Interview: Cherry and Game Lounge

Interview: Cherry and Game Lounge

Cherry made a significant affiliate acquisition in the Nordics in late January, agreeing to pay €1.43m upfront and up to €2m in add-ons for a controlling stake in Game Lounge. 

Published 18th March 2015

FREDRIK BURVALL, ACTING CEO, CHERRY 

How did the deal for Game Lounge come about?

The costs for acquiring new customers have risen markedly in the past few years and we’ve been looking at ways to reduce this. Affiliates are increasingly important, and we’ve been very impressed with Game Lounge since we started working with them a couple of years ago. They are not only experts in the affiliate world, but also SEO, which is becoming more and more vital in today’s iGaming marketplace. We hope that the acquisition will help us add volumes quickly on current brands at a significantly lower cost, while the prospect of creating white labels with Game Lounge was also very appealing.

Operators tend to prefer to keep affiliates outside the business on a performancerelated basis. Why did you decide to buy an affiliate business?

The ultimate aim for Cherry is to acquire more customers at a lower cost and we will look at any way to achieve this, both organically and via acquisitions. Game Lounge has a unique approach in the affiliate world and they have brought Cherry high quality customers since we started working with them. We are very excited about launching our first white label with Game Lounge, SveaCasino.com, and, with plans to create more white labels in the future, we see this deal as more than just buying an affiliate business.

How do you see Game Lounge how Cherry undertakes marketing and acquisition activity across the wider business?

It will supplement our existing marketing and acquisition strategies as well as adding new layers. We have been quite aggressive with our marketing efforts across all of our brands anyway and this will definitely continue. The acquisition will significantly strengthen our position in the affiliate sector as we continue to focus on driving online gaming growth. The Game Lounge team is highly skilled in SEO so it will also help our brands to get stronger positions on search engines and other affiliate sites.

You will be acting as a white label partner for SveaCasino.com. Will this be run differently to your own brands, and can we expect to see you roll out more for Game Lounge-owned sites, should this prove successful?

It will be slightly different from our brands, which we own 100%, and with Game Lounge, this will be our first part-owned white label. The majority of the customers will come through affiliation or from Game Lounge’s own affiliate sites. We concentrate more on external marketing for our other brands, so it will be interesting to see how these compare. We are also expecting plenty of organic traffic as SveaCasino is a powerful brand name in the Swedish market, and we are confident that it is going to be a very successful new casino. If it works as well as we hope, there will definitely be a number of other brands that we create with Game Lounge in the future.

What impact, if any, will the acquisition have on the Cherry Affiliates proposition?

I believe that affiliates will find Cherry more attractive than they did before, due to the white labels and their potential for growth. We also expect to see a greater percentage of new customers coming to our current brands from affiliate networks.

Other operators advertising on Game Lounge sites may see your ownership as a conflict of interest. How will you be managing this and keeping them on board?

Game Lounge will be run as a separate company, so nothing will change with the service other operators get from them. It is not uncommon for operators to have stakes in affiliate businesses and there is room for many operators within the Game Lounge network. From Cherry’s perspective, we have been very impressed by the results from working with Game Lounge and I’m sure that’s also true for many of their other partners. We also invested in Yggdrasil Gaming on the B2B side, and that hasn’t stopped them doing deals with numerous different operators, so I don’t really subscribe to a conflict of interest with either of these deals.

Turning attention to the wider business, you recently stepped up as acting CEO “with the goal of reaching profi tability in this area as soon as possible.” How is the strategy changing, and are further acquisitions imminent in 2015?

Cherry has, in the fourth quarter and beginning of 2015, made a number of changes in order to create the best possible conditions for further profitability and continued growth. Online gaming turnover grew by 60 percent and deposits by 56 percent in Q4 2014, so we are on the right track, but there is still plenty to be done. Cherry has a solid strategy of growing both organically and through acquisitions and we will certainly be looking at other opportunities in 2015. However, for the time being, we are concentrating fully on our partnership with Game Lounge and getting our first white label brand up and running as quickly as possible.

JONAS CEDERHOLM AND FREDRIK LANGELAND, FOUNDERS, GAME LOUNGE

Non-Swedish readers may not be that familiar with Game Lounge. Can you provide a brief background to the business and how it is structured?

