The American CHALLENGE: An affiliate’s take

What are some of the challenges you`ve found moving into the US, particularly around all the different licensing regulations in each state?
They`re all so different. The interesting one is New York because from an affiliate perspective it was comparatively easy if you want a good partnership with a sportsbook. If you`re a good affiliate, you can essentially passport yourself in. But for other states, you have constantly changing landscapes, you need to give fingerprints, shoe size and all sorts of things. Obviously, this is an exaggeration but it was unbelievable how many rules and regulations certain states had, and the number of hoops one had to jump through to become an affiliate. That`s just to get set up in a state; when it comes to revenue share, that opens another can of worms; it`s another level of complexity.

Is it an advantage to be paid in a cost per acquisition (CPA) model rather than revenue share in New York, given the state`s high 51% tax rate?
The proof will be in the pudding. It`s still comparatively early days for us in New York, most sportsbooks are reluctant to go into revenue share deals even though one knows that, actually, in the long run a revenue share model is in everybody`s interest - for sportsbooks and affiliates. Sportsbooks want better-value customers, and if an affiliate is remunerated by the calibre and quality of what these customers bring to the sportsbook it`s the best thing for everyone. So I do think there will be an evolution in New York towards revenue share as this market evolves, because it`s still in its infancy. One can`t look past this fact really. When people say "it`s the end of the first innings, the start of the second," that`s what it feels like, like we`re at the start of the second innings.

There`s a hell of a long way to go. If you look at the big states that aren`t yet online, and the sophistication of an American bettor - for Brits and Europeans, the idea of betting is etched into our cultural DNA, the US not so much. Aside from a minor few who`ve bet offshore for many years, the average American looks at sports betting thinking this is novel, this is fun - I`ll go for one particular sportsbook. There isn`t yet a sense of seeking value, seeking the best odds. It will come and, for us, it`s about being an educational tool in the US market; it will build out our brand to eventually become a destination for US bettors. This is the nub of what we`re trying to do: build a destination.

For an affiliate, how difficult is it to get regulatory licences in different states?
We`re licensed in every state where one can be in the US, even in Maryland, which is one of the latest markets to come online. The variance of different rules and requirements across these states is staggering. It`s essentially the United States of 50, 51, 52 countries, or however you want to frame it. I think Europe can be viewed in the same way, each country is vastly different; so if you apply this to the States you can see it is, in terms of gaming regulations, a united nation of countries. But we were aware of that before we undertook our US expansion, moving from Europe. It`s part and parcel of what one has to do, it`s part and parcel of being an affiliate. In the US, you have to do things properly and abide by the rules. In a way, for a brand such as ours, as a new entrant, it puts off other people. The reason being it costs a fortune, and the administrative annoyance is staggering, so people don`t want to go through this. It`s costly and time consuming, but if you do things properly it can be a success.

How does an affiliate`s relationship with an operator differ in the US from Europe?
The main difference is that European relationships have been built long term. In the US, relationships are just starting out. The main difference is affiliates earning income through cost per acquisition (CPA) in the US, rather than revenue share as mentioned earlier. US operators are very much shareholder-obligated right now, they have to meet financial benchmarks, listen to analysts on Wall Street and focus purely on that. Imagine if operators were to take a pause, take a breath, and say "for the medium and long term what makes the most sense for my business?" But none of them are doing that. They`re all held accountable to their shareholders.

If you were a major, well-funded, unlisted sportsbook, I think you`d have a very exciting journey in US markets. That`s where a brand like Fanatics would be very interesting, for a merger perhaps. They`ve got the brands and there`s a lot of excitement around that. Ultimately, when you look at the industry as a whole, it's the same process of choosing a bet, placing a bet and either you win or you lose.

The question is whether people will be drawn to a brand and stick with it. If you look at the success of FanDuel and DraftKings and how branding had been predicated on their fantasy audience, this is the reason they`ve done so well when flipping the switch to sports betting. The question around Fanatics is whether it can transfer its social media followers into bettors. Because it`s a further gap to say "I love you on social" and "I`m going to place a bet with you on Broncos vs Seahawks." For fantasy sports, FanDuel and DraftKings, it`s easier to close that gap, if people are going to compete in fantasy sports, betting on it is just a small additional step.

Then you have brick-and-mortar companies, your MGM Resorts, Caesars and Wynn, operators with brand recognition. Obviously, Wynn has not had the rip-roaring success expected. But the likes of BetMGM and Caesars, which have deeper pockets, and operators with greater business nous will appreciate that a great app experience will be important. I will expect these established names to eat into FanDuel and DraftKings` lead, eventually.

Then, of course, there are smaller international players - for them, it`s tough. They have to be more agile, offering more exciting and novel bets to create a dent in the market. What`s stark is an operator like bet365. What are they doing in the US market at the moment? Not much, aside from peering over the parapet and taking an occasional look at how things are going. I think that`s a particularly novel approach too and from an outsider`s perspective it`s intriguing. But one can have a crystal ball and a crystal ball can be wrong. Regardless, there`s a lot of movement ahead.

Will you face more competition from affiliates like BestOdds who have moved over into the US, or competition from US-founded affiliates?
I fear for us it`s both! Competition, competition, competition, from all sides. In terms of the affiliate space, the sophistication and calibre of tech and business nous are highly impressive. Some affiliates I doff my cap to; they are very good at what they do. It`s tough for a brand new US brand that in the UK would resonate with millions of bettors. In America, we have to create our own noise to craft our own destination, our own brand. This is our long-term plan. We want to step up to the big table and sit with the goliaths. Step by step, we hope to get there.

How do you plan on creating the noise to build your brand in the US? What`s the roadmap?
Getting locality down to a tee can really help. It harks back to what we were saying about US states as being akin to 50 different countries. The key is to tailor yourself to the local market as best you can. In a company of our relatively small size, it`s tough to be local everywhere. So everything has to be bang on in terms of content, to appeal to as many different types of people in different regions as possible. But locality is key,and it is something we will push as we evolve because each state is a different country - one has to do that to be a success.

What other plans does BestOdds have for the next 18 to 24 months?
Within the next three months, we`re hoping to launch our V2 website. We want to continue to stand out and not be just "another" affiliate site; we`re always striving for originality. Being a brand for the long term is what we strive for, so using the hare and the tortoise analogy we`d much rather be the tortoise; little by little, step by step. We have a version of our site coming later in the year and plan to move into different verticals in the coming years, all the while not losing sight of who we are and what we`re trying to be; the bettor`s best friend.

In terms of markets and the US, there`s a huge amount to do. As each state evolves it`s our job to be present, to be ready. What`s interesting is the market keeps evolving at the moment; everyone was excited about the US and rushed to get in the door, then everyone rushed to get into Ontario which, unlike the US, has turned into a huge disappointment. It`s really been a damp squib, owing to the stringent guidelines laid out by the Alcohol and Gaming Commission of Ontario (AGCO). One never knows what will happen next, but it`s quiet so far in terms of the States, with nothing major on the horizon as of yet. I think when - and I do think when rather than if - California and Florida go live, US sports betting will move firmly into the mainstream. For an affiliate, the US is an exciting place to be.