Affiliate marketing is high on the agenda in the US right now following a controversial U-turn in the Bay State and a proposal for restrictions around the sector in New York.
After successful lobbying, the Massachusetts Gaming Commission (MGC) opted to temporarily overturn a regulation prohibiting marketing affiliate revenue-share and cost-per acquisition (CPA) deals ahead of online sports betting’s launch on March 10. However, a further change of direction saw affiliates restricted to negotiating only CPA deals with licensed operators in the state from April 14 onwards.
The New York State Gaming Commission eventually reached the same conclusion and decided that CPA deals were permitted, having previously considered an outright ban on affiliate marketing for sportsbooks.
To examine the fallout from the developments, the current playing field for affiliation in the US, and the role the channel may play in the growth of the regulated sports betting industry across the country, SBC Americas is joined by Justin Stempeck, Chief Regulatory Officer of Compliable, Ismail Vali, Founder and CEO of Yield Sec, and Jill R. Dorson, Managing Editor for Better Collective’s SportsHandle.
SBC: Exactly how important is the role of an affiliate in the wider sports betting ecosystem, particularly in newly-regulated states?
Justin Stempeck: Affiliates are important as they are one of the paramount drivers of new customers to legal and regulated operators. They also serve as a knowledgebase for those new to the industry by educating players about different bet types.
Over the past five years, all new jurisdictions in the US that legalized online sports betting and gaming saw an initial surge of bettors, and operators have spent eye-watering sums on marketing affiliates to swell growth in this area. Investors believe that this is totally unsustainable moving forward, but it certainly remains one of the main drivers of acquiring a customer base.
Ismail Vali: Affiliates play a critical role in the sports betting ecosystem, especially in newly-regulated states in the US. As a key channel for customer acquisition, they help operators expand their reach and generate revenue. There are issues though with the affiliate reality, as, like everything within the online gambling ecosystem, a duality is present. Through our monitoring and surveillance of marketplaces we have found that affiliates still play a part in promoting illegal operators, even in regulated markets.
Take one Yield Sec-monitored marketplace as an example – Switzerland. During the 2022 World Cup, we discovered that 96% of affiliates targeting Switzerland only promoted illegal operators. Like all facets of iGaming, affiliates need to be assessed, audited and, where required, cleaned up. It’s simply unacceptable to have an illegal operator industry, corrupting and stealing from legal marketplaces. It’s equally unacceptable that the distribution mechanism for those criminal operations is via a similarly corrupted illegal affiliate estate.
Jill R. Dorson: I come at this wearing an editorial hat and can share what I’ve heard and seen over five years covering sports betting legislation and regulation. The landscape has changed drastically in those five years, so much so that I didn’t even know what an affiliate really was at the beginning, despite working for one!
I think it’s hard to quantify ‘exactly how important’ affiliate marketers are, except to say that I’ve learned they serve a valuable role and can offer directed, targeted marketing to consumers who want it. In newly-regulated states, affiliates, including Better Collective’s brands, can educate consumers not just about each sportsbook, but about how to bet responsibly, and where to find help if that is needed. Affiliates regularly report on new responsible gambling programs that are available, as well as commitments from specific states to responsible gambling.
Affiliates are clearinghouses of information that can help a consumer to better understand how wagering works, what platforms are available in their jurisdiction, and how to manage their wagering. Speaking for Better Collective, across our sites, we provide everything from sports betting glossaries to sportsbook reviews to clear information about time and money limits and other RG tenets.
SBC: What long-term repercussions could regulators expect should they opt to deny affiliates the right to operate within a state?
Ismail Vali: It’s up to the government and regulators to establish the rule of law at the dawn of each new online gaming marketplace but if regulators deny legal affiliates the right to operate, they risk spoiling the sustainability of the iGaming ecosystem and the maximization of tax receipts and responsible gaming compliance.
A legal affiliate network is crucial for certain legal operators. This is especially the case across a diverse state-by-state, or province model, as in North America. There are many tiers of operators and without affiliates, small and local brands will struggle to become sustainable when leading companies like DraftKings, FanDuel and BetMGM simply dominate most of the legal marketing opportunities.
Regulators need to recognize the duality in all iGaming marketplaces and place primacy upon the presence of legal companies only, which is part of their mandate. The solution is to remove the crime and corruption from illegal operators and affiliates as well as other parties and ensure a fair, safe, and responsible marketplace where crime is actively identified, qualified, and quantified, and then enforced against, across the full range of its reality.
Jill R. Dorson: Based on what I heard when the Massachusetts regulator was considering banning affiliates, regulators could expect to see an increase in mass media marketing, the very kind of advertising and marketing that consumers complain about in every newly-legal state. Affiliates advertise and market to a specific audience – one that is interested in sports betting – and in general, they do it in a targeted fashion, meaning that Joe Sports Bettor is potentially getting emails or seeing banner ads via an affiliate marketer, but all consumers in a state or region are not seeing those materials.
Unless a jurisdiction was to outright ban all advertising and marketing – which is an even more dangerous slope – regulators should expect more billboards, more frequent television advertising, an increase in social media advertising and marketing, and more, as operators search for other avenues on which to reach bettors should this one be blocked.
