Interview: Delzar Khalaf, LottoTech
Published 24th March 2015
Online lottery has not traditionally been a profitable niche for affiliates, what has changed?
The lottery industry is currently undergoing a process of profound change. It is moving from traditional retail to new business models, which is essentially a shift from physical to digital distribution. This process expands and redefines the existing user profile and will result in exponential growth of the whole market. There is not much work for affiliates just yet, precisely because we are at the very beginning of this shift, but this by no means implies that online lottery is an unprofitable niche for affiliates. Quite the opposite! Lottotech is riding the wave of this transition with a pioneering platform and new business models – the Scan and Insurance ticket systems - which will open up new markets and audiences, both online and mobile. The sooner affiliates realise they have unprecedented opportunities to profit from this shift, the bigger profit they will make. In the next couple of years, we will witness the core lottery business increasingly relying on those new business models. The future of lottery is online and mobile. I’ve seen this happen with casino and other industries outside gaming, too. It’s nothing new. My advice to affiliates is to dare be among the first as this will secure their place among the biggest a couple of years from now.
Not all affiliates may be familiar with the secondary lotto model. How exactly does this work?
The Lottotech platform enables lottery enthusiasts to participate in various lotteries from around the world regardless of their physical location. It allows them to buy lottery tickets online from any device in a single purchase. This freedom of access, as opposed to the physical and geographical restrictions of primary lotto, is possible thanks to our new business models – the Scan and Insurance ticket systems. The first model works through a network of local agents who buy real lottery tickets on behalf of the players and provide them with a scanned copy. The second model operates through purchasing insurance certificates, which guarantee that in case of any winning, the prize amount will be paid out by the insurance company. In both modes, winnings are transferred directly to the registered user account. Secondary lotto has tremendous business potential because it gives consumers value they cannot get from local national lotteries. For example, a ticket for the Bulgarian lottery costs €1 and the biggest jackpot you can win is about €500 000. A ticket for the MegaMillions lottery costs $1 and the current jackpot is $100 000 000, but if you want to play for it, you either have to ask someone in the US to buy you a ticket or travel there to buy it yourself. The first option is a nuisance and the second is just too expensive! The Lottotech platform eliminates these obstacles, providing fast, easy and secure access to the world’s biggest lotteries from any device. Yes, it would cost you a bit more than the local ticket price, but if you take into account the time and effort you save, it is a bargain. It makes your dream hundreds of times bigger. You will never lose your ticket and you won’t have to check specifically to see if you’ve won. On top of that, you can subscribe to your favourite lottery in just three clicks and never miss a draw.
What is the market potential for online lottery, compared to other traditional iGaming verticals?
If we look at land-based and online markets combined, lottery is the undoubtedly the biggest of all gaming verticals. If we look at online only, however, lottery is the smallest. Online lottery presents a gap in the market and therefore has the greatest potential to grow and expand as compared to other online gaming verticals. It also has two unique advantages that put it ahead of the other sectors. The first is that it has always been seen as a “soft” gaming activity, never as gambling proper. Second, the product itself is simple - 75% of all people have played some form of lottery at least once throughout their lives, and picking a set of numbers or does not require any special knowledge, experience or education. Combined with the little investment required, this gives you a really huge target audience and market potential.
How is lottery affiliation different from other iGaming products, such as casino, sports, and poker? Are the skill-sets easily transferable?
That’s a tricky question! Affiliates need to realise one very important thing: the extremely broad target audience combined with the small initial investment means much less effort to find and reach people who are willing to try and play the lottery online. It also implies lower CPAs because it would take fewer impressions and cost less to convert a potential lottery player. Personally, I don’t think the skill-sets should differ significantly. If you have learned to survive on the other iGaming markets, you should find it easy to generate audience for online lottery, especially if you already have your databases and working funnels. At the moment, it is very easy to develop funnels and to generate traffic as the industry is new and there is little competition. You don’t feel the pressure to be very creative or innovative in order to succeed, but this situation will change quickly in the next couple of years. In the other iGaming verticles, pretty much everything has already been done.
What can affiliates expect when it comes to commission plans and deals, and again, how do these differ from what they are used to in the traditional online gambling space?
The market is still very young and there is very little competition. Competition in traditional online gaming is fierce and the market is over-saturated, which has brought much higher CPAs and increasingly lower retention. Consumers are lost in a sea of brands and are much more fickle in terms of brand loyalty. The same affiliates are fighting for the same impressions and the CPA keeps growing, leading to an ever-shrinking margin. Many businesses decline in this process, and some even fall out because they can’t cope with these challenges. The online lottery market still doesn’t display such problems, which should ring a bell among smarter affiliates. For, let’s say online casino, you might have to burn 100 to 1,000 times more impressions to get a FTD compared to the secondary lotto.
What support and tools is LottoPartners able to provide to affiliates?
LottoPartners is the only affiliate network in the online lotto industry, and is powered by Lottotech, the leading online lottery software provider. Our main priority is to develop the best platform with the best integrations for affiliates and make it as flexible as possible because we all know that traffic is the industry’s oxygen. We utilise the latest and most advanced systems and technologies so we are able to provide a variety of funnels, tools and creatives to affiliates so that they can optimise on all levels and yield high returns.
How many brands does the affiliate programme currently work with?
We currently have six active brands, among which are FTV Lotto and Lotto365. We are expecting to expand them to 20-30 by the end of the year. Every brand has its own unique competitive advantage, which is really the best thing about the Lottotech platform and LottoPartners. LottoPartners will enable affiliates to come and find the brand that will match the needs of their traffic and therefore convert it best. Brand-specific operational capabilities, localisation strategies, language support, payment options, etc. determine to a large extent the kind of traffic that will convert with this particular brand. We, as a platform provider, have the visibility about the strengths and weaknesses of every brand under our system, and thus we are able to point the right direction for our affiliates’ traffic. This approach results in increased profit for both the brand and the affiliates, and ultimately it helps us grow our business, too.
Are there any risks affiliates need to be aware of, such as in relation to player payouts etc.?
No, and this is yet another big advantage of online lottery. Unlike the rest of online gaming, here there are no bonus hunters or fraudsters, precisely because lottery is not generally perceived as gambling proper. It is much softer, broader and less problematic in this particular aspect. In my personal opinion, as it grows bigger and bigger, there will appear people who will try to find ways to beat the system as this is only natural, but we haven’t seen it at large so far.
How do you see the lotto industry evolving over the next few years?
We expect a continuous and growing shift from physical to digital distribution, emergence of new markets, business models and audiences. Online lottery and the way it works is appealing to people who wouldn’t otherwise consider playing for various reasons – huge jackpots, fast and easy access, reliability and security, to name but a few. It is literally taking the whole lottery experience to a brand new level.
“At the moment, it is very easy to develop funnels and to generate traffic for online lottery as the industry is new and there is little competition.”
“For online casino, you might have to burn 100 to 1,000 times more impressions to get a FTD compared to the secondary lotto.”