An affiliate marketing masterclass with Luke Cotton – part 2

In the second part of our interview with Luke Cotton, marketing manager at affiliate programme company Digital Fuel, he looks at how the nature of the affiliate area has changed in the past few years, becoming much more professionalised. He also looks at where he thinks the opportunities lie with eSports and looks at why so many have identified that sector as an area of growth for the years ahead.

GamCrowd: How do you think the changes in the world of online marketing are changing the affiliate scene? Is it becoming more 'professionalised' for want of a better word?
Luke Cotton: Affiliate marketing is a fair few years past the ‘bedroom-to-business’ switch and most of the leading affiliates are as professional as any other company in the space. The main changes nowadays are affiliates are more acutely aware of how their traffic responds to different offers and brands and how they can fit all their activities together into an overall business strategy. Affiliates have generally moved away from being focused on a single area of marketing, such as SEO, PPC or direct media buying arbitrage, and are coming up with more cohesive digital marketing strategies in order to acquire customers. For those focusing on a single area, there is a reason that they succeed as the right-place-at-the-right-time affiliates are slowly being forced out by those with true expertise in that area. This has enabled smart affiliates to scale up their businesses. The other development has been for super-affiliates to purchase multiple smaller ones - resulting in more bargaining power and increased margins.
 
GamCrowd: What are the biggest areas of interest in affiliate marketing right now?
Luke Cotton: Whilst online casino, bingo (particularly given the shift in focus towards slots) and general sports betting are likely always going to be the big three, the intensity of competition is huge and it will take something out of the ordinary to really break through into those markets. It is being done but new affiliates doing so are few and far between. Affiliates with a presence already in, or direct experience in those spaces, are in prime position to develop new products to grow their businesses. Start-ups with larger budgets may want to look towards financial markets such as binary options and forex, which can be very lucrative if done well, particularly in foreign markets.
 
A couple of the more recent developments have come in daily fantasy sports and in eSports although both have their own challenges. DFS is suffering from regulation and an affiliate model that relies on ‘whale hunting’, with CPAs too low to be attractive and significant rev share earnings coming solely from multi-entry players. That may be squeezed even further with rumours of certain brands looking to cap per player affiliate earnings. eSports has its own challenges: there is uncertainty around player values that will be seen from such customers; obvious search volumes are low and existing activity is almost all undertaken on questionable skin betting websites. A key challenge to affiliates is to convert such players to real money betting and gaming. eSports is also a more complex ecosystem to understand than traditional sports and it is obvious to its fans when outsiders who do not understand the industry try to get involved. eSports communities can be vociferous opponents of such companies, so having an in-depth understanding is crucial. Just putting up a page on an existing site won’t work.
 
GamCrowd: Why do you think there is great interest in the area?
Luke Cotton: The reason for interest in DFS is obvious: a legal way to monetize American traffic. Most large non-US facing affiliates do not want to touch America so as not to be black-balled from any future involvement if the market is regulated. Daily fantasy provides an opportunity to not only monetize existing traffic but to build up a presence in the US legally.
 
I think there are a few reasons for the interest in eSports and it is likely a combination of them all for the interest from the betting industry. Firstly, it is the development of eSports and the video games industry itself. Over the past couple of years, the games industry has shifted away from a one-off £40 to purchase a game, that is played for somewhere between 10-50 hours, to a free-to-play model where users are playing for hundreds and thousands of hours, and are making regular micro-transaction payments. This has led to publishers needing to retain their customers in order to make money, and eSports became the most profitable (and relatively cheap) marketing channel for a number of publishers, most significantly RIOT and Valve, who can both directly attribute revenue to their eSports activities. So as not to be left behind, other publishers are also forced into supporting their own eSports ecosystem. This success is in no small part due to the growth of live streaming, particularly Twitch, due to high-speed consumer broadband becoming available. Thus, eSports generally has seen a boom and increase in media coverage and investment.

In Valve’s case, unlicensed and unregulated skin betting websites have been a key contributing factor to their success. When millions of dollars are wagered on such markets per day, it is impossible for the regulated betting industry not to notice. The growth of eSports and its existing wagering, combined with a relatively quiet 2015 in terms of new industry developments and the potential to tap into a new customer base, rather than operators repeatedly stealing the same customers from each other, is attractive.

This has led to product development such as increased numbers of betting markets, both in terms of game titles, match fixtures, and derivative markets. My affiliate company, Trifecta Media, first worked as an eSports affiliate back in 2011 and started building our domain portfolio from then onwards. It was not until a reasonable number of operators brought out a suitable product range that it became worthwhile focusing on the industry, as we have done so with our websites like CSGO Betting (http://www.csgobetting.com) and League of Legends Betting (http://www.leagueoflegendsbetting.com). Now there are bookmakers who can fulfil the customers’ demand - or at least get nearer to it.

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