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Affiliate MonitorOctober 2019
Written by Clear Concise Media
for iGB
Published October 2019
© 2019 iGaming Business Ltd
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The information contained in this publication is believed to be correct at the time of going to press. While care has been taken to ensure that the information is accurate, the publishers can accept no responsibility for any errors or omissions or for changes to the details given.
Readers are cautioned that forward–looking statements including forecasts are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified and, consequently, the actual performance of companies mentioned in this report and the industry as a whole may differ materially from those expressed or implied by such forward–looking statements.
Author: Scott Longley
Editor: Stephen Carter, Joanne Christie
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iGaming Business • Affiliate Monitor • October 2019 iii
Contents
Editor’s letter .................................................................................................................... 1
Executive summary .................................................................................................... 2
Part 1Analysis of second quarter results .............................................................................3
Part 2: The US affiliate opportunity ..........................................................................................9
Part 3: RAIG and the regulatory push and pull plus Portugal opportunity ..........12
Part 4: M&A update .........................................................................................................................16
iGaming Business • Affiliate Monitor • October 2019 1
Editors Letter
Editor’s letter
The headline development this quarter is that Better Collective’s
stronger momentum in acquiring NDCs, as predicted in our last
report, has seen it overhaul Catena Media in this crucial KPI.
Catena is still the largest performance marketer among its listed peers
based on the headline metrics of revenue and EBITDA, but quarterly
NDC volumes have clearly been tailing off since it took its foot off the
consolidation pedal.
CEO Per Hellberg subsequently announced a number of SEO-focused
turnaround measures designed to address a situation the company is
‘clearly not happy’ about and promised analysts they will do better in H2.
The Catena boss also revealed the direction of travel in terms of value
per individual NDC was in the opposite direction to volume, up to €235 in 2Q19 from €170 in 4Q18.
With regulation continuing to subdue performance in markets such as Sweden, Spain, France and
Italy, geographic expansion was also a common theme of the Q2 earnings releases and analyst calls,
with the likes of Latam, Japan and India – and of course the US – all figuring.
In the US, affiliates of course face several hurdles on top of the state-by-state rollout, not least the
huge DFS player databases of FanDuel and DraftKings reducing these brands’ need for affiliates and the
absence of online operations in the initial launch phase in some states.
Gambling.com Group’s Charles Gillespie also makes the point that US regulators prioritising
‘suitability’ above black and white rules on advertising and problem gambling controls could
conceivably see the sector run into the same problems as we are now seeing in the UK and Sweden.
We hope you enjoy this report and find it useful. Should you have any suggestions or feedback please
don’t hesitate to email me at [email protected]
Stephen CarterEditorial director, iGaming Business
iGaming Business • Affiliate Monitor • October 2019 2
Executive summary
Executive summary
The big news from the second quarter
results from the listed affiliates is the
change at the top in the key metric of new
depositing customers (NDCs). Better Collective
has taken top spot from Catena Media with an
NDC count of 111,000 in the three months to June,
compared with just under 100,000 for its rival
over the same period.
It is, of course, only one metric; Catena Media
still leads the sector in terms of revenues with
€23.7m in the second quarter versus €15.8m over
at Better Collective. It is also ahead on EBITDA
with €9.4m versus €7.0m.
This change at the top on NDCs comes at an
important stage of development for the sector
as a whole. The opening up of the US sports
betting market has presented the affiliate
sector with a huge new potential opportunity
and the sector leaders have not been slow to
make their moves.
Catena Media had already bought its way into
the US prior to the repeal of PASPA and now
Better Collective has made its own move, buying
first a 60% stake in the RotoGrinders Network for
$21m (with an option to buy the remaining 40% in
three to five years) and then following it up with
the VegasInsider.com and ScoresandOdds.com
buyout in July for $20m.
These are big statements on intent and taken
with the other moves in the US from Catena and
the rest, it is fair to say the largest companies
in the sector have pivoted towards the sports
opportunity in the US. Whether they will succeed
is a question that will – as with the operators –
take some time to answer.
The timing of the US opportunity could not
have been better given the extent to which the
regulatory pressure in Europe continues to be
ratcheted up on affiliates as much as operators.
References to issues in the UK, Sweden, Spain,
France and Italy pepper the results statements
of the listed firms and all go to illustrate the
degree to which the regulatory embrace now fully
encompasses the affiliate sector.
In response, three leading names within the
affiliate space have launched a new organisation
called Responsible Affiliates in Gambling (RAIG),
with which they hope to encourage best practice
in the sector while also providing it with a voice
for the first time.
How the sector evolves from this point will be
of interest to the operators as much as to those
involved in the affiliate space. As ever it should
be noted that the listed firms that this report
concentrates on are not the whole market, but
together they provide an informative straw in the
wind and help provide an understanding of the
market as a whole.
iGaming Business • Affiliate Monitor • October 2019 3
Part 1: Analysis of results from second quarter
compared with Better Collective’s €15.8m. The
rest of its competitors are all sub €10m. Also, in
terms of adjusted EBITDA, Catena remains on
top, albeit by less of a margin at €9.4m to Better
Collective’s €7m.
