Analysis: How are online gambling’s three biggest affiliates performing?

Things move quickly in online gambling. Christmas will soon be upon us and as the industry powers into Q4, EGR Marketing takes another look at the most recent batch of affiliate financial results to be released. Better Collective, Catena Media and Raketech – the three biggest affiliates on EGR’s annual Power Affiliates list – go under the microscope in this analysis, which rounds up the trials and tribulations of each business throughout the Q2 period. Which affiliate sailed through the reporting period with barely a scratch? Which had to be dragged kicking and screaming into the second half of the year?

Raketech reported a Q2 revenue decrease of 6.1% to €5.7m due to low Swedish player values and a strategic shift in revenue streams. Organic growth at the Malta affiliate was down by 8.8%, while adjusted EBITDA fell 10.7% to €2.9m, down from €3.2m in the same period last year. However, Q2 profit increased by €1.5m to €1.7m in total, while new depositing customers (NDCs) also rose by 21.7% to 24,974. Raketech said the decrease in revenue was down to a temporary shift in revenue streams, meaning a larger proportion of revenue share deals over CPA, as well as well-documented struggles in Sweden. Interestingly, direct expenses at Raketech increased to €600,000 due to increased investment in SEO development, on top of content-related consultancy expenses. This saw employee expenses drop by €200,000 to €1.2m as full-time employees decreased to 76 from 90, due to a new focus on outsourcing developers and content writers.

Catena Media’s share price fell more than 18% after the affiliate firm reported its own Q2 revenue dip of 9% to €23.7m. EBITDA for the second quarter dropped by 22% to €9.5m, while NDCs decreased by 29% to 99,981, down from 140,154 in the same period last year. The Malta-headquartered firm said poor performance was due to regulatory upheaval in the UK and France, as well as a weak sports betting environment and higher than usual casino pay-outs. In the UK, it was the UK Gambling Commission’s new KYC measures that led to the drop-off in revenues.

To combat the dip in revenues, Catena has chosen to focus on improving its non-performing casino products. Acquiring casino brands at such a rapid rate in the past has made it very difficult for Catena to integrate hundreds of web pages with any kind of continuity or consistency. CEO Per Hellberg tells EGR Marketing that it has already analysed and detected what is broken and have repaired the issues to stop further decline. The sites will also be improved and scaled into new markets throughout Q3 and Q4. Hellberg revealed that 24,000 different SEO fixes have been made across Catena’s casino sites since the start of the year.

Better Collective tipped the negative Q2 trend on its head by reporting frankly whopping revenue growth of 64% to €15.8m as the business continues to reap the rewards of its US investment strategy. The Copenhagen-headquartered affiliate saw EBITDA growth before special items of 77% to €6.8m, with an EBITDA margin of 43%. New depositing customers (NDCs) exceeded 111,000 in the second quarter of 2019, marking growth of 60% from the prior corresponding period.

Assessing acquisitions

Better Collective has been the busiest of the Nordic trio which is arguably a reflection of its strong revenue performance. Its biggest purchase during the reporting period was for two leading sports betting sites in the US – Vegas Insider and Scores and Odds – for a combined $20m. The two brands have provided sports betting information in the US for the last 20 years and amassed more than 15 million unique visits per month during the 2018-19 NFL season.

The affiliate giant pledged to change the business model of the two sites, from user subscriptions, tips and brand advertising to affiliate marketing and lead generation within sports betting. According to the European firm, the two sites will start sending traffic to licensed US operators from Q3 this year, while a full technical and commercial overhaul should be completed by H2 2020.

Better Collective will manage the Vegas Insider and Scores and Odds brands via its Florida subsidiary, having recruited 10 new employees to oversee the transition from an office in Fort Lauderdale. CEO Jesper Søgaard has made big promises regarding the acquisition, insisting the brands have the potential to become the largest revenue generating assets within Better Collective in the next few years.

He added: “I am confident that we, by way of these acquisitions, have put Better Collective in pole position for a market-leading position in the US states where online sports betting will be regulated and available.”

Not content with boosting its US presence, the Danish firm also dug deep to sew up a £2.2m deal for UK-based sports betting affiliate, My Betting Sites. The site – which advertises sign-up and retention offers from UK bookmakers – was founded in 2015 and generated revenue of approximately £400,000 in 2018. The website’s founder and CEO Ian Bowden will remain with the business and join Better Collective.

Søgaard described the acquisition as “not large” – a clear signal of just how much growth the biggest affiliates in egaming have experienced over the last two or three years. He added: “However, it fits all our key criteria for integration into the Better Collective Group, and the founder adds significant competences within UK sports betting that we believe we can utilise across other assets.”

Raketech too muscled in on the market during the Q2 period by sealing the €2m purchase of Japan-focused affiliate portfolio, Casumba Media. Casumba Media is a Malta-registered business that offers an “extensive amount of affiliate websites in the Japanese market”, according to Raketech. The founders of Casumba Media will stay on board to facilitate the roll-out of Raketech products in Japan, and possibly other Asian markets in the long-term. CEO Michael Holmberg said: “This is another milestone in Raketech’s history and fully in line with our strategy to expand into new markets. We see many operators looking at Japan and this acquisition is an opportunity for Raketech to be in an emerging market where our customers want to grow.”

Japan has proven a popular market for egaming affiliates, particularly in the casino sector, ever since Game Lounge entered the country as the first professional European outfit back in 2016.

Catena Media is yet to make an acquisition in 2019 after CEO Hellberg made the decision to go back to basics and focus on organic growth. Many believe Catena made too many acquisitions in too short a period of time, which made integration difficult and revenues impossible to sustain. The affiliate did, however, launch sports betting sites in Japan and Romania, as well as a casino site in Romania, while an English-language version of popular casino affiliate AskGamblers specifically tailored for the Indian market should go live by the end of the year. Football stats site Squawka will also be launched in Spanish.

No signs of slowdown

There is no sign of a slowdown as we had into Q3 for these three publicly-listed affiliate giants. The C-level merry-go-round is in full swing at Raketech, where chief financial officer (CFO) Andreas Kovacs pivoted to a new role as director of business development. The Malta-based affiliate looked close to home for a replacement and appointed Måns Svalborn from Maltese bank Credorax as its new CFO.  Raketech also tapped in to the North American gambling trend, but this time in Canada via the launch of casino comparison domain CasinoFever – one of Sweden’s most successful casino products.

Better Collective has shown zero signs of resting on its laurels after upgrading the backend of its flagship product bettingexpert, having also signed a lucrative commercial deal with UK newspaper The Daily Telegraph. The firm continues to develop Responsible Affiliates in Gambling, the affiliate trade body founded by Better Collective, Racing Post and Oddschecker Global Media.

The new-look Catena Media has been quieter than its competitors, and this appears to have become the norm for now. Perhaps the Malta-based behemoth’s new media-shy approach is testament to the hard work that is going on behind the scenes to ignite a growth turnaround. Hellberg definitely has a plan, but will it work?

One thing for certain is that there is no rest for the wicked – or the wise – in the constantly evolving world of gambling lead generation – the news just keeps on coming.