The Partnership Model in US iGaming: A Potentially Massive Missed Opportunity for Webmasters

Introduction Despite a widespread belief that the US will be the next goldrush in the online sports betting and gaming industry, it’s fair to say that it’s a market with its own set of challenges to overcome. With continual state-by-state regulation, a land-based industry that needs to adapt, and a customer base that needs more education around sports betting in particular, could the US be a huge missed opportunity for many webmasters who can’t meet the ever-changing requirements? This paper looks at the huge opportunity that the US market provides and focuses on how the gold rush that many webmasters envisage, could fall flat should the right strategy not be adopted. The aim of the paper is to provide clarity around strategic options that webmasters can take, in order to make the most of this opportunity. It will specifically look at the affiliate marketing landscape and highlight that technology and player education will be key to the success of webmasters targeting the sports betting market. If you own an asset and you’re not attracting the quality of traffic you’d expect, this paper discusses how you should consider a partnership model with people who have the resources to build it out profitably, sharing in the higher future revenue. The Affiliate Marketing Landscape at a Glance The overall US affiliate marketing outlook going into 2020 is a positive one with overall spend on this channel looking set to rise to $6.8B, with Forrester Consulting expecting this spend to continue to grow by 10% per year. In a young online sports betting market such as the US, we look to more mature and well-regulated markets to understand how affiliate marketing will play its part. A study in 2017 by Regulus Partners within the GB landscape showed affiliate spend to be estimated at £301M – 20% of all the £1.5B online marketing spend – having grown 17% per year since 2014. Key Affiliate Marketing Points:

• 2020 US Affiliate Marketing spend is expected to rise to $6.8B
• Forrester Consulting says this spend will grow 10% p/yr
• 81% of Brands are using affiliate marketing in the US
• GB gambling market saw £301m spent through affiliate channel in 2017
• 20% of £1.5B online marketing spend in GB went through affiliates