The quarterly results snapshot provided by
the listed gambling-related affiliate sector
has once again provided a glimpse into
the major trends currently affecting affiliates and
suppliers within the gambling space.
For the second three months of the year, the
results show that by the important metric of new
depositing customers – also termed first-time
depositors – there has been a change at the top.
Between April and June this year, Better
Collective added circa 111,000 NDCs while
erstwhile sector leader by the number of
customers, Catena Media, slipped back to circa
99,000.
However, it should be clearly stated that
when it comes to other important metrics,
Catena Media remains the listed sector leader.
By revenues, it continues to be ahead of the
pack with second quarter revenues of €23.7m
Part 1: Analysis of results from second quarter
Table 1: Listed affiliate 2Q19 results comparison
Metric/Company Catena Media
Better Collective
Raketech Gambling.com
Group
GIG (media
services)
Net Gaming Europe
Revenue (€m) 23.7 15.8 5.7 4.4 8.6 3.5
YoY revenue rise (%) -9 64 -6.1 17 -1 -23.9
Adjusted EBITDA (€m) 9.4 7.0 2.9 1 4.7 2.0
YoY Adj. EBITDA increase (%) -22 79 -10.7 -29 0 -32.1
EBITDA margin (%) 40 43 51.1 21 55 58
Pre-tax profit (€m) 7.1 3.7 1.8 Unkn n/a 1.3
YoY organic growth rate (%) -10 18 -8.8 17 Unkn -27
NDCs 99,981 111,000 24,974 19,487 29,435 Not stated
YoY NDCs % increase (%) -29 60 21.7 22 -6.9 -29
Proportion of revenues from rev-share (%)
47 74 45 Unkn 60 47
Source: Company results
Chart 1: NDCs – Better Collective overtakes Catena Media
60000
70000
80000
90000
100000
110000
120000
130000
140000
150000
Q218 Q318 Q418 Q119 Q219
Better Collective Catena Media
Source: Company reports
iGaming Business • Affiliate Monitor • October 2019 4
Part 1: Analysis of results from second quarter
Yet NDCs are an important measure of the
health of any affiliate organisation and Catena’s
relative decline in this area is worthy of some
analysis.
NDC focusDuring the second quarter results analyst call,
Catena Media repeated the message from its
capital markets presentation from last November
that it was quality rather than quantity that
mattered when it came to NDCs. As chief
executive Per Hellberg stated at the time, the
company “doesn’t talk about NDCs internally” and
“volume is not the key”.
Yet the NDC number still represents as good
a measure as any for the health of any gambling
affiliate’s business. The business is a funnel and
whether the affiliate’s revenues are dependent on
CPA or revenue share, the number of NDCs will be
the determinant for future revenues.
As such, the trend for Catena Media’s NDC
count will likely be the cause of some headaches
within the company.
The company was, of course, built on
acquisitions; as of last November it said it had
completed 34 deals and had collected more than
1,200 website brands. This strategy of pursuing an
affiliate space land-grab had achieved results and
between the first quarter of 2017 to the second
quarter of 2018, NDCs soared 74% from more than
80,000 to about 140,000.
However, in the four subsequent quarters this
metric has gone into reverse. Since Q318 the
quarter-on-quarter NDC trend has been negative,
with an average decline over the past four
quarters of 8% and a hefty 19% drop between the
first and second quarters of this year. In year-on-
year terms, meanwhile, the drop in the second
quarter is worse at nearly 30%.
The company has cited, variously, the effects
of regulation in key territories including the UK,
Sweden and, perhaps surprisingly France, where it
said the regulator had asked that it separate two
products, lead generation and paid-for betting
tips, onto separate sites.
In the UK, the company said that the KYC
Company “clearly not happy” with NDC numbers and “will do better in second half”Per Hellberg – Catena CEO
Chart 2: Catena Media’s NDCs rise and fall
160000
140000
120000
100000
80000
60000
40000
20000
0
Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Q119 Q219
80421 91222 100741 113258 133322 140154 138194 127805 124007 99981
NDCs
Source: Catena Media
Chart 3: The quarter-on-quarter NDC performance at Catena Media
-20
-15
-10
-5
0
5
10
15
20
25
Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Q119 Q219
%
QUARTERS
Source: Catena Media
iGaming Business • Affiliate Monitor • October 2019 5
Part 1: Analysis of results from second quarter
checks introduced earlier this year were the
source of delays in player activities and sign-ups
in May and June, while in Sweden Catena said
there was “no tangible improvement” due in part
to seasonal lows.
The company also blamed player winnings
which, it said, affected its revenue share
arrangements, particularly for AskGamblers.
During the second quarter results earnings
call, Hellberg said the company was “clearly not
happy” with the situation regarding NDC numbers
even as he repeated the message about quality
over quantity. He also suggested the company
was engaged in various remedial measures to
turn the situation around. These include the hiring
of more than 30 new SEO, product design and
management personnel, plus the hiring of external
agencies. These have been working on what the
company said have been, to date, 24,000 SEO
fixes across its vast website estate. “Our aim is
more NDCs,” he told analysts. “We will do better
in the second half.”
