IT'S NOT WHO YOU KNOW, BUT WHO KNOWS YOU


Profile building for affiliate marketing.


AS AN AFFILIATE, building a large profile can be a tremendous asset to business. The visibility and positive exposure that go hand-in-hand with cultivating a prominent profile are a sure-file way to increase the effectiveness of all your marketing efforts without ever actually changing how you market. Essentially, a strong profile means you get better results from the same actions; as an affiliate, building a strong profile will give you the edge over competitors promoting identical promotions and programs.

An example of a strong profile is that of Amazon and its 'Associates' affiliate program. Chances are that when a person thinks of buying books, Amazon is one of the first names that pops into their head even though titere are numerous other places to purchase books. This prominence reinforces Amazon's strengths in bookselling, amongst other things, without the brand having to do anything other than operate "business as usual'. This ubiquity in profile works as a self-perpetuating promotion for Amazon, and only increases the company's level of success.

Like all things in business, having prominent visibility is not a magic bullet that miraculously helps increase your profits; it requires consistency and hard work. A profile is just like a house; it must be built brick by brick. The more prominent a profile you desire, the more building it is going to take. Acquiring visibility is an initial investment that takes time and effort but when done properly, will generate profits in the long run that far outweigh the initial labour. Building your desired profile is a multi-pronged process, and it is important to cover all possible bases for the best possible results.
 
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CHANGING REVENUE MODELS


How affiliates and operators must work together for the future.


AS THE BANKING crisis of recent vears has shown, not everything that seems outwardly profitable is necessarily sustainable in the long run. Following me demise of a variety of prominent poker operators earlier this year and the subsequent increase in general regulation, the online gaming industry stands at a crossroads. Operators and affiliates must realise that in order to remain profitable, it wfll be necessary to adapt. In a sense, the mode of operation that both affiliates and operators have grown accustomed to is destined to become a thing of the past, and been ennnes must work together with the future in mind to succeed.

The success and sustainability of the iGaming landscape is based primarily upon the relationship between operator and affiliate. Practically, this relationship is one of mutual dependence. Affiliates help operator earn money by promoting their sites. In turn, operators pay affiliates for successful marketing efforts. This relationship dynamic is what makes affiliate marketing so useful, since both parties are better off through their interaction and help each other earn revenue.

Cooperation

The long-term sustainability of the symbiotic relationship between affiliate and operator depends on cooperation - something that cannot occur with each party working in self-interest. Rather, operators and affiliates must realise that they are united as an entity. All possible pursuits should be undertaken so that the whole becomes greater than the sum of its parts. If affiliates simply try to increase their gains, they may benefit in the short-term, but operators will then suffer, and the general relationship will be impossible to maintain. Equally, if operators attempt to decrease their affiliate marketing expenditures, affiliates will lose both revenue and, consequently, any motivation in being affiliates. Without their affiliates, operators will lose the benefit of a strong acquisition and retention channel that can help grow their business as well as increase the value of their brand.

Regulation

With increased regulation, and the promise of even more regulation to come, operational costs are climbing and reducing the margins for operators. By offering their affiliates lucrative revenue share packages (which can sometimes be in the range of 50 percent), operators can find themselves living beyond their means, particularly if they are operating in markets where player life time values (LTV) are lower.

Lucrative revenue share deals are particularly unsustainable if operators must continually share revenues without a constantly increasing player base. If this becomes the case, operator revenues will consistently decrease, as will their ability to pay affiliates. Most importantly, this affects the relationship between operator and affiliate, which is the most important characteristic of a strong and successful affiliate program.

Regulation includes high tax payments to authorities. In addition to the taxes, operators must also factor other operating costs such as licensing, legal costs to ensure operation within legislative guidelines, payment processing, marketing and advertising, staff, as well as all affiliate related costs. Realistically, this can lead to operators paying out up to $7 to $8 out of every $10 they earn. As such, having a revenue share system that factors key costs, has a continuous injection of new players and transactional volume and has a good ratio of retaining customers to compensate low margin with volume, becomes imperative for survival and success. Developing such a system is easiest via operator and affiliate cooperation, which itself should be based on understanding and desire for mutual success.

Sustainability

As mature affiliate programs have a slower rate of acquiring new affiliates, their reliance on a sustainable win-win model is crucial, lest they find themselves in a situation where they are paying out higher revenue share to their existing affiliates for activity from past referrals while not making up the margin with new acquisitions. This, coupled with the costs for retaining players, can put more pressure on an operator's business if there is an imbalance in the compensation model as well as the acquisition and retention strategies.

Furthermore, with tighter margins, there is more competition between operators; this has led to a change in the landscape, with common practices such as lifetime guarantee of revenue share now coming under threat. Similarly, with cost per acquisition (CPA) schemes, their sustainability also lies in the continual referral of new quality customers, since it is a one-time payment. A CPA scheme has its advantages with a key appeal to affiliates being its provision of income each month ver advertising costs, provided their referred players fulfil the requirements set out in the CPA structure. This also has advantages to operators in that it allows affiliates to dedicate their efforts and revenue towards further acquisition.

Conversely, operators have traditionally shied away from CPA schemes due to their risky nature and paying for traffic that may not meet desired quality. It has also been unpopular with affiliates, who are in the business for the long haul and have invested their resources in building traffic volumes and referrals in return for continued revenue and a long-term business.

In addition, affiliates on CPA models do not tend to have the same level of commitment to relationships with operators as those on revenue share models do. This is due to the fact that the affiliate tends to play the role of a traffic supplier and less of a partner that analyses retention and life time player values.

So, what is the solution?

Short-term rev sharing? CPA structures? Fixed fees?

Just like affiliates and operators know from advertising experience, there is never a best single approach; it is always more prudent to custom-tailor efforts. Likewise, it is important for operators and affiliates to work together to craft personalised commission structures towards a mutual goal of profitability for the affiliate and operator as a single entity. This approach could involve revenue share, CPA, fixed fee, or hybrids of them both, so long as it fundamentally involves the interest of maintaining long-term profitability for both affiliates and operators.
 
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GAMING AFFILIATES AND THE SPANISH MARKET


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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