Since this is a hot topic in the last few days especially regarding some Microgaming casino groups (so I know it’s not just me who is extremely interested in this topic), I thought I’d post some of the latest update to this report:
http://casinoaffiliatefrauds.com/
This is the domain name set up by the owner of the guy who runs http://www.gamblingmagazine.com specifically for the report. Part 2 (from November 3rd) is almost halfway down the page.
Some very interesting scenarios that have made me think.. I’ll post an excerpt here
The player deposits $100 and it’s 100% of the total available.
From this 100% you need to deduct the following:
The licensee will pay an average of say 25% license fee to the game developer. The game developer has good systems in place to make sure the licensee can’t cheat them, so they will collect the 25% and you can be sure about this.
The licensee needs to pay an average of say 12% for high risk credit card processing, charge backs, anti fraud systems, processing and payment fees, bank charges, and other fees on the processing, and making payments and receiving them and collecting them, etc………
The licensee has operating expenses of say 28% for paying salaries, rent, gaming license, advertising, offshore servers and connections, IT and crooked programmers, traveling, insurance, leasing, bank charges and loans, legal expenses, customer support, telephone, depreciation, offshore companies, accounting, auditing for some, taxes, sales tax, etc……………
The marketing companies will offer affiliates an average of 25% to 50% and some much more. They also offer the affiliates to get up to $400 per player, plus all sorts of gimmicks, and other incentives to sign up, and then stick to their fraudulent programs. Let’s take 35% as the average they promise the affiliates.
25% license fee
12% payment processing
28% operating expenses
35% marketing company
100%
The first problem is that in the above example, the licensee didn’t make any money, and the 100% are theoretically gone, there is nothing left for the operator.
The other problem is that we didn’t take into account the sign up bonuses, and other incentives given by all the operators to attract new players and also to get repeat business.
The above average percentages can vary by a few points, either way, depending on where these crooks operate, and how they are set up, but a few things are certain:
1) The game developer makes sure he gets paid his license 25% license fee.
2) It’s hard to get the 12% processing fees down, because of the high risks involved and the penalties that are common in the industry. If you feel that 12% is high for all these expenses, you are out of touch with the reality. The reality is that many of these very big operators are also laundering money, and they are offering to credit card processors 20% to 25% just to process the credit cards. Credit cards are only one component of our average 12% and for many operators it’s much higher.
3) The operating expenses of 28% can naturally vary, either way, depending on locations, volumes, efficiency, and other factors, but it’s hard to get them down because many are fixed and recurring expenses. Many licensees have considerably higher operating expenses, because the game developers steal their clients to direct them to their own sites, where they make a higher profit margin. This means that the licensee needs to spend much more to get some business through the door, so his operating expenses can easily go up.
4) You can be sure that the marketing companies will have a good system in place, so they will get paid by the licensees. This means that they will collect the average of 35% from the licensee.
Where did the money for the affiliates disappeared in all that because in the above examples the affiliates didn’t get paid? The marketing companies got paid, and everyone else, except the affiliates.
The answer is that the affiliate’s money didn’t disappear, it was programmed by the marketing companies and by the licensees that he wouldn’t get it in the first place, or will only get a tiny percentage of his real commissions.
There is 35% missing right there, and the crooked marketing companies get away with it by only paying a very small percentage of their own 35% to the affiliates.
A very high percentage of affiliates get cheated an average of 95% to 99% of their commissions. This means that instead of getting a commission of $100 they will be lucky if they get $5 and in most cases, lucky if they get $1 or $2.
More than you can ever possibly imagine get cheated 100% which means that if their net commission was $5,000 or $10,000 or $25,000 or $50,000 they get nothing, absolutely nothing, zero!