Today the industry still delivers 50% of iGaming companies customers, but like operators, affiliates are facing many of the same challenges, which include the need to scale to comply with advertising regulations in multiple jurisdictions and the associated rising costs of navigating a more complex business landscape.
Consolidated at the top, fractured at the bottom, the affiliate industry is most likely on the cusp of major change. Large operators had been taking out mid-tier firms, leaving an industry which is dominated by a handful of large operators and a large number of micro players. Consolidation on the side of those smaller affiliates will likely continue given that scale is becoming increasingly important for companies to absorb the increased compliance costs, as well as to become attractive acquisition target for the larger affiliates. Consolidation also raises questions for super-affiliates, while those who control their own properties are probably best placed to reap the benefits of the consolidation of the market. The future of affiliate networks is less visible: they will either have to play a role in the acquisition of smaller affiliates or risk losing significant market share.
“Our main concern right now is addressing all the new laws and regulations that have and are coming into place in the gaming industry across the globe. We feel instead of waiting for something to happen, we would rather address these issues as a whole to be ahead of any problems that could arise in the future. We are focusing on many countries at the moment and are ensuring that we, our affiliates as well as the casinos we work with are fully compliant."
Dennis Dyhr-Hansen, CEO of Matching Visions
The changing regulations have now seen operators become responsible for the actions of their affiliate members, and, in turn, operators have begun to place greater scrutiny on affiliates’ actions and implemented higher due diligence requirements. Conversely, affiliates, having been burdened with all these new requirements, are asking operators for a larger revenue share to compensate for these additional costs. This, operators are warning, could reduce the return on investment of their affiliate programmes, making them less attractive than other marketing channels.
“Affiliates are still a key driver of business, especially in markets where affiliates still dominate the SEO acquisition channel. We are extremely data driven in our marketing efforts and are constantly monitoring investments and expected results. If an affiliate starts charging too high a price for their traffic, we eventually need to stop working with them."
Remko de Boer, Acting Head of Affiliates at LeoVegas
There is widespread agreement that hard times are ahead for affiliates as more regulators are keeping a closer eye on affiliate activities. However, not all in the industry believe this is a bad thing. Many operators and affiliates are saying they would welcome some level of regulation, be it in the form of government or self-regulation. Proponents of regulation argue that tighter rules will lead to better practices and improve industry standards in the long term. Companies also like this concept because it would help them separate the best from the rest and allow them to only work with serious affiliates. In any case, affiliate regulation will surely be a topic that will feature high on the industry’s agenda in 2019 and beyond.
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