In Massachusetts, the affiliates and operators explained the value of affiliates to the MGC, which has some of the most stringent advertising and marketing guidelines in the US, and the commissioners decided to meet affiliates partway, by allowing affiliates to operate with ‘cost-per-action’ deals, but not revenue-sharing models.
Justin Stempeck: Denying affiliates the right to operate in a state will likely not decrease advertising and can ironically have the opposite effect. Unless a state bans advertising entirely, the result will simply be more mainstream promotions – radio, television, internet – and less targeted marketing through online affiliates.
However, if complete prohibitions were to be applied, it could have huge implications on the regulated market as affiliates assist consumers in finding legalized sportsbooks, keeping them away from any illegal promotions, which in turn helps with stronger player protection.
SBC: What role do affiliate marketers play in the promotion of safe and responsible gambling, are they integral to consumer protection?
Jill R. Dorson: As we’ve seen and heard from discussions, particularly in Massachusetts, all wagering stakeholders stand together when it comes to the value of affiliates in terms of safe and responsible gambling. From the National Council on Problem Gambling to operators, it’s clear that all believe the affiliate marketers are a critical way to get the responsible gaming message out. They are also a critical way to get the problem gambling crisis lines out to the public.
In terms of consumer protections, affiliates play a key role in not only reporting on all the ways that different states endeavor to preserve integrity and otherwise make the legal wagering world safe, but also offer primers and reviews of operators, allowing consumers to make more informed decisions about where and how they want to bet.
Justin Stempeck: The connection between affiliate marketing and responsible gambling is largely tied to the specific state regulations at play. A number of states that have recently legalized sports betting include very detailed restrictions on terminology and offer language that can play a role in adding transparency to the offers with a net positive impact on responsible gaming.
If a state lacks this level of restriction, it is unclear if marketing affiliates would voluntarily add it as their advertising language is largely dictated by the operators paying them. Unfortunately, self-regulation has not been particularly effective in the area of advertising to date.
Ismail Vali: Legal affiliate marketers are another legal stakeholder, and they have an important role to play in promoting safe and responsible gambling. They can educate customers about the risks of problem gambling and promote responsible behavior. By partnering with operators and regulators, affiliates can help ensure that consumers are protected.
SBC: How important is it that operators and affiliates work closely together to ensure that marketing is compliant and within moderation?
Justin Stempeck: It is vital that affiliates and operators continue to assist each other. Operators often have a better understanding of the regulatory requirements and have compliance teams dedicated to ensuring rules are met.
Giving affiliates free rein risks mistakes being made that do not support the operators’ strategy. On the other hand, affiliates can educate operators on what route is the best to attract players. A close collaboration is therefore beneficial for both parties.
Ismail Vali: It is crucial that legal operators and affiliates work together to ensure that marketing is compliant and responsible. This includes promoting safe gambling practices, avoiding misleading advertising, and adhering to marketplace standards. By working closely together, operators and affiliates can build trust with customers and strengthen the legal industry as a whole.
SBC: What do you predict for the future of affiliate marketing in the United States in the coming years?
Ismail Vali: I predict an appreciation of the duality dilemma affecting more than just operators. Crime must be removed from iGaming marketplaces and legal affiliates have a huge, important, and broad role to play in that. Yield Sec exists to support and assist all legal stakeholders in their fights against crime and the removal of the gambling marketplace duality that has corrupted so much of our current potential, profitability, protection of children, the vulnerable, and consumers, and frustrated all hopes of meaningful and sincere responsible gaming and positive community contribution.
Our mission is to support all legal stakeholders to realize the fair, safe and sustainable gambling ecosystem – that only happens by embracing solutions that work rather than recycling single instance ‘measures’ that have never, could never, and will never work, such as IP-blocking or bank restrictions. That is failing to understand one’s enemy – crime – across the duality marketplace dilemma.
Jill R. Dorson: As a reporter and editor, this isn’t really my bailiwick, but Adam Small, Better Collective’s General Manager of Editorial and Commercial Sites shared some thoughts with me.
As we’ve already started to see in the sports betting landscape in general, expect continued growth, but also consolidation. As operators tire of spending millions on mass-market advertising – which is tough to track – they will spend more and more on affiliates, which deliver a clear payoff and target the very audience that operators seek. During the MGC roundtable, representatives from FanDuel told the commission it gets about 30% of its business from affiliates.
With the growth and consolidation, we’ll also likely see more professionalism. I’m proud to work for a company that from the first day I started and it was just Brett Smiley and me, that Smiley, and later Adam Small, prioritized journalism. They’re both terrific businessmen, and knew from the beginning that to get credibility, they would need experienced journalists to populate their sites. BC and some of the other major affiliates also see this need, and the trend toward more professional platforms with well-reported stories should continue.
Affiliates will also likely see a shift in their own business models. As responsible gambling takes center stage in our business, affiliates will not only have to educate regulators about what they do, they will have to expand their own compliance and legal teams as more and more jurisdictions require licensing.
Justin Stempeck: Recent regulatory trends point towards further and tighter restrictions on advertising across the board. More regulators will take a critical eye towards the specific language used in promotions compared against broad regulations on unfair and deceptive advertising, as well as valid responsible gaming concerns.
Decisions in certain states, such as Ohio, have demonstrated that regulator action can spur real change in the market in any given jurisdiction, and other supervisory authorities will likely follow suit and tighten up gambling advertising nationally.