A shade over 2 years ago, Nevada became the first US state to legalise online gambling (poker). Since that time, we have seen the first legal poker site rise and fall, New Jersey and Delaware follow the Silver State’s lead, with the former accepting play on online casino games, and we’ve participated in an unmelodious collection of regulatory debates in states such as California, Pennsylvania and Massachusetts lobbying for, and against, iGaming legislation.
We’ve seen billionaire-funded attempts to roll the market back to UIGEA, or worse.
But most of all, we haven’t seen a lot of players.
We have to look at New Jersey in particular here. Plain and simple, you’re going to see Nevada or Delaware struggle to reach critical mass offering poker alone, even with player pooling just around the corner. Online casino requires less need for a tight ecology, but volume is still essential to ensure margins kick in effectively and true month-on-month growth can occur.
Comparing NJ with the Nordics
New Jersey has a population of almost 9 million – a shade under that of Sweden and very nearly twice that of Norway. The Nordics offer arguably the greatest micro-melting pot of player knowledge, value and conversion rates of any region on the planet, with player value of an online casino customer 75% greater than that of the established UK market.
Whilst EU law has allowed unregulated brands to advertise in Sweden and Norway’s National Government Pension Fund has billions of Kroner invested in offshore gambling, operators are restricted in a far greater sense in the way they can market to potential customers than licensed operators in New Jersey… with one exception.
The humble affiliate.
The portal owner, the email marketer, the blogger, the Facebook tipster, the forum moderator, the PPC whizz, the new-fangled app builder all represent the glue that has put Sweden and Norway on the iGaming map, driving heavily-critiqued competition – and consequently product and market understanding of the Nordic casino player.
It’s a glue that is sorely lacking in New Jersey. Hell, the way the market looks, a webmaster won’t even get a sniff at it for an ounce of financial stimulation.
It isn’t too hard to become vendor registered as an affiliate in New Jersey. This would see you sit on a relatively strict CPA deal, and you may garner enough traffic to get something prepaid arranged, or some other form of media-based deal.
But to sit on a revenue share deal, that’s an altogether less appealing process – a process that includes full ownership character appraisal demanding things ranging from your finger prints to your toddler’s savings account details and the need to bring in legal advice to get things done “cheaply”. Not the end of the world for many affiliates, but here’s the:
Million Dollar Question
Why would bother with the rigmarole if you can earn more money by sending money to unregulated online casinos?
This is the very crux of the ongoing UIGEA fallout that WILL keep regulated operators behind the curve until it’s resolved. Since 2006, offshore operators have relied almost unilaterally upon affiliates to acquire players. Here you have a classic chicken and egg scenario that probably weighed heavily on the Pennsylvanian legislator’s pen as he drafted a recent bill that would see a would-be affiliate need to stump up – cue Dr Evil – ONE MILLION DOLLARS to obtain a license to promote regulated poker.
The tangible association of the affiliate with illegal online gambling is there. Offer a viable alternative, even an incentive, to break those ties and, just like that, the problem of the offshore casino or poker room disappears for good.
Devil’s Advocate
For the sake of those not as intrinsically involved in marketing channels and budget as I am, let me throw some facts your way.
Amazon
eBay
are all affiliates. They receive revenue in return for advertising and selling products or services. The inexactness of existing legislation, or its interpretation, in New Jersey that permits pre-paid advertising on sites like NJ.com or sports sponsorship deals bwin.party has with the Philadelphia 76ers and the New Jersey Devils displays a commercial naivety at best.
Newsflash: these commercial arrangements can only happen if they achieve a return on investment – ergo their very existence is dictated by player losses and any renewal or continuation effectively sees the recipients earning out of players’ pockets. I’d love to see Mark Zuckerberg send his fingerprints to the DGE if we’re doing things “properly”.
One might argue the ins and outs of what is proper when it comes to the regulation of advertising, in particular online. The bottom line is stringent regulation stifles growth – not just for affiliates either.
Affiliates create Market Knowledge
A late-2014 survey conducted in New Jersey indicated that under 10% of New Jerseyites even knew online gambling was legal, which ought to be bonkers considering the plethoric nature of billboard and television advertising the moment you land at Newark or cross the Hudson from Manhattan.
But for me, it’s not bonkers. The advertising, I’m sure very well thought out by brand managers and agencies, pushes brand and price heavily – repeating the successes of software partner brands in Europe. The issue is there is zero differentiation on product and consequently zero in terms of tangible comparison for the customer. What’s more, there is zero requirement for the operator to improve product or service delivery. It’s a turn off of the highest order, made infinitely worse when a customer does come to research ‘regulated online poker’ or ‘regulated online casino’ product in the Garden State, the independent resources ranking highest still push offshore, unregulated brands.
The DGE, via complaints from New Jersey’s handful of fully licensed affiliates, has formally forbidden any affiliate operating using a vendor license (our friends on the low rate CPA) from advertising regulated brands alongside the shady, higher earners.
What’s an affiliate to do?
The choice is simple. Earn more now by ditching the regulated brands and see what happens in the future. Affiliates, particularly those still operating as one man bands, tend to be from the “make hay whilst the sun shines” school of thought. Unlike the rest of the industry, they’re not the sort to sit back, play by the rules in the hope that a panacea is delivered out of the stresses and strains of state-by-state lobbying and bill redrafting. Regulators may well be irked by this approach, but they only have themselves to blame.
The solution is simple. Give affiliates FREE access to the market, let them do what they’re good at – namely independently appraising good and bad practice of online casino and poker operators for the greater good of the playing public, providing the substance to branding and becoming the glue the burgeoning regulated US iGaming industry needs to make targets stick.
Regulators – welcome affiliates with open arms and in one foul swoop you’ll expedite the demise of offshore gaming, build market knowledge and create the critical mass your licensees yearn for.
Tom Galanis 