U.S. Finally Taking Action on Online Gambling

**Nathan** · 12-02-2009 09:51 PM

...But Will Affiliates Be Better Off?

From the CAP News page:

December 2, 2009 (CAP Newswire) -- Tomorrow, Thursday, December 3, the U.S. Congress’ House Financial Services Committee is scheduled to formally (and finally!) begin discussing legislation introduced by the committee’s chairman, and one of the United States’ most influential lawmakers, Barney Frank.

The bill, and the discussion, is about the full regulation of Internet gambling in the United States. The hearing is scheduled to begin at 10:00am (Eastern Standard Time, or Washington time), and will include testimony from leading figures in the Internet security and consumer safety industries.

"Top experts are expected to describe how existing systems and technologies have proven successful in blocking minors from gambling online, combating compulsive gambling and protecting consumers against money laundering, fraud and identity theft,” reports the Safe and Secure Internet Gambling Initiative in a news release.

"This hearing will provide further evidence on the ability to effectively regulate Internet gambling and require licensed operators to utilize already-proven technologies to protect consumers," said Michael Waxman, spokesperson of the Safe and Secure Internet Gambling Initiative. "It's expected this hearing will answer any outstanding questions and pave the way for a vote in the committee on Chairman Frank's legislation."

Coming as it does on the heels of the U.S. government’s decision to delay the economically disastrous, morally misguided Unlawful Internet Gambling Enforcement Act (UIGEA) for six months, many industry figures are looking hopefully upon this as the first step in a serious effort to get online gaming fully regulated in the U.S.

But would that really help online gaming affiliates? Or would opening the huge door of U.S. online gaming actually shut affiliates out by making gigantic casino companies more active in marketing efforts in hugely profitable American market?

Click here to read the original news release from the Safe and Secure Internet Gambling Initiative.

**Poker Dude** · 12-02-2009 09:59 PM

Originally Posted by Nathan

But would that really help online gaming affiliates? Or would opening the huge door of U.S. online gaming actually shut affiliates out by making gigantic casino companies more active in marketing efforts in hugely profitable American market?
.

Unfortunately, this will be the beginning of the end for online gambling affiliates. Affiliate marketing will be reduced to commoditized CPA's offered by Las Vegas through the likes of Commission Junctions. These CPA's will be small, I would imagine - probably $ 20 or $ 30 a pop. MGR and RB will die off. Las Vegas' superior branding and their ability to use mainstream media to advertise, will severely diminish the need for traditional affiliates. Only the very large affiliates will be able to make any money in this environment, and even they will make much, much less.

I am hoping that this drags out for many years, so things remain status quo. At least there will be less pressure on financial operators, with the heat off somewhat. I give the industry 2 years max, before it changes radically, and for the worst. Time to diversify guys..."last call" for gambling affiliates..........

**Nathan** · 12-02-2009 10:40 PM

All that's definitely possible, but don't you think that the enormous gambling market in the U.S. could partially offset those negative effects you describe? In other words, maybe there'll be enough revenue to go around for everyone? Isn't there always room for success in affiliate marketing, even when you're promoting something that's heavily promoted elsewhere?

**Poker Dude** · 12-03-2009 06:35 AM

Originally Posted by Nathan

All that's definitely possible, but don't you think that the enormous gambling market in the U.S. could partially offset those negative effects you describe? In other words, maybe there'll be enough revenue to go around for everyone? Isn't there always room for success in affiliate marketing, even when you're promoting something that's heavily promoted elsewhere?

Of course, it's possible, anything is. I think that many gamblers in US, are already gambling, and they will gravitate towards these new Las Vegas entities, when they become available. And I think that brand name recognition will be the premier driving force that will bring gamblers to these Las Vegas sites. I don't think affiliate marketing will go away entirely in this sector - but, I do think that Las Vegas won't need the same sort of affiliate marketing that 888.com and Party relied on in the U.S., back during the good 'ol days. Hence, the elimination of MGR and RB, and just small CPA's, is my belief.

Again, I really hope that I am dead wrong here. I remember several of the influential members of this board outright rebuked the idea of a UIGEA ever being passed, thinking that it never could happen. Don't think that the ramifications of legalized online gambling in the U.S. is all good - it ain't. Great for the players, mind you, but I really think the affiliates will take a major hit here. Please let me know if I'm DEAD wrong here, when legislation gets passed. I would love to hear it

**Dominique** · 12-03-2009 08:37 AM

I hardly think they will be in a position to snub affiliates, and if they try they will soon regret it. Affiliate sites drive huge traffic, and we won't drive it to where there are no profits.

The usual casinos will not disappear, they will continue on as they always have.

If anything, Vegas will have to court us.

**Captain** · 12-03-2009 12:06 PM

I beleive Dom is 100% correct and everything will be great.

**allfreechips** · 12-03-2009 01:30 PM

Its not the traffic we can drive to them, its the traffic we could prevent going to them.. With tha VAST presence of affiliates they would have to play ball, or they would find themselves as the lowest rated or most disrespectable casinos on the net.

**KeithF** · 12-03-2009 01:41 PM

Big brands would be foolish not to utilize affiliate marketing. They can target their marketing dollars much better than they can with traditional media.

Internet only brands can do quite well competing against B&M brands. Just look at Walmart.Com vs. Amazon.Com this holiday season. Huge battle and Amazon gets most of my wife's dollars...

Having a name like Harrah's will be a big advantage, of course. But this is online gaming, and they need to attract online players, not 65 year old grandmas with a jar full of change. (No offense to any 65 year old grandmas who are internet savvy!) - If they want to compete for online gaming ad space, they'll need to pony up a competitive offer.

Affiliate commissions are largely based on customer value, no matter what the industry. I'm willing to guess that the profit value for an online gaming customer is much higher than the profit value for a Walmart.Com shopper. See what I'm saying? The reason we get fat $300 CPA's for a casino depositor is because their profit value is huge. Compare that to say, a Cabelas.com customer who might spend $300 on hunting gear, but after the cost of the merchandise and labor is factored in, there is not a lot of profit to share with an affiliate.

I digress (I need to get back to work!). I don't doubt the big brands will try to pay less, but I think they will do so because their brand produces better conversion rates, and that gives them leverage. Affiliates are willing to take a smaller commission or CPA if the room converts extremely well. Full Tilt Poker is a good example. However, a $30 CPA would not get space on my site when another casino is offering $300 CPA's, unless that $30 CPA site converts at least 10x better.

Finally, even if big brands didn't want to do affiliate marketing and instead wanted to go with PPC or CPM, I'm guessing that PPC or CPM for casino/poker traffic would be quite high.

The idea that more competition for my ad space means the price will go down, does not make sense. Supply & Demand says otherwise. Again, things will change, but if you have casino/poker traffic, somebody is going to be interested in buying that traffic...

**Poker Dude** · 12-03-2009 02:39 PM

KeithF, you make very sounds points indeed. I really think though that once online gaming is legal in the US, that the US will make much more of an effort to make sure that the money stays "in house", and that there will be a trumped-up effort to keep operators outside of the US from grabbing players and their money. Las Vegas may be able to do that inherently by creating larger bonuses (for the players) than currently exist today. Larger bonus expenses may be another negative to affiliate earnings. Las Vegas will get lots of free advertising from the Media, when it becomes legal, and don't underestimate the power and lure of this extra free media. I stand by original comments, and again, I hope that i am dead wrong. However, your points were well made, and I certainly respect them.

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