Round Table: Secondary Lottery For Affiliates

Round Table: Secondary Lottery For Affiliates

While DFS and eSports are attracting most of the hype in the iGaming world, it’s secondary lottery that is currently the most profitable opportunity to affiliates. Here we find out more.

Published 9th November 2015

There is a lot of hype around several new markets/products at the moment, including eSports and DFS. Why is secondary lotto such a big opportunity for affiliates?

Ivan Hadjov:

Traditional lottery is an extremely high-volume industry and secondary lotto is a rapidly growing market. Unlike pure gambling products like casino that require specific knowledge, lottery boils down to buying tickets, which makes it very similar to e-commerce. Such a simple and popular product implies very high conversion rates and big traffic that could come from almost everywhere. Affiliates should act now while competition is still relatively low, and take the unprecedented opportunity to bring players from places they haven’t tried yet or haven’t even thought of before. It’s a great time to open a new business and monetize huge volumes of traffic.

Jeff Falcke:

Lotto products have been around, in one form or another, for hundreds of years. The current spotlight is being placed on the secondary lotto industry. This is attributable to a number of factors. First, the large amount of innovation that is currently taking place in this space. Second, the increasing recognition that this space comprises a huge volume of potential players globally and a sizable revenue stream (global lottery ticket sales in 2014 amounted to $260 billion, according to the World Lottery Association). Third, we’re seeing a shift from an offline to an online focus for lotto products. The hype is therefore also around leveraging off the opportunity that this shift provides. Fourth, the online lotto space is currently very uncluttered. It actually reminds me of the casino space 15 odd years ago. Coupled with an incredibly high volume of search queries from around the world, the opportunity available is obvious. The acquisition of a lottery player at this point in time, due to the low level of competition in this vertical, generates a much lower CPL.

Stuart Ballan:

It’s too easy to dismiss lottery as “too small”. But everyone, everywhere, wants to be a multi-millionaire and understands and trusts national lotteries, yet are often restricted due to their geographically remote location. The lottery messenger industry will fill that demand, and it’s the affiliates, who take a longer term view and understand that the lottery messenger industry is not a “quick win”, that lottery customers are loyal, will play forever and will have increasing LTVs, who will benefit from this big opportunity. If eGaming and DFS affiliates won’t get it, perhaps those of the media/publishing world will.

Yuval Ganot:

Lottery is the biggest market in the world. It is bigger than binary, forex and casino. However, the online component of the lottery market, or the secondary lottery, is less than 1%, which makes it the biggest potential market with unlimited opportunities. One of the reasons the secondary Lottery market so big is because it is one of the oldest games in the world and everyone is familiar with it, making it easy and simple to explain and market the product, unlike some established iGaming products. Secondary lottery is also accessible almost to all types and ages of the population, unlike the binary, forex and casino industry, which are mostly niche markets. All these factors make the marketing and advertising of this secondary lottery market a very interesting opportunity with huge potential. It is also important to mention that the level of competition around marketing the secondary lottery market is currently very low, even compared to the binary, forex or casinos market. In this respect, the secondary lottery market has no competition.

What are the most effective techniques/strategies for acquiring customers and traffic for secondary lotto websites?

Ivan Hadjov:

Because of the product’s nature, affiliates can look for players practically everywhere. The only other gambling product that behaves similarly in this respect is probably sports betting. The majority of official government-sponsored lotteries are still nowhere near close to going online and keywords for the world’s major lotteries are still relatively cheap, so affiliates can buy traffic with those keywords and monetize it on the white labels.

Jeff Falcke:

The standard strategies applied across the gaming space are applicable to lotto as well, including search and SEO. Lotto is so widely played around the world that the target market is far broader, leading to a healthy balance between volumes and conversion. Due to the everyman appeal of lotteries, there is not the so-called stigma that is sometimes associated with other verticals in this space, allowing for more opportunities in acquisition.

Stuart Ballan:

Lottery is likely to follow the supply & demand paths of eGaming, binary, etc, where CPA costs started off low and increased as the industries matured and were saturated with many brands. Lottery’s CPA cost should also be driven up over time by the increased confidence level of lottery customers, moving to purchase higher value and recurring packages, reflecting increased lifetime values. Retention will be absolutely instrumental in guiding customers up the LTV graph.

Yuval Ganot:

From seeing a few of the brands that are using our lottery platform, the main marketing techniques are media buying; SEO, as there are huge volumes of searches particularly for phrases such as as “lottery results”; and email marketing.

Are there any legal/advertising/ marketing restrictions affiliates should be aware of with respect to the various models, countryspecific or otherwise, and what advice would you provide here?

