Prepare for Lower Commission Models: US Regulation Tip #9
Affiliates have reason to be excited in anticipation of a regulated US gaming market, but one negative to prepare for is lower commission models. With CPAs and CPLs likely to decrease, negotiating and figuring out how to offset costs and find more players will become imperative to success.
Many affiliates feel overwhelmed with questions about commission models in the regulated US market. Is revshare still going to be available? Will commission models be going up or down?
In truth, no one really knows the answers to these questions but it’s reasonable to expect commission models in the regulated US market to be lower than current industry standards.
It’s unrealistic to expect major, land-based US casinos in Nevada and New Jersey to pay affiliates the same amount for players as they currently receive. These businesses will simply be less reliant on affiliates to acquire players. They are able to market to customers directly in their brick-and-mortar properties. Basically, operators in the regulated market will not be valuing online affiliates as highly since they have other methods of acquiring players. As such, affiliates can expect to be compensated less.
Rev-share payment models could also be discarded entirely in favor of exclusively using CPA and CPL commission models. No one knows what to expect for sure, but it may be wise to brace for significant drops in compensation from US operators.
Dealing with Change
There are a few ways affiliates can prepare for dealing with lower commissions.
First, it’s important to realize that the negotiating power you may be accustom to having with operators will go out the window. Wynn, MGM and other companies likely to be operating in the US market are several billion dollar companies. Many iGaming sites affiliates currently deal with are only worth amounts in the tens of millions. Don’t expect these billion dollar organizations to invest a lot of resources in negotiating with affiliates hoping to claw their way to a higher commission rate.
However, limited negotiating ability doesn’t leave affiliates powerless to capitalize on the huge opportunity that is the regulated US market.
In order to offset lower commissions, affiliates should have an emphasis on finding more players. There will be a huge opportunity to do this when the market is regulated. More players will be available for conversion since there will no longer be an “illegal” stigma surrounding iGaming which currently prevents many from giving it a try.
Affiliates should also keep a mind on how cost cutting could compensate for lower revenues. Keep your affiliate business structured like any other company by making sure your costs remain light.
Watch: Preparing for US Market Regulation webinar with Professor I. Nelson Rose and iGaming industry expert Warren Jolly.