have worked for. Affiliates with a long-term business view tend to choose revenue share as their preferred commercial model. These affiliates have been referring players for a number of years with the intention of accumulating a healthy group of active players consistently generating revenue each month.

These affiliates fear and know only too well that when slots are removed from the equation, revenues will drop by as much as 85 percent.

Those that have built a business and hired employees on fixed salaries have some tough decisions to make; do they let go of their staff? Do they operate at loss until slots are regulated (if they will be)? Do they change their business model and concentrate on the products that will be regulated like sportsbetting, poker and casino table games?

In general, the preferred commercial models will be sure to change given that revenue share affiliates know that their commission is calculated from Net Revenue (after Gross to Net deductions); Gross Revenue will take a 25 percent hit before converting into Net Revenue.

Would this notion encourage affiliates to change to a CPA model which is usually triggered on minimum deposit and minimum wagering (without having to worry about Gross to Net deductions as CPA is not based on revenue)?

On the other hand, many believe that the drop in revenue will be compensated by an increase in business as operators will soon be allowed to advertise using PPC and the main channels of communication, such as TV and radio. These factors make it very hard for operators to predict where the industry is going in general and unfortunately, affiliates, are in the same boat; waiting for clarification, and waiting for this market to unfold within the next 15 months.
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