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A daily podcast delving into the biggest stories of the day throughout the sports betting and igaming sector.
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Hello and welcome to the iGaming Daily podcast where we dive into the latest trends and developments shaping the gambling sector. Today we're taking a close look at how some of the industry's leading players are navigating the challenges and opportunities of 2024 within the affiliate space. And joining me on today's episode is SBC News' content director Ted Memwear and SBC's media project director Martin Elliott as we explore the financial performance of key companies Tina Media, gambling.com and rake tech. We'll also be tackling some of the pressing regulatory concerns raised by the American gaming association regarding sweepstakes models, which seems to be a hot topic at the moment within the gambling space across the globe, not just in the U S but first mine, Ted, are you okay? Yeah, I'm very well. Thanks James. Uh, nice to be back on with my old sparring partner, Ted. It's been a while. How are you feeling today? You're going to put your fist up against Martin? Um, yes, I am. For good to be good to be back guys with my, my old dancing partner, Martin. So I prefer to say, well, let me go get changed. I'll put on my, uh, white and black stripes and I'll be the referee in between you to try and keep this. Not PG. Let's not go PG, but let's keep it clean. Um, we're going to dive in straight away, but before we do I'm just a quick shout out to our sponsor, which is OptiMove, the number one CRM marketing solution for the iGaming market. The offer still stands for people. If you want that free month of OptiMove, please visit optimove.com forward slash SBC. I, and as usual, I will leave all the links in the description below. That was a very quick one. I'm sorry OptiMove, but we have got a lot to dissect. So first off, and I think let's kick things off by discussing. the financial results posted by some of these biggest names because that really does kind of help us move into the conversation. Better Collective, they reported a flat, despite a 27% revenue increase in Q2. Ted, I'm going to come to you on this one first. How significant is this kind of divergence and what does it kind of tell us about the current state of the affiliate market? So... Better Collective has been the outlier for affiliate PLC in terms of performance and shareholder value since its IPO in 2019. Its interim results detailed that Better Collective's more better maintains revenue growth at 190 million euros, but has suffered a poor Q2B to stagnation of 20 million. The primary reason is related to the company shifting its operating model for its US network from high value CPAs to rev shares. And this is a process which began back in the first half of 2023. Leadership believes that a beta upgrades will return once financial comparatives stabilize for its US network. This is much needed as US media generated just 1.7 million a beta from 26 million revenues during Q2. The other dynamic is that Beto Collective claimed weaker initial earnings contributions from acquisitions of Playmaker Capital, the platform in which it hopes to build its Latham network. Overall, I think it's important to note that Beto Collective maintains its upgraded targets, which on a year basis sees Ebitda just lag only 5 million behind target. Okay. Martin, do you want to put a jab towards Ted or a left hook? No, not really. I think the interesting thing from the better collective results is really what they will hope is that short-term impact for switching to the rev share model. I think they've made a good long-term decision to do that. If you look at the way the operator market is shaping up in the US. not a huge amount of competition, particularly in sports. iGaming hasn't yet opened up in the way everyone was hoping it was. So you can almost view it as a defensive move to go with a longer term rev share sort of model. I think it'll work for them, but time will tell. Yeah, one of the things I've seen from all four of these financials is the trend where revenue growth isn't necessarily like leading to kind of higher profitability and comparing these with like companies like gambling.com and rate tech, they're kind of experiencing their own financial struggles for both of you. Is this a sign that the affiliate sector is kind of under more pressure than it's ever been because there's been so much more focus recently on affiliates, which I think is really good. But It seems quite, what's the right word to use? Hostile in terms of figures that are coming through, if that makes sense. Look, I'd rate right, look. The affiliate was, you know, it was kind of considered kind of a gross segment for the industry, right? It's now becoming kind of, as we've seen from Better Collective results, is that it is reflective of the market conditions, especially in the US. Now, part of the reason where Ebita is lagging for Better Collective, it's because the US network is kind of recalibrating to US conditions, especially against high CPAs that were paid out. in 2023. Essentially, it needs the US network to rebalance and to stabilize and to move on to rev share deals to then say, look, long term, this is a more sustainable profit or more sustainable model for our media in the US. That's part of the process. And I think that's part of the reason why you don't see better collective panicking or triggering a corporate transformation. Do you actually think kind of the move to the US is that long-term smart move? Because I mean, every kind of strategic shift has its pros and cons, but as you've seen on the scene with the North American market, I know there's a big influx of companies coming in and then they struggled and we're kind of seeing kind of consolidation across the gambling space in the US. Is there not a risk now that they're actually entering a market which is competitively fierce or actually maybe not as thriving as more than we thought and that regulatory landscapes? just a bit complex, obviously with various states. Well, the US has not panned out the