Thread: Potential Threats to the UK Market

The UK is known as a massive opportunity for affiliates in the Online Gambling Industry. Recent studies and stats on demographics even show some excellent growth opportunities in this sector. With the increase of women participating in online gambling- that's a huge open door for the market. Also, it's looking promising for continued growth as PartyPoker recently shared that they're experiencing a 174% increase in site visits in the past year. (You can check out some pretty cool details here: Online Gaming in the UK: Profiting, Marketing and Winning Sources.)

With all this being said... there are some threats. The UK government is conducting an overhaul in online gambling regulations, and rumor has it there is the potential of some new taxes to be introduced. Any one know of more details on the proposed tax increases? What can this mean for affiliates trying to get in on this market?

I believe the tax implications were to stop sites such as william hill from operating offshore to avoid being taxed in the UK, not 100% sure on that though.
Good news on the growth, not surprised to see party gaming grow, which I'm sure is partially thanks to the collapse of FTP

Originally Posted by deanimus

I believe the tax implications were to stop sites such as william hill from operating offshore to avoid being taxed in the UK, not 100% sure on that though.
Good news on the growth, not surprised to see party gaming grow, which I'm sure is partially thanks to the collapse of FTP

Good insight here deanimus. The concern the with tax implications, again, is the effect it will have for affiliates. If taxes are raised, it ultimately hits the bottom line.

And yes, the growth opportunity is quite promising.... not too sure what it's all attributed to. But wouldn't be surprised if the fall of Full Tilt has something to do with it.

the UK government has historically been pretty supportive of gambling, and are trying to adjust things to stop companies moving overseas for tax reasons.

However, a bigger problem is the basic fact that at the moment people just dont have as much money as they used to. Player values are on the whole lower. Whilst this doesnt necessarily have a big impact, it does affect affiliate revenues - but not only in the obvious way.

A lot of big affiliates either charge a tenancy or high CPA or both. With the decreasing value of an individual player this means that in a surprisingly high number of cases the deals are actually costing the operators money.

For example if an operator is tied in to a 12 month contract to pay say, £2000 a month and £100 CPA and the players are only now depositing on average £50 before leaving, then the operator is actually LOSING £2000 a month plus £50 CPA £100 CPA paid to the affiliate against the £50 player value) on every single player.

If that affiliate is bringing 100 players a month then the operator is losing £7000 a month just on that one deal. Go back a while ago when we werent in such an economic mess its likely that the same player was depositing and losing £150 on average - then the deal was a win/win for everyone with the affiliate being paid £120 (£100 CPA plus £20 of the £2000 tenancy for the 100 people bought in) for a player who deposited £150.

This has been the reasoning behind reducing and eliminating CPA payments and moving everyone to revshare. However even on a 40% revshare, using the above example, an affiliate would now only be earning £20 per player instead of the £100 they were used to - forcing smaller sites out of the market thus allowing larger affiliates to survive, and at the same time lessen the impact of this cost shift as they gobble up the players that the smaller sites were getting.

Margins are being squeezed everywhere and ironically its some of the large affiliates who are contributing to this, possibly without even realising it.