30 June, 2022

Merging the transatlantic divide

XLMedia’s VP of Europe, Richard Gale, discusses some of the lessons US markets, and its operators and affiliates, can learn from Europe as they start to mature

What can the US learn from the EU/UK as its markets mature?

Where the US can learn, not just from the UK but the EU too, is the journey the US is going to go on over the next 10 years. I believe the journey will be very similar. I think compliance, long-term relationships and product diversification are all things that will happen in the US market. I think US operators and affiliates need to look at the EU/UK and use the journey as a template. Not just the EU, Australasia is a good template too after going on a very similar path. 

When looking at how the US will evolve, I always start with compliance. My silly catchphrase is that compliance only goes one way. Sweden seems to be breaking that, actually: they’ve broken my rule by going backward. Aside from Sweden, I think we can assume that in the US compliance is only going to go one way. US regulations will not be lessened, but only toughened as we move forward. I think at the start, compliance wasn’t very high up on the agenda. What we were seeing was some European bookmakers shocked at a lack of compliance happening on affiliate sites, whereas US operators weren’t that bothered.  

A quick lesson for US operators is to look at what has happened in Ontario. Ontario has come in straight away and stamped compliance all over the jurisdiction. Everyone in the US has said “hold on a minute, is this the future?” And I think it is for them. It’s been a really quick, easy lesson for North America. What has happened in Ontario very recently constitutes the kind of compliance that is operated within the EU and UK. My feeling is that eventually these compliance laws will trickle through to the US.

What are some other differences between the UK/EU and the US, outside of compliance laws?  

At the moment, the whole market in the US is being driven by cost per acquisition (CPA) revenue. Very few affiliates are looking at revenue share; it’s very hard to get a licence. The operators themselves aren’t interested in revenue share, it’s just the land they’re worried about at the moment. But we’ve seen this in the EU as well. As this land grab is completed, then there will be a revenue vacuum for the affiliates. In the EU, we still make a lot of revenue from revenue share tails that stretch back 7, 8, 9 years. So we still work with the operators to drive their lifetime player value (LPV) and drive their attention, because we’re getting the benefit of the long-tail revenue share.  

If everyone in the US continues down this CPA route, just look at Pennsylvania as an example. Everyone keeps saying “Pennsylvania is great, another record month, etc.;” affiliates aren’t seeing any of the benefits of that. Operators took all affiliate money from an upfront CPA. I think, as an affiliate, but also from an operator’s standpoint, if we look 10 years down the line these relationships need to become much more symbiotic. At the moment, affiliates are essentially used as an acquisition tool. Relationships need to be symbiotic so that, in 10 years, affiliate sites are working as a retention and reactivation tool for the operators, not just a tool for acquisition.
But to do that, the use of revenue share needs to become more widespread.   

If you imagined Europe to be the US, looking at all the different countries as states, Europe is now saturated. We’re regulated in every market and there are no new markets exploring regulation options. The EU is a very mature market so the acquisition is very hard. How do affiliates carry on making strong money in the EU? It’s because of the revenue share agreements they have. If I get 100,000 players to my site, my job is to continue getting players to be with an operator to extend the LPV for the operator and revenue share for the affiliate.   At the moment, the way I see the US operating, there will become a revenue vacuum at some point that will be created by two things: affiliates will stop promoting, because they’ve got their CPA so there’s no point in carrying on. Also the levels and volumes that are being offered at the moment we all know is not sustainable. At some point, it’s got to flip through.