Catena also pointed to the value per NDC
figure, a somewhat newer metric in the affiliate
space. According to a chart produced in the
second quarter presentation, that figure had risen
from circa €170 in the fourth quarter of 2017 to
about €235 in the second quarter of this year.
NDCs comparisonsWhat is obvious from the results elsewhere in
the listed affiliate space is that Catena Media is
not alone in suffering a reverse in new player
numbers. Both the media services division within
Gaming Innovation Group (GIG) and Net Gaming
Europe also suffered year-on-year NDC declines.
Conversely Raketech and Gambling.com Group
– which although not listed has a bond listed on
the corporate bond list at Nasdaq Stockholm and
hence releases quarterly results – each followed
Better Collective’s lead with NDC rises of circa
22% each.
Given the variance in business models and
geographies across the listed affiliates, it is hard
to draw many conclusions from the numbers.
Regulation was cited as a drag also by Net
Gaming Europe and by Gaming Innovation Group,
along with the comparison from last year when
the World Cup took place partly during the
period.
At Raketech, the picture on NDCs was far more
upbeat, even though the company said during its
own earnings call with analysts that in Sweden
– which remains its biggest market – growth
had “stalled”. The Nordic region as a whole
represented nearly 97% of total second quarter
revenues.
We generally have high traffic levels on our sites, but player values remain at the lower levels, which we have noted since the beginning of the year.Michael Holmberg, Raketech
Table 2: Listed affiliates NDC comparison
Metric Catena Media
Better Collective
Raketech Gambling.com
Group
GIG Net Gaming Europe
NDCs Q219 99,981 111,000 24,974 19,487 29,435 Not stated
YoY NDCs % increase (%) -29 60 21.7 22 -6.9 -29
Source: Company reports
iGaming Business • Affiliate Monitor • October 2019 6
Part 1: Analysis of results from second quarter
The US aside, areas cited variously for
expansion include Latin America, with Spanish
and Portuguese language sites very much to the
fore, parts of eastern Europe including Romania,
and Japan and India.
Notably, there is a clear move towards
unregulated markets. While the focus for many of
the affiliates’ operator clients will be on regulated
markets, and the risks involved there, the affiliates
themselves will be seeking greener pastures in
markets where the regulatory framework is either
in the process of being built, such as Brazil, or
entirely absent, as in India and Japan.
“We generally have high traffic levels on our
sites, but player values remain at the lower levels,
which we have noted since the beginning of the
year,” chief executive Michael Holmberg told
analysts.
Geographic expansionThe dependence among many affiliates on key
regulated markets across Europe – previously
trumpeted by Catena Media as a strength – is
being addressed to varying degrees across the
listed sector. Of course, the US is already a major
area of activity and this will be dealt with later on
in this report.
Company-by-company results takeaways
Catena Media• Revenues of 23.7m, down 9%
• EBITDA of €9.4m, down 22%
• NDCs down 29% to 99k
The second quarter was one to forget for
Catena Media. The company laid out a host
of reasons for the revenue miss including
seasonality, regulatory pressure in the UK and
France, continuing issues with the Swedish
market, a drop-off in lower-value NDCs and
instances of higher player pay-outs in casino.
EBITDA target of €100m is nixedHaving previously abandoned its EBITDA
target of €100m, chief executive Per Hellberg
had to admit during the earnings call that the
target was “a long way away” at present. “The
ingredients are there to make that happen, but
costs will be a factor,” he said. No new target
date was set.
Geographic expansion plansOne remedy for Catena’s ills comes with
plans for further geographic expansion, with
sports being launched soon in Japan and
sport and casino slated for launch in Romania.
The company also said it would be dipping a
toe in South America with both Spanish and
Portuguese language sites planned.
Third quarter improvementsRemedial actions have taken place within the
past three months or more to improve under-
performing assets and Hellberg said that the
results of this were being seen in third quarter
trading to date.
Italy and FranceWhile discussions with the regulator in Italy are
ongoing, it was notable that Hellberg said that
trading in the market was “more or less dead
in the second quarter”, With Italy now below
10% of total revenues. In France the company
has two products, lead generation and paid-
for professional tips, and Hellberg said the
regulator had instructed these can no longer be
on the same site.
Raketech• Revenue down 6% to €5.7m
• Organic growth down 9%
• Adjusted EBITDA down 10% to €2.9m
• NDCs up 22% to circa 25k
iGaming Business • Affiliate Monitor • October 2019 7
Part 1: Analysis of results from second quarter
Raketech said continuing uncertainties in
Sweden and a tough comparative with last year
due to the World Cup were to blame for the
year-on-year revenue fall. Specifically, Holmberg
suggested the market in Sweden, Raketech’s
largest market, had “stalled”. Looking ahead, he
said early third quarter trends suggested player
values “will not decrease any further”.