way everyone hoped it would do post-Paspa. So it is difficult. And what we are seeing a bit is that the affiliate market is almost going in the same way as the operator market in that you're just getting big players emerging, big, very successful players. There's the odd niche. success like betting hero. We've got this model where they sign people up in shopping malls and at sports games and so on, rather than just doing it all online. But in general, it's the big players who are being set up for success. So if you look at elsewhere in better collective results, Europe is doing they were doing quite well in Europe still quite well in the rest of the world. So it's not a full. We've bet the house on America in it. And if it doesn't come in, it's game over. Well, not for better collective anyway. And one or two of the others have maybe over-focused on the US. So do you want to name drop one of the two of the others? Well, Katina looked like they might have gone a bit too far down that route, but they've got, they've got a new CEO in who said, he's been pretty blunt. He just said. The team before had the wrong strategy. I've got new ideas. He was quite bullish in the earnings call the other day. So perhaps it's too early to write them off completely. Yeah, I do kind of find it kind of funny where you've just said they were doing it the wrong previously. He's got the right ideas. Those right ideas seem to focus heavily on sweepstakes. And once a kind of announcement of kind of the company's shift towards that being their kind of prime future, the American gaming association came out quite strongly against kind of sweepstake based wager models, which It's concerning for kind of, I think it's concerning for Katina, a bit for the affiliate space, but definitely Katina who have kind of shifted a lot of their focus towards it. Well, I think Katina have only been the most vocal about it. If you do a bit of a Google search around the sweepstakes models and affiliates, most of the affiliates have leaned into this as a sort of a shadow i-gaming market. Some of them are saying they think, well, you know, it's a good player acquisition tool for when more states go live with regulated iGaming and so on. I, that's not the way I see things playing out because regulators are already getting a bit, a bit chippy about these sweepstakes casinos and some of them have had sort of warnings from regulators to cease operations in certain states. The AGA thing. You have to remember what the AGA is. It's got a very official sounding name, but essentially it is a lobbying organization, which has to speak up for its members and its members are people who've gone to the expense of buying licenses and, you know, complying with all the quite restrictive regulation in various US States. So it's speaking out and saying these things aren't legal because Its members do not, its members think we've spent all this money and we're going to lose a bit of market share. And they're right to take that stance on behalf of their members. Where the legal truth lies will of course be played out in courts and by regulators over the next couple of years. In my opinion, Katina carries the highest risk strategy of any affiliate PLC in the industry. And looking at kind of It's H1 accounts. Deficiencies are everywhere, but especially to a strategy, it's just how, how badly it's lagging in its U.S. support performance. Um, delivery of new customers was half to 30, to 30, to 30,000. Whilst revenues declined by 65% to 9 million. And the unit's kind of detailed and kind of recurred beta losses of 5 million. So. It's got a lot of catch up to do in age two on the sports book front. Perfect. Just looking at the time and we've got a few things to cover. And one of the things I definitely do want to cover, which is huge in the affiliate space. I mean, it's huge in a lot of spaces that have online and online presence, but the affiliate sector in particular, and that's kind of SEO challenges and kind of alternative traffic strategies as well. So. We know that SEO has kind of been this kind of cornerstone for affiliate marketing, but there's been recent algorithm changes. You have companies like Rayetech, they're kind of feeling the pinch now. We've seen what's happening with Google. What impacts do you think these changes have on the affiliate revenues overall and how companies are adapting and we won't just focus on Rayetech, let's focus on all four of them. You know, gambling.com, Markatina, Bear Collective and Rayetech. Good question. I think that you have to take the presence of affiliates and the commercial models across all media platforms now. So it's no longer just relevant to one discipline being SEO. What we've seen in the past years is that they're growing their media buying units, display, you're getting more kind of prominence of hybrid contracts. But in terms of affiliate marketing... As a discipline, affiliate marketing kind of reflects the conditions of the market. So going back to the US, Martin pointed out that there is kind of a decrease in competition and that is true. There are less bookmakers or less kind of active bookmakers in the US. And it's the same with Google. The affiliates have to make changes or have to adjust and accommodate Google changes. Now going back to what we've seen in H2, my view is that Katina... from what's been reported carries the biggest exposure in terms of its paid partnerships with US partners to Google changes and it's the most susceptible to it. It is a discipline in which the majority of affiliate PLCs are putting significant resources to so I don't think that they're just going to be giving up on paid partnerships, but I think they've now got to kind of readjust to putting out better, more informative content. and kind of re-engaging their partnerships in a new way. Well, good. Just for the listeners there, Martin, if anyone's hearing any click and it's not Ted being a ticking time bomb, it's Ted being a pen ticker. So, uh, just an FYI, Ted, put the pen down. Sorry, Martin, continue. Um, I can't remember what I was going to say there. Um, right. Okay. Um, the, the pay partnership thing is, uh, in Google is