Ivan Hadjov:

The insurance model requires a gambling licence. The messenger model is still unregulated, but that doesn’t mean it robs official lotteries of their revenues. Quite the opposite – by purchasing thousands of real tickets, agents generate substantial profits for the lottery, including taxes. In our experience, with both models one of the most popular strategies is media buying using various licenses.

Jeff Falcke:

Lotteries are not treated as gambling products in many markets, so there is typically far more flexibility when it comes to advertising. That said, as with all the other verticals in this space, legislation needs to be reviewed on a case-by-case basis. We would recommend that affiliates review the legislation in each target market and adopt a relevant strategy based on the outcomes of their findings.

Stuart Ballan:

The messenger model has few restrictions, with “stay away from the USA” being a given. The insurance model will be constrained by the requirements of the selected gaming licence and the regulatory status of individual countries. There will always be greyer jurisdictions and situations, which will boil down to a risk/reward formula, well understood by operators and affiliates.

Most of our readers will be working in other iGaming verticals, such as casino, sports. Are the skill-sets easily transferable to secondary lottery, and how do the commission structures and deals compare?

Ivan Hadjov:

Lottery is all about buying big dreams for a very small price, so it’s much easier to find people who are willing to try playing online. It also implies lower CPAs because it would take fewer impressions and cost less to convert a potential player. If affiliates have learned to survive on other online gambling markets, they should be able to find audience for secondary lotto, especially if they already have databases and working funnels. Commission plans are the same as everywhere - CPM, CPL, CPA, hybrid and revenue share deals, but affiliates seem to prefer rev. share, as opposed to CPA, which indicates that we are facing an untapped market niche and a stable industry that is here to stay.

Jeff Falcke:

The skill-sets are almost identical; obviously a basic understanding of the lotto products can be beneficial but is by no means essential. We have seen great success with cross-sells from gaming verticals such as casino, sports and financial. Commission structures will vary across operators, obviously. The standard structures such as CPA, revenue share and hybrids are all available in the lottery space. One interesting aspect is that revenue share seems to be most popular due to the fact that retention of lotto players far surpasses that of players on any other vertical. It’s not unheard of to see lottery players still active with an operator over a decade after their first ticket purchase.

Stuart Ballan:

Affiliate skill sets are generally easily transferable to new industries. Low CPA costs initially seem to make lottery less attractive to affiliates, but should increase with brand saturation and increasing player values. To kick-start the affiliate industry for lottery, operators will have to consider both the current lower, less attractive CPAs and a revenue share, the latter reflecting the potential years that lottery customers can remain loyal to a specific lottery brand. It will also be interesting to see how the lottery B2B platforms, launching comprehensive affiliate services as part of their total value proposition, influence the formula. What operators do, and affiliates must recognise, is that eGaming players know they are gamblers whilst the majority of lottery players would perish the thought. Selling lottery to eGamers makes sense, but selling eGaming to lottery players is swimming against a strong tide.

Yuval Ganot:

The skills are the same. Thanks to the limited competition, I would say it is even easier to start an affiliate marketing business in the secondary lottery market. The commissions are similar to the products mentioned above, however the rates are lower. That said, while CPAs are lower, conversions are much higher, which makes the overall income of the affiliate even higher. Another important aspect I see from managing our platform is that the potential population to which the affiliates can offer the product is much bigger than that for binary, forex or casino, which makes the potential income for the affiliates far higher.

The number and frequency of playing/betting opportunities is currently far lower for secondary lotto than for products like poker or casino or sports betting, which could be seen to limit the market potential. How are operators/ providers dealing with this aspect?

Ivan Hadjov:

One option is to explore the cross-selling potential between secondary lotto and other gambling products by integrating it into online gambling portals. This is a win-win situation for both secondary lotto and gambling operators. Another way is to develop live streaming lotteries and side games like scratch cards or soft casino games which all convert very well with lotto. B2B operators also have the exciting possibility of creating multiple white label lotto networks with rules and jackpots independent from land-based lotteries, thus presenting the player with a new thrill and a whole new experience.

Jeff Falcke:

We have seen some exciting innovation within this vertical in the last 24 months, to aid both user experience and affiliate income. Short-interval lotto based games have bridged the gap between draw days, increasing retention and ultimately improving player lifetime value. Users are able to purchase their tickets and know if they have won the jackpot within a five-minute period. Lottery operators are also able to innovate on traditional lottery games to provide more exciting products, with flexible draw cycles and higher jackpot values. I believe that