Becoming an Operator: the Next Step for Affiliates?

I AM 100 PERCENT biased towards affiliates...

Over the last four months, we have been contacted by at least half a dozen major super affiliates about setting up an operation in various markets - particularly South America. On top of this, we get contacted almost every day by smaller affiliates looking for a sportsbetting site or a poker room.

I AM 100 PERCENT biased towards affiliates - they know how to acquire players, they are incredibly focused on bottom line profits and optimisation at a micro level - these are fundamental skills for an operator. Affiliates have been schooled at the University of Life - I'll take that over an MBA any day of the week. Indeed, most of Offsidegaming's marketing staff are ex affiliates - and we pay on revenue share because it's such a great model.

So, is there a growing trend of affiliates moving across to be operators? The short answer, I think, is yes. This is partly driven by the number of B2B operators that have emerged. But first of all, let's look at the pros and cons of the affiliate world over the operator world. Of course, there are board shorts over suits. But I'm talking here about money! To give an example; a super affiliate contacted us recently - his organisation generates 4,000 real players per month for a range of operators in Europe. At a CPA of Ђ100, that's Ђ400k per month in billings for a business with a very low headcount and pretty low fixed costs - they are hosting 80 or so sites. On the other hand, assuming this affiliate is on 40 percent revenue share with an active player base of 10,000, again, this would probably convert to Ђ400 in revenue per month (based on 10,000 players with Ђ500 per month spend in sports plus associated casino and poker revenues).

However, if the same affiliate becomes an operator, he could be keeping upwards of 50 to 70 percent of his profit if he does
a deal with a B2B provider - the potential revenues are nearly double. On the face of it, this would seem an absolute no-brainer for a high volume affiliate to run their own operation. As an operator, you also fundamentally have a customer database and a business you can exit from more easily than a traffic-based business which tends to be volatile and affected by Google updates and so on.
However, is becoming an operator as simple as this?

The first issue is that with most affiliate strategies, it is easier to drive traffic to four to eight betting companies than to just one. Affiliate content strategies are based around the comparison of bookmakers or casinos, the quality of the offer and so on. Most affiliate publishing strategies cannot just be 'switched to one company'. Their very value is based on their position as an affiliate - as an intermediary, if you like. (Although it is true that any affiliate with a content site strategy could always start pushing traffic to their own brand whilst maintaining their existing business.)

The other consideration with being an operator is that increasingly, the work really begins once that customer is through the door. The entire industry is a lot more CRM focused than it was previously. As an acquisition focused affiliate, you should not underestimate the amount of work in running a poker room, casino or sportsbook - or all three. Indeed, if going down this route, it is perhaps better to partner with a B2B operator who can deliver this for you - allowing you to focus on acquisition.

The third most important difference between the affiliate world and the operator world is volume. As an affiliate you can make a good living recruiting 50 or 200 players per month and you may even have a couple of staff and a pretty good business. However, as an operator, 200 players per month won't even cover your costs - a lot more scale is required to cover fixed costs, customer services and so on. In reality, an operator site needs about 500 funded players per month to really get some growth and ideally, a lot more than that. Payment service provider fees, charge backs, revenue shares to software houses, taxes, and affiliate commissions all need to be taken care of before any marketing even begins. I think this is the fundamental point for any affiliate considering the 'other side'.

Also don't forget, the grass is always greener on the other side. I, for example, have worked on the operator side for ten years. I've always wanted to become an affiliate. Indeed, I am making my first moves in this area, any potential partners please get in touch.
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