1 July, 2022

The American migration

Richard Gale, VP Europe at XL Media, talks to AffiliateCon on the migration of European affiliates to the US, and the challenges they face

What are some of the differences between affiliates looking to enter the US market from Europe and vice versa?

A while ago, we saw a lot of operators, suppliers and of course affiliates shipping out to the US at the start of its launch; that’s pulled back slightly now. While certain trends in the EU will affect the US going forward, I think right now the key is understanding the market and the sports. I don’t think many EU people have got that (understanding of the US) because they haven’t been brought up on it. At the start of this conversation, you and I started talking about Chelsea FC and its recent takeover, without explicitly talking about the issues because that was assumed knowledge. When two people are brought up in the same culture and have an understanding of the same sports, they can have a conversation with a high level of assumed knowledge.

I think the majority of EU operators – I include XLMedia in that – thought they could just write some great SEO content and go straight into the US market. That’s why we saw this M&A splurge, because operators and affiliates suddenly realised they not only had to buy existing assets, but buy the local knowledge and passion of US markets. At the end of the day, when you split between sports and casinos, sports are about passion. You have to have writers; you have to have product owners and marketers. You have to have a passion for the sport in question.

A lot of EU affiliates didn’t have that knowledge of the NFL, NHL or even the way the American betting system worked. If you’re in the industry you can see it’s very similar, but if you’re a consumer they’d look like completely alien things. For me, that was one of the big lessons that we now have learned about the US market and culture. It was easy for super affiliates and normal affiliates to spread out in the EU; although there were different languages, culturally European countries are very similar, especially in relation to sports. In the US, M&A was driven to acquire local understanding and local passion.

On the opposite side of the fence, what can the US learn from the EU/UK?

What the US can learn from Europe is that the product always wins. I’ve probably worked between 100-200 operators in my career as an affiliate, and I guarantee you it’s the operators with the best product who keep customers and have the best LPV (lifetime player value). In the UK, it’s bet365 and Sky Bet that has the best product in my view. They have the best product; I must have 30 different betting apps on my phone, those are always the ones I go to. I also think bet365 has the best customer relationship management (CRM) in the industry. Their knowledge and the data they hold on players means its CRM is so on point that so often you’ll be out and get the £5 free bet for the Champions League Final or something, then bam you’re back in. In the case of operators, who out in the US are saying, “you know what? If we have the best-in-class CRM, then we’ll win long-term.” For me, that’s where bet365 keeps on winning. Who will do it in the US?

Diversification is important, too. New operators come in all the time and rely on affiliates. That’s not how it should be done fully. Some of the big US operators are catching on with big omnichannel marketing strategies, which is so important. You can’t rely on Google, you can’t rely on Facebook, you can’t rely on affiliates, because you don’t own any of those platforms. At any point, these avenues could be taken away. Again, this is something Europe has learned the hard way. You’ve got to have an omnichannel marketing strategy so that if any one of an operator’s different legs falls, you’re not stuck in the water.
Nor operators should never undervalue the importance of casinos. So much of the tail revenue that XLMedia generates is through a sportsbook that has upsold a player to a casino. I know there are only about three states in the US where that’s possible at the moment, but we know that the average casino player is worth multiples of a sports bettor. So, as the land-grab finishes, as operators start looking to grow their margins to become more profitable, the question is how the cross-sell into the casino goes, because the casino is where a large amount of the revenue comes from.

If you’re an affiliate now, which US state would you be looking to enter?

I’ll answer that question with a different answer if I can! Let’s take out New York; I don’t think many affiliates are dying to get into the New York market at the moment. My instinct is that affiliates won’t look at it like that. I think successful affiliates will look to go into all regulated states, carefully tracking where each state is in its legislation, and pre-preparing their sites and marketing materials for those states. I think they’ll want to have a full US contingent, and not cherry-pick the states.

One reason I say that is because it very much relates to cost efficiency. Trying to run a single-state affiliate site, or even a single state-operator, the cost efficiencies just aren’t there. Affiliates will want to have US sites, perhaps with sub-state sites underneath them; but the infrastructure will be US-based. Affiliates need to have 10 operators to work effectively, so I’m sure they’ll be looking at all of the USA to try and maximise cost efficiency.

On the flip side, are there any states to avoid for affiliates?

Well of course there’s New York with its 51% tax rate, a no go for affiliates, but other than that I don’t think so. Taxation is going to play a huge part in the markets that affiliates look to enter. That and states in which operators run a monopoly or duopoly. Even with a duopoly, the chances for an affiliate to make a viable business are very limited. So high taxes and monopolies/duopolies are the two things to avoid when entering a state.

In an ideal world, what would constitute the perfect market for an affiliate to enter?

Low taxation, for one. Several high-density cities within the region, with multiple sports teams across multiple sports. And a legislative framework that makes it easy for revenue-share agreements. If all those things occur in one place, I’m in!

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