Sportsbook affiliate marketing: Navigating a changing landscape
While most US operators rely on affiliates to expand their reach and capture market share in a rapidly growing marketplace, challenges such as increased regulation, heavy taxation and high promotional costs have been driving gaming providers to diversify marketing channels to reduce dependencies and cut costs. But how can operators explore new marketing channels and grow into new markets while still retaining control over their costs?
The market’s liftoff
The US Supreme Court annulled PASPA (the Professional and Amateur Sports Protection Act of 1992) in 2018, ending Nevada’s near-monopoly on sports betting in the US. With every state allowed to legalise and launch its own market, the US sports betting market has been experiencing explosive growth.
Currently, over 39 states allow either in-person or online sports betting and seven have legalised iGaming. According to the American Gaming Association (AGA), Americans wagered over $147bn legally on sports across 2024, up more than 23% from 2023. Facing this huge growth spike in a short time, betting operators had to hit the ground running and now look to capture market share as soon as new states are opened. As a result, most have reverted to third-party affiliate marketing as part of their launch strategy.
Using affiliates to hit the ground running
Marketing through affiliates is one way of covering territories quickly and reaching a much wider audience of potential customers. Affiliates provide operators with a cost-effective, performance-based marketing model, eliminating the risk of investing millions of dollars in advertising campaigns. Leveraging in-house knowledge and technical expertise, affiliate marketing companies drive high-quality traffic to sports betting websites and apps consisting of prospective, interested bettors with high purchase intents.
“Similar to many other online and mobile industries, affiliates became a significant part of the sportsbook’s marketing mix”
This allowed operators to establish their brands quickly and scale efficiently, optimise ad spend and reach niche audiences while ensuring compliance with regulations, given many US regulators must also license those affiliates.
Evolving challenges
Despite the booming betting industry, US sportsbooks face significant cost challenges that increasingly pressure their profitability. These challenges begin with high taxation; New York leads with a 51% tax on gross gaming revenue, while Pennsylvania follows at 36%. Another significant cost is the licensing fees each state charges just for market entry. For example, Illinois and Pennsylvania regulators charge $20m and $10m, respectively. Considering that most sportsbooks operate in multiple states, it adds significantly to operational costs.
In addition to taxes and licensing, sportsbooks in the US spend sky-high marketing costs to capture and protect their market share in a rapidly growing but crowded industry. This starts with external marketing expenditures across TV, digital platforms, stadium advertising, sponsorships, etc and continues with high welcome bonuses meant to entice new customers to sign up, as well as promotions and rewards to ensure the loyalty of existing customers.
While it is difficult to quantify the portion of these marketing costs that would also benefit an affiliate’s marketing efforts, this does mean, in essence, that the betting operator is paying for exposure that will later benefit the affiliate’s marketing efforts.
Driven by aggressive marketing spending, the cost per acquisition (CPA) a sportsbook will pay to an affiliate for a newly deposited customer could reach hundreds of dollars. Another model to remunerate affiliates is by revenue share, but these high costs force sportsbooks to balance growth with profitability.
This then means many operators look to reduce dependencies on affiliates by bringing expertise and resources in-house to cut costs. But how can that be done cost-effectively and without undermining growth?
From land grab to sustainable growth
With fewer new states regulating sportsbooks and online casinos, more customers already have accounts on remote gambling sites and apps, and increased competition from established operators, the market has entered a new maturity stage. Providers must continue to grow and protect market share in a controlled, sustainable way.
Data is everything, therefore partnering with platforms that also provide real-time performance reports and data analysis powered by AI technology, will offer operators the most accurate overview of campaigns which is crucial when looking for that competitive edge.
Not only that, but systems harnessing machine learning and AI to build predictive models on customer behaviour to suggest future bids, bonus schemes and more, will give operators the best advice to optimise acquisition and retention strategies.
As US operators increasingly search for sustainability, technological diversification is the key to success. However, one thing is clear: affiliate marketing poses a low-risk, high-reward solution to operators if they are partnered with dedicated experts. That is why many operators will still continue to rely on this channel.
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