interesting because that wasn't an algorithm change yet. They were manual penalties to downgrade all these paid partnerships. I find that really, this doesn't help with the commentary about the state of the affiliate industry, but I do find it an odd decision by Google that before I could go on and type in, whatever, best sign up offers for UK bookmakers. it would take me to a daily Telegraph page with the best signup offers for UK bookmakers. It doesn't do that anymore as a result of the change. I don't see what the harm was in those paid partnerships, but there we go. That's an aside. It's happened and it has been costly for a number of these businesses. And what we're seeing now is a core algorithm update rolling out throughout August as well. And there's been a lot of volatility in search results over the past few weeks. And it'd be really interesting to see when that settles down next month, who the winners and losers are from that. But, you know, there's no getting away from it. Ted mentioned, you know, a number of other channels open to affiliates now. But while Google has this hold on consumers around the world, it will remain probably the primary channel for affiliates to find business. And they've just got to live with and carry on adapting to the policy changes of, frankly, as somebody who's worked in marketing previously, the most annoying company in the world. I've said it once and I'll say it again. We need to forget about Google and we need to bring Ask Jeeves back. Like that was the go of a search engine. Sorry, Ted. I think one thing that's forgotten is that in the ecosystem of iGaming, and you have to remember that affiliates also compete against operators for keywords. So it is a kind of a constant battlefield as in who's getting keyword rankings. And it's, you know, it's not just a discipline that's bound for affiliates, it's bound for every kind of stakeholder in the industry. So there will be affiliate losers, but there will also be affiliate operators in the Google algorithm change. Cool. Right. We're going to look at rounding this up and We might struggle to kind of round up all four of these that we've talked about, but there's a few things that we've also, I also want to discuss about kind of diversification, technology investment and kind of new revenue models, which we've touched on a little bit. Are there any emerging trends that could define the future of the affiliate section? Okay. So, 2023 and 2024, we've seen, like mirroring operators, a lot of the gambling affiliate PLCs have entered a period of reorganization and transformation, rebalancing their networks. And then the other thing is that they kind of... undertaking a revision of the required M&A assets. So this is definitely a period of transformation for the main players in the affiliate space alongside the Google changes that we talked about. I think just short term from an H2 perspective, I think the analysts and observers in the affiliate space are really going to be looking at the cost balance sheets of these companies, right? So you mentioned that they got big tech projects, big integrations, but it's also, it's going to really come down to what is their revenue to beta generation and how they maintain kind of cost balance sheets, right? Reflective of how good the business and how sustainable their business is long-term. So I don't think that they're just looking at this on a six month period. I think in that... This is a critical kind of agency to say, look, we can reorganize, right? But we can come out better in 2025 and 2026. So the other thing is I think that they're all looking at each other's assets and analyzing, well, if. If one of these companies has a bad period in the next age, too, I think that they could be looking at that and saying, look, these are easy, easy assets that we can kind of vulture off these guys. The M&A won't stop in this sector. Perfect. Martin, do you want to deliver the knockout blow now? To end the podcast? Ted has summed it up really well actually. Oh, so he's not GV? Yeah, he's not me. Are you on the canvas? Yeah, absolutely. Absolutely. I think two things to watch out for though, slightly away from what we've talked about, is Brazil. Is anyone going to make a... the affiliate space is going to make a solid move in Brazil. The other thing is how well these companies will adapt to the biggest change coming down the line in Google, where they are rolling out AI overviews in search results for, well, around the rest of the world before the end of the year. It's just been in certain parts of the US so far. That's a big change to how results are presented to consumers. And it will require across all industries, not just gambling affiliates to rethink how they perform SEO and how they're going to drive revenue from organic search. So really interesting to see what plans these guys have got in place to adapt to that. Maumata, do you think that affiliates will be the first kind of segment of the industry to kind of suffer kind of an AI rupture? I think it has the potential to do that because the way Google has been talking about AI overviews or it's actually rebranded to that fairly recently, but it's always said the idea will be we will take you directly to the information you want, not to a selection of sites which vaguely mention it, which is how Google works at the moment. They've struggled to make that work in testing so far. But if they do make it work, why would operators need affiliates? And that's a question for another day because we've run out of time. I can't believe we've actually managed to dissect all this in 20 minutes. So mine and Ted, well done. Thank you for helping us through this. For the listeners out there, any information that we've talked about today, I will leave links to the relevant articles in the description below. Please go and check them out because Ted. Memwear, the SBC News team and the Casino Beach team have done a cracking job in covering this when it breaks and in great detail. But apart from that, I've been James Ross, been joined by Ted Memwear and Martin Elliott, and this has been iGamingDaily, supported by Optimove. Thank you, goodbye.