Geographic expansionLatin America was again given a mention
and Holmberg also suggested the company
was looking at Spain and Italy. The results
came before the Japanese-facing Casumba
acquisition, which was prefigured by Holmberg
suggesting Raketech was “looking primarily
at Japan and India”. Unlike some of its rivals,
Raketech gave the impression that it was not
entirely convinced by the potential in the US.
“Short-term, we see better growth (prospects)
in other markets,” he told analysts.
Better Collective• Revenue up 64% to €15.8m
• Organic growth of 18%
• EBITA up 77% to €6.8m
• New depositing customers for the quarter at
111,000, up 60%
As the company said, this was a decent
performance given the World Cup comparatives
from last year. The key for Better Collective
will be execution in the US. The company was
more positive than some of its rivals regarding
Sweden, although it too suggested that in the
second quarter revenues had been “lower due
to seasonality”.
M&AAhead of the acquisition of UK-facing
mybettingsites.co.uk, chief executive Jesper
Søgaard suggested the company had a “good
position in the M&A space”. “We are also
looking at skill sets. And potentially markets or
environments where we feel sports betting is
important.” This pretty much fits the bill of the
mybettingsites.co.uk deal, where the ex-owner
Ian Bowden has remained in situ as the head of
the UK for Better Collective.
Geographic expansionAccording to Søgaard, the company believes
South America represents a “great opportunity”.
“We are already invested in that region; it is
quite high on our agenda.”
GIGB2B media highlights
• Revenues and EBITDA flat – €8.6m against
€8.7m last year and static at €4.7m,
respectively
• Sequentially, revenue down from €9.1m,
EBITDA down from €5.2m
• Revenue share was down to 60%; CPAs up
to 17%
• FTDs down from 31.4k to 29.4k
In his last presentation as CEO Robin Reed said of
the affiliate business that it had a “solid quarter”
given the World Cup comparatives from last year.
Though the media business remains stable, as the
company has noted previously, clearly the issues
going on elsewhere are having an impact on the
organisation as a whole. The flat-lining revenue
performance and slight decline in NDCs will likely
have been concerning to the board given the
business’s reliance on media services revenues.
Expansion plansIn terms of the geographic expansion of
the media division, the company said it had
received a licence to operate its affiliate
business in Romania.
Sale of Highroller.comAhead of the results, GIG announced it had sold
Highroller.com to Ellmount Gaming, an affiliate
business based in Malta.
iGaming Business • Affiliate Monitor • October 2019 8
Part 1: Analysis of results from second quarter
Net Gaming Europe • Revenues down 24% to €3.5m
• EBITDA down 32% to €2.0m
• NDCs down 29%, with casino NDCs down
33%
• 32% decline in US revenues “due to
competition” for PokerListings
Net Gaming Europe blamed its disappointing
performance on the regulatory backdrop
without talking specific countries (though
UK and Sweden are obvious problems). The
company is hoping to transition to more
revenue-share arrangements from CPAs and
said its results were impacted by this move.
However, it is still reliant on casino (69%) and
poker (13%) so no sports revenues as yet. It said
the fall in US revenues is down to competition.
Falling NDCs
CEO Marcus Teilman admitted that the move
to revenue share will hit the top line and the
NDCs figure. “We will get more stable revenues
over time. You can also see the NDCs decline
by 29% and revenues by 24% and that is related
to the difference between revenue share and
CPAs. Over time that will benefit us.”
Gambling.com Group• Revenues up 17% to €4.42m, all organic
• Adjusted EBITDA down to €0.99m from
€1.39m; EBITDA margin also down to 21%
from 37%
• NDCs up 22% to 19.5k
Gambling.com is making a big push in the US –
it has established an office there and launched
the American Gaming Awards – hence the fall in
EBITDA (presumably) due to the investment.
Investor shiftThe big news for the company came
subsequent to the results, however, when it
announced it had secured a $15.5m investment
from private equity firm Edison Partners. In the
press release announcing the deal, Gambling.
com said it believed the US opportunity
would be sizeable and would “grow to rival”
the European market in the coming years.
The press release said Edison is replacing an
existing shareholder at Gambling.com, but iGB
understands that this is not Mark Blandford, the
largest shareholder at the time of the issuing of
the listed bond issue.
iGaming Business • Affiliate Monitor • October 2019 9
Part 2: The US affiliate opportunity
What should we make of the US
opportunity for the affiliate sector
at present? The biggest two in the
sector are now positioned for picking up potential
US growth, yet the figures we have seen to date
suggest it will be a while before we see the
degree to which US sports betting may transform
the gambling affiliate space.
Catena Media is certainly betting that the US
will be central to its business in the years to come,
with chief executive Per Hellberg saying the
question was simply one of quantum and when
the uplift would kick in.
“We expect the higher numbers to come,” he
told analysts. “We had a very good July. We live
by previous statements. We think the US will
double our business.”
At present, analysts believe the US represented
circa 10% of Catena’s revenues in the first half and
with Pennsylvania coming on stream they expect
that percentage to rise to circa 15% by the end of
the year.