Whilst US operators will work closely with their strategic partnerships around land-based gambling sites and collaborations with sports teams, the opportunity for webmasters to help drive the success of operators is clearly there and, with the right relationship in place, will be a fruitful channel for both parties. The Outlook is Bullish, Yet Many Assets Will Fail to Perform As part of a global online gambling market, deemed to be worth $102B by 2025, with a CAGR of 11.5% according to a study by Grand View Research Inc, the opportunity within the US is clearly apparent. However, for many webmasters, the expected gold rush on the US may not transpire as assets will fail to perform to expected levels. The US market has a history with sports and has a history with betting, yet the online sports betting market is still young and has a long way to develop further. Whilst a webmaster’s asset may be deemed valuable in itself, this paper argues that it will be the technology behind the asset that holds the real value when dealing with the challenges ahead. Technology Will Help Overcome Regulation and Compliance Challenges As the market opens up on a state-by-state basis, with different levels of licensing and regulation for each state, this in itself provides multiple challenges for webmasters whose assets aren’t set-up from a technology perspective to handle the challenge. In particular, the ability to geo-target and localize on a state-by-state basis, whilst adhering to the regulation and compliance of each governing body is crucial and many assets will not be able to meet these requirements easily – potentially seeing them left behind as others thrive. Educating Players Will be Key to the Market’s Success Webmasters will also need to address the challenge of educating players around online sports betting. In a market where huge operators from more mature European markets are moving in to make their mark, they bring with them a more advanced betting product, with a much wider range of markets to digest, that ultimately return a better margin. For operators to bring players through the door, there will be a need to build trust, which many are doing through strategic partnerships with sports teams, land-based casinos and relationships with free-to-play games. However, webmasters could play the biggest part in building trust for Operators but only those whose technology set-up allows them to scale trustworthy and objective content and data quickly, again geo-targeted by state, will be the ultimate winners here. The Great Opportunity for Webmasters Great technology needs to be built in-house, nurtured over time, refined constantly, and then re-evented regularly, as your asset and team behind it grow. It must be adaptable quickly to market changes and must allow you to scale at pace whilst maintaining its core function. Buying an asset off the shelf, ready to approach the market, is one option but you cannot always buy the technology required to see the asset flourish. The technology that you can buy off the shelf to plug-in to an asset is often solid, yet not flexible enough to deliver the strongest of results. If you own assets that don’t have the technology behind them and you’re not seeing the right quality and quantity of traffic coming through, then the opportunity is there to strategically partner with a company that does deliver this, who can help to build out your asset profitably, utilizing a commercial model that shares future revenues. This strategy can allow your asset to thrive in a competitive growing market and allow global growth at a level that may not be attained otherwise, through partnering with a company that is set-up specifically to deal effectively with the challenges that the global online gambling industry brings. Placing technology at the heart of all their high-performing assets allows them to scale at pace, geo-target and localize effectively, whilst focusing on educating players and shining a light on the industry itself. The Case in Point – The Stars Group, Fox Sports, Oddschecker and the Strategic Partnership Machine To best illustrate the strategic partnership opportunity at hand, it makes sense to look at the recent activity around The Stars Group, who stand out amongst the various mergers and acquisitions of the last few years. Whilst the bulk of activity has been around the operator level, there is still massive relevance to webmasters through the affiliate arm of The Stars Group business. In April 2018, The Stars Group announced they’d reached agreement with Sky Betting and Gaming to acquire the business in a $4.7B deal, taking on board the entire suite of products and portals within the group, including their dominant sports betting odds comparison and data affiliate, Oddschecker. Since then, and most recently, Flutter Entertainment announced in October 2019 that it had reached agreement to acquire all shares of The Stars Group in what has rightly been deemed a mega-merger, creating the largest global online gambling company in the process. The Stars Group had already made a huge impact into the US sports betting market through a further strategic partnership with Fox Sports that saw a 25 year agreement put in place for exclusive rights to a number of Fox Sports trademarks, with the creation of sports betting operator Fox Bet, running front and centre. However, the acquisition of Oddschecker, through the SBG deal is interesting for all webmasters who wish to take their assets to the next level. Having always operated as an independent company, and who continue to do so as the affiliate arm of The Stars Group under the name of Oddschecker Global Media, they have placed technology and data at the forefront of their operation and have seen this pay dividends firstly through the acquisition, but further through the beginning of its own acquisitions. In September 2019, Oddschecker acquired WhoScored, the soccer statistics and data portal and, no doubt, will continue to look at opportunities to bolster their group offering on a global level. WhoScored’s founder highlighted that it was “their global presence, innovative technology and extensive commercial experience makes them the perfect partner to help accelerate WhoScored’s growth”, further proving that by partnering with companies with the right technology in place and the resource to drive things forwards, that you can elevate your own asset accordingly and continue to share in the spoils. Whilst Oddschecker provided a solution to WhoScored, there are other models of global affiliate, such as KaFe Rocks’ technology-led global platform approach to informational betting content that could fit some webmasters more appropriately and allow them to monetize the assets they own more efficiently. Conclusion – Take Advantage of the Great Opportunity In conclusion to this paper, it is clear that the US online sports betting market is only going to grow speedily, to become a major sector of a predicted $103B industry, and that affiliate marketing will play a huge part in the success of this sector. If you’re a webmaster with an asset but believe you don’t have the technology required or the ability to educate players effectively, then rather than trying to buy off-the-shelf, or recreate for yourself, take advantage of the great opportunity available to you and look to partner strategically with a company who can drive your assets forwards, both within the US market and beyond. Failing to investigate this may be the “Missed Opportunity!” Contact If you would like to contact the author he can be found at tim@luminaconsults.com or USA 303-882-9977. About the Author Timothy Kneen is Founder of Lumina Consults, a M&A advisory firm specializing in Gaming. Special thanks to Simon Pilkington for his research into this white paper.