Game Lounge was founded in 2011 and we had a clear strategy from the outset as to how we wanted to innovate in the affiliate sector targeting the Scandinavian market. We specialize in SEO, but we also invested heavily in media spend, both on TV and in newspapers. From the very beginning, we have been buying media in the biggest newspapers and TV stations in Sweden, which has helped us stand out from the crowd. At present the company operates around 300 websites, and we make sure that we have the very best content on our sites. Quality content is absolutely crucial to our business and sits alongside our SEO and media buying strategies. Some of the major websites operated by us are www.SveaCasino. se, www.SuomiCasino.com and www. NorgeKasino.com. We have a team of 11 employees all based in Malta, and we will be growing this during 2015.

How is your business split between the various markets in the Nordics? Is Sweden by far the largest territory for Game Lounge?

Sweden is by far the biggest market for us at the moment. We actually started our business in Finland, but it is a hard market to penetrate as the regulations are much more stringent and you can’t do the marketing that you can in Sweden. SEO is also more difficult in Finland. We moved into Norway last year and we have already seen a great deal of success there. Norway is definitely a key market for us in 2015, but we’re always looking at other markets to see if there is any value there.

How did the acquisition by Cherry come about? Were you also talking with other operators?

We’d been working with Cherry for two years and we had a strong working relationship with them. We were actually speaking with a number of companies about potential investment, so we told Cherry about this and then discussions started about them investing in Game Lounge. Everything felt good with Cherry. They were very happy with the service and quality of players they were getting from us, so we had a lot of meetings to discuss the details of the deal and we then signed in January.

How do you see the acquisition - and the capital injection - transforming the Game Lounge business?

I see the acquisition as something extremely positive for Game Lounge. Our strength in SEO and the affiliate market, combined with Cherry’s online casino experience and strong platform, is a perfect match. As we are launching our first white label and our own casino for the first time, it also made sense for us to do this with a partner that has a good platform and a deep knowledge and understanding of running online casinos. There is a possibility that we might consider acquiring some other affiliates to help grow our business further, but at this stage we are focusing on delivering the new white label and we have high hopes for the B2C market. We will hopefully launch many more white labels with Cherry in the future.

Cherry will be providing a white label for SveaCasino.com. Are you already operating white labels, or will this be your first experience operator-side?

This will be our first move onto the operator-side, but we have been thinking about this for some time and we are now well-positioned to enter the market. Affiliates are an increasingly important segment of the online gaming industry, so our knowledge and understanding in this area, combined with Cherry’s experience in running white labels, means we have a solid base to help our brands succeed.

Post-acquisition, will the portals be more geared towards promoting Cherry’s sites over other operators’, or will it be business as usual?

No, it will be business as normal. We’ve worked with Cherry for a number of years on the affiliate side and that has gone really well. We have seen particularly good results with Cherry in the past six months, but that is the case also with many other operators. There have been plenty of other affiliate businesses that have been acquired by an operator, but that has not changed their focus. It would not be in the interests of Game Lounge or Cherry to focus solely on one operator.

Denmark recently re-regulated, and Sweden is set to do the same. What impact is this trend to regulation having on Game Lounge’s business, or are you yet to feel the full impact of this in the Nordics?

It isn’t really having much of an effect on our business. The Danish model is widely acknowledged as being the blueprint for future regulated markets, although the tax rate is perhaps still a little too high. Sweden is still some way off a re-regulation and I wouldn’t even like to guess when that will happen. It certainly won’t be before 2018. In any case, at this stage regulation isn’t really affecting our business.

Other than regulation, what do you see as the main challenges and opportunities for affiliates in 2015?

The main challenge for affiliates will be to stay in the top positions within Google. An increasing number of operators now see SEO as one of the most important elements of the marketing mix. They also have bigger pockets than the affiliates so we have a fight on our hands to win the Google war. We also think that more affiliate companies will be acquired as they continue to grow, so there are definitely opportunities out there if your products and services are strong enough.

“I believe that affiliates will fi nd Cherry more attractive than they did before, due to the white labels and their potential for growth.” Fredrik Burvall, Cherry

“There have been plenty of other affiliate businesses that have been acquired by an operator, but that has not changed their focus.” Jonas Cederholm and Fredrik Langeland, Game Lounge

Advertisement