Hellberg referred to the good news on states
such as Pennsylvania opening up when he said
that with regards to the process of state-by-state
legislation, “everything improves for the better”,
not just for the second half of this year, but also
for 2020 and beyond. “We are very happy with the
Part 2: The US affiliate opportunity
outcome over there (in the US),” he added. “We
have a good reputation and want to build on it.”
The DFS problemOne aspect of the US business alluded to on the
call which will be examined closely is the degree
to which, in New Jersey at least, the affiliates
have been somewhat sidelined due to the daily
fantasy sport (DFS) beginnings of the early
market leaders. Both DraftKings and the Flutter-
owned FanDuel have extensive and ‘live’ customer
lists from their DFS operations, which they have
successfully relied on to fuel their market entry
into sports betting.
Hellberg suggested that Catena’s fortunes
would reverse once there was further operator
competition, particularly in New Jersey. “There
are also more operators and they don’t have the
databases,” he told the assembled analysts. “So
they will need more affiliation; it will take a larger
part of the revenues.”
This could well be true; the newer market
entrants – whether that is MGM, Bet365 or Fox
Bet – do not have the DFS customer lists of
DraftKings and FanDuel. But they do have other
strings to their marketing bows; MGM has the
huge M life customer loyalty scheme, while Fox
Bet has the Fox Sports ownership behind it, on
The degree to which affiliates have been sidelined due to DraftKings and FanDuel’s extensive and ‘live‘ customer lists from their DFS operations will be examined closely.
iGaming Business • Affiliate Monitor • October 2019 10
Part 2: The US affiliate opportunity
the US affiliates but there are others. Land-based
registration processes as adopted in some states,
particularly Illinois, for instance, will be the cause of
obvious problems, as will states that don’t initially
opt for online operations at all, such as New York.
There is a layer of cultural and consumer context
that also needs to be addressed, according to
Charles Gillespie, chief executive at Gambling.com
Group, which also has US ambitions.
“Particular types of content and the maturity
of the consumer differ significantly from Europe
so the actual execution does require a different
approach in terms of product,” he says.
This was also mentioned by Søgaard on the
earnings call. “We also expect it will need a
different and dedicated approach,” he said. “Each
state is like an individual country. Some products
can work across the entire US market whereas
others need to be tailored for a single state.”
The cultural differences extend to the
regulatory level. Gillespie points out that US
state regulators tend to “prioritise suitability”
over other aspects of corporate probity. As he
says, this is to, “make sure that the people in
the business have a clean background and are
suitable enough for the privilege of operating in
the regulated gambling sector”.
However, this approach makes some
assumptions about “suitable” businesses making
decisions regarding their commercial objectives
and to what extent the business should be
pushed to hit target.
“But businesses need black and white objective
rules handed down by the regulator to tell them
where the boundaries are, or they will simply push
as hard as they can,” he says. “The US regulators,
by and large, do not prioritise the issues that
top of the gaming experience of Stars. Bet365,
of course, may have more of a need for affiliate
marketing and that, along with many other
reasons, is why the Stoke company’s entrance on
the US scene is exciting so much interest.
To an extent, the DFS database issue has
effectively been confronted head on by Better
Collective, which bought out leading DFS-
related affiliate RotoGrinders in May. As Søgaard
acknowledged, this “brings an audience”. BC has
also subsequently added to its US presence by
snapping up two tips sites, VegasInsider.com and
ScoresandOdds.com.
“These two websites have been the platforms
preferred by millions of visitors and they have the
potential to become the largest revenue-generating
assets for Better Collective in the coming years,”
Søgaard said during the earnings call.
With both the RotoGrinder and VegasInsider
and ScoresandOdds deals, it is clear that Better
Collective has gone for established brands. “With
the regulated market, these sites are already
reaching the exact demographic we want to
target,” said Søgaard. “That’s why we see such a
big opportunity.”
Moreover, in partnering with NJ.com, one
of the largest publishers in New Jersey, Better
Collective is also aiming at pressing home its
message with a wider mass audience. “Clearly
we see this as an important business going
forward, as we are teaming up with publishers
that have huge traffic already,” said Søgaard,
who noted that the profit split on the NJ.com
deal was in Better Collective’s favour.
Further US hurdlesThe existing database issue is one problem for
The DFS database issue has effectively been confronted head on by Better Collective, which bought out leading DFS-related affiliate RotoGrinders in May.
iGaming Business • Affiliate Monitor • October 2019 11
Part 2: The US affiliate opportunity
really make a difference in online gambling, such
as sensible advertising restrictions and internal
controls to reduce gambling-related harm.”
Given such a scenario, it is entirely possible that
the sector will see similar issues arise in the US –
on the parts of affiliates and their own marketing
attempts – as have been highlighted in the UK
and Sweden. How the regulators react in such
circumstances will have a big role to play in the
success of the gaming affiliates working in the US,
whether homegrown or hailing from Europe.
The last word on the US comes from Ben
Robinson, partner at RB Capital. He makes the
point that the battle for market position that takes
place in the short- to medium-term might be one
where the affiliate sector could well be a bystander.
“The US market will be immense… at some
point in the future,” he says. “However, while
affiliation plays an integral part in the acquisition
funnel in other markets around the globe,
dominant brands in the USA already have such a
massive head start. Whether affiliates fit into the
equation in a significant way, I’m not putting my
money on that horse.”
Businesses need black and white objective rules handed down by the regulator to tell them where the boundaries are, or they will simply push as hard as they can.Charles Gillespie, Gambling.com Group
iGaming Business • Affiliate Monitor • October 2019 12
Part 3: RAIG and the regulatory push and pull
No one in the gambling affiliate sector
needs reminding of the growing
importance of regulation to the business.
It’s therefore no surprise that a new organisation
should have emerged with the express intention
of giving visibility to affiliate efforts in the arena of
responsible gambling.
However, whether the founding companies
behind the Responsible Affiliates in Gaming
(RAIG) will achieve their aim of signing up large
numbers of affiliates to their initiative is at present
open to question.
To recap, RAIG was formed in May by Better
Collective, the Racing Post and Oddschecker with
the express intention of helping “raise standards”
in the sector and foster further initiatives in the
area of social responsibility and to “help create a
safer gambling environment for consumers”.
As a condition of membership, each
organisation will submit itself to an audit by
independent third party Gambling Integrity.
Yet, while there was some fanfare in May
and widespread appreciation for the fact that
the affiliate sector was at least coming up with
some form of response to the pressure it is
facing, particularly in the UK, there have been
murmurings of discontent from some corners of
the sector.
Part 3: RAIG and the regulatory push and pull
Phil Blackwell, acquisitions operations manager
at Lindar Media, says that the £20,000 fee and
the loading of the board with members from the
founding partners, as well as Clive Hawkswood,
the ex-Remote Gambling Association (RGA) chief
executive, makes it look very much like a stich-up
in favour of the larger affiliates. Noting the lack
of activity since May, he suggests “it has all gone
quiet”. “If nobody supports it then it will have no
authority and it will fall apart,” he warns.
Certainly, Søgaard from Better Collective
said on the company’s earnings call that “more
affiliates need to come on board”. “It’s not just
the smaller affiliates that can cause issues for
the larger affiliates,” he said. “It’s any affiliate. We
have seen what can happen in the UK where the
authorities thought they had to crackdown.”
Paying heed to regulationSarah Ramanauskas, senior partner at Gambling
Integrity, says that “absolutely, standards need to
be raised for affiliates”.
“They are currently one of the weakest links in
the industry’s efforts to ensure compliance with
the many and varied aspects of responsible and
safer gambling in the UK,” she adds.
“The industry as a whole needs to work
together more closely and this includes affiliates.
If nobody supports [RAIG] then it will have no authority and it will fall apart.Phil Blackwell, Lindar Media
iGaming Business • Affiliate Monitor • October 2019 13
Part 3: RAIG and the regulatory push and pull
One of the aims of the RAIG audit is to create a
knowledge base of best practice, making it easier
for affiliates to understand what needs to be done
to comply with the many and varied UK regs, and
how best to do so.”
Ian Sims, chief executive at affiliate compliance
tools provider Rightlander, points out that the
organisation is still in its formative stages and
that it “shows promise”. But he adds a note of
scepticism. “I’ve heard some affiliates say it sounds
like a bit of a closed shop but when the premise
was first touted around, it met with a lot of verbal
support but no real commitment,” he says. “A lot
of affiliates liked the idea as long as someone else
was doing it and prepared to pay for it.”
He suggests that we will know the fate of RAIG
in six months. “These things are always easy
to criticise when you aren’t involved and don’t
understand what’s going on,” he adds.
Regardless of the fate of RAIG, there is unlikely
to be any relenting in the pressure that affiliates
find themselves under in regulated markets. And
it won’t just be the largest affiliate organisations
that see greater scrutiny as the price of doing
business, says Adam Bielinski from iGaming Nuts.
“We prefer to stay in the regulated markets,” he
says. “It is easier to calculate long-term revenues
and costs, which is less risky. It is easier to invest
in people and products when we know that
market will not change for a few months.”
Whether this message is being fully received
across the sector is open to doubt, however. Sims
says there has been “more engagement” from the
affiliates he has spoken to, adding that there is
recognition among them that “one bad apple is a
threat to all of them”.
He adds: “No affiliate wants a programme to
close down in a lucrative market but it’s a very
real prospect once the fines start rolling in.
“There is a still a little confusion over what is
needed but it is much clearer than a year ago and
generally speaking it is often down to a lack of
investment in time to learn and understand what
is needed.”
Ad bansThe UK regulations aside, the clearest threat to
the gambling affiliate sector comes from the
potential proliferation of gambling advertising and
marketing bans. As was noted in the first quarter
edition of Affiliate Monitor, Italy was the first to
instigate an outright ban and both operators
and affiliates are still attempting to understand
precisely what is and isn’t allowed.
According to Catena Media, the effects of the
new regulations – which came fully into force
in July – were “not as severe as expected” and
“detailed work by our compliance/legal teams
means our assets remain in a strong position there”.
As it stands, odds comparison sites are still
allowed under the Italian regulations although
whether this provision will stand should any new
Italian government, of whatever stripe, look once
again at the rules is very much open to question.
What can’t be doubted, however, is that ad
bans are a growing threat. The latest jurisdiction
to announce moves is Spain though the news
from there is somewhat confusing. While the
official Ombudsman has said that his proposals
for an outright ban, first published in May, had
been accepted in full by the government, recent
reports suggest that the Ministry of Finance has
[Affiliates] are currently one of the weakest links in the industry’s efforts to ensure compliance with the many and varied aspects of responsible and safer gambling in the UKSarah Ramanauskas, Gambling Integrity
iGaming Business • Affiliate Monitor • October 2019 14
Part 3: RAIG and the regulatory push and pull
said that the final decision has yet to be taken.
With rumblings of discontent over gambling
advertising also being voiced in Sweden and
Denmark, the direction of travel across regulated
Europe is certainly worrying for operators and
their affiliate marketing partners.
Yet, as Sims suggests, with the affiliate space
having shown itself to be resourceful throughout
the years, ad bans might yet be an opportunity as
much as a threat given the likelihood that, as with
Italy, loopholes around affiliate marketing could
leave them as the only game in town.
He concludes that the mix of regulation and
technology, as well as the changing nature of
the affiliate landscape due to continuing M&A,
simply means more affiliates will have to adapt
to survive. “The days of opinion-based content
writing are probably drawing to a close in many
markets but there are many other ways to find
customers with a bit of resourcefulness,” he says.
Ad bans might yet be an opportunity as much as a threat given the likelihood that, as with Italy, loopholes around affiliate marketing could leave them as the only game in town.
Grass is greenerOne potential solution to the threat of being
tied down by red tape in regulated markets is
to look at further geographic expansion.
While Asia obviously got a mention by a
number of firms – and Raketech subsequently
announced a deal for the Japanese-facing
Casumba – the possibility of expanding into
Spanish and Portuguese language versions of
various sites was also discussed.
Catena Media said it would be launching its
AskGamblers sites in both languages in the
third quarter, Better Collective said Spain was
not core but was “meaningful” and Raketech
said it was looking at South America as a
potential region for expansion.
It is important to understand at this point
that any efforts towards either Spanish or
particularly Portuguese language versions of
successful sites likely is, as suggested above,
more about South American opportunities than
about either Spain or Portugal.
In the last case, certainly, the opportunities
for affiliates are necessarily limited due to the
low number of licensees. With only 11 operators,
the Portuguese online market offers affiliates
precious few firms to work with.
The problem with PortugalThe issue, of course, is the nature of the
regulated regime in Portugal and the tax rates
applied across both sports betting and online
casino.
Table 1: Portugal tax rates breakdown
Product Initial tax rate (on turnover) (%)
Upper rate threshold
Effective upper tax rate (%)
Sports betting 8 €30m 16
Gaming 15 €5m 30
iGaming Business • Affiliate Monitor • October 2019 15
Part 3: RAIG and the regulatory push and pull
Yet, if the number of market participants
has been held back due to the tax rates, gross
gaming revenues have sustained reasonable
growth since the new regime was instigated in
2015, with 24% growth seen last year. Indeed,
growth in the first half accelerated and was up
36% to €95.6m.
Still, the market remains small and hopes that
the government might revisit the tax rates issue
are in abeyance after a government working group
missed a reporting deadline earlier this year.
Player numbersThe relatively underdeveloped market is
confirmed by the latest data from the Gambling
Regulation and Inspection Service (SRIJ), which
suggested there were circa 297,000 active
accounts in the first half. This compares with
a cumulative player account number of 1.41m
registered since 2016.
The data showed that just under 50% of
the first half total made a sports bet only, 35%
played casino only and only 14% engaged with
both products.
Gabino Oliveira, president of the Portuguese
operator association APAJO, says the number
of active accounts measured places Portugal
in the average range for accounts per head of
population across Europe and in line with the
figures from France and Spain.
Moreover, and this is definitely worth bearing
in mind when it comes to affiliate activity in
and around Portugal, Oliveira cites research
undertaken by APAJO that suggests that
an increasing number of gamblers play with
licensed websites because they appreciate that
these sites are more secure and that pay-outs
will be quicker.
“The survey also found out that Portuguese
customers are extremely well informed about
which operators hold licenses and which do
not,” he added. “In fact, after three years into
the opening, the top four chosen operators by
customers are all licensed in Portugal.”
Oliveira believes the regulatory embrace
clearly evident in the UK and Holland of late is
finding echoes in the Portuguese market. “We
see today that the risk appetite diminishes with
this stricter approach on behalf of regulators,”
he says.
iGaming Business • Affiliate Monitor • October 2019 16
Part 4: M&A round-up
While there has been some semblance
of M&A activity over the summer,
with deals involving Raketech, Net
Gaming Europe and Better Collective, the general
trend towards less acquisitions than in the buyout
frenzy of 2017-18 remains the central case.
Better Collective aside, the trend towards
fewer acquisitions has been matched by similarly
lower levels of transaction prices. At the peak in
2017/18, buyouts closer to €10m were common;
now, Better Collective’s deals in the US aside, the
money being splashed out is very much in the
lower single-figure millions.
Part 4: M&A round-up
Those seeking an answer for why the pace
of M&A has slackened have a range of potential
reasons. Clearly, the fact that the most voracious
player Catena Media has effectively shut up
shop on M&A pending the digestion of its 34
acquisitions up to November last year is one
reason for the slackening of the pace of deals.
The company itself has signalled that its
buying spree has come to a temporary halt.
The quality over quantity strategy is in itself an
admission of that and Hjalmar Ahlberg, analyst at
Kepler Cheuvreux in Stockholm, certainly thinks
that Catena has at least temporarily placed the
We recently scanned some acquisitions for a big affiliate to help them check if historical content was compliant in the territory the site was targeting, so it’s certainly on acquirers’ minds.Ian Sims, Rightlander
Table 2: Acquisitions in the affiliate space May-September 2019
Date Acquirer Target Market focus Initial price
May-19 Better Collective RotoGrinders US sports $21m
Jun-19 Raketech CasinoFever.ca Canada Unkn
Jun-19 Net Gaming Europe BettingGuide.se Sweden Unkn
Jul-19 Net Gaming Europe BettingOnline.co.uk UK £1.6m
Jul-19 Better Collective VegasInsider/
ScoresAndOdds US sports $20m
Aug-19 Raketech Casumba Japan €2m
Sep-19 Better Collective MyBettingSites UK £1.5m
Source: Affiliate Monitor
iGaming Business • Affiliate Monitor • October 2019 17
Part 4: M&A round-up
chequebook back in the drawer.
As he suggests, Catena Media now has
“limited funds” to spend on acquisitions given
its committed earnout payments. As of the end
of the second quarter, €53.5m of asset purchase
commitments are outstanding, of which circa
€25m is to be paid in cash.
Another reason for the general slowdown
in M&A in the affiliate space comes as a by-
product of the previous frenzy – the inflated
expectations on the part of vendors. Catena and
the others have been keen to stress they will
only pay multiples of EBITDA within set limits
but that doesn’t stop those being approaching
overestimating what they think their business is
worth. A big enough valuation gap could easily
put paid to many a deal.
Then there is the regulatory shadow spoken
about earlier in this report. Sims at Rightlander
suggests that ensuring that the content on your
site is compliant will be a big factor in all future
deals. “We recently scanned some acquisitions for
a big affiliate to help them check whether historical
content was actually compliant in the territory the
site was targeting so it is certainly on the mind of
an acquiring party, that is for sure,” he adds.
“Popular M&A targets (apart from special
situations and distressed assets) are rarely
situated in markets that face uncertainty,” says
Robinson from RG Capital. “Multiples are directly
related to the return on a buyer’s investment
(ROI) and how fast they can recoup the purchase
price and start generating profit. When a market
faces uncertainty, the sustainability of a business
is unclear.”
Then there is the issue of the compound annual
growth rate of the business and what that means
for multiples. “Unless an affiliate is bucking the
trend that is facing the majority of UK affiliates,
this will be reduced considering the challenges
(currently facing the affiliate sector),” he says.
Sector consolidation and client concentration riskOne aspect of the drive towards bigger affiliate
businesses is the risk it poses in terms of client
concentration. The most visible relationship in this
regard is between Better Collective and its main
client Bet365. According to an analyst initiation
note from the team at Redeye in May this year,
Bet365 accounts for circa 25% of total revenues,
while the Better Collective IPO document in
2018 said that the top 10 clients were worth
circa 52% of total revenues. However, this latter
Popular M&A targets (apart from special situations and distressed assets) are rarely situated in markets that face uncertainty.Ben Robinson, RG Capital
Better Collective’s top 10 clients were worth circa 52% of revenues according to the IPO document, while Gambling.com Group’s were worth 59% according to its bond prospectus. Neither percentage is thought to have significantly changed since listing.
iGaming Business • Affiliate Monitor • October 2019 18
Part 4: M&A round-up
figure isn’t necessarily a standout. According to
the Gambling.com Group bond prospectus, the
company made 59% of total revenues from its top
10 clients.
Neither percentage is thought to have
significantly changed since being made public
and indeed Jonas Amnesten, analyst from
Redeye, says that further consolidation will likely
bring even further concentration with “fewer
larger clients with larger purchasing power”.
Nevertheless, in the case of Better Collective
and Bet365, Amnestan sees the greater reliance
as a plus. Bearing in mind Bet365’s recent launch
in the US, his comment that he views the close
partnership with Bet365 as “primarily a strength
in the ongoing expansions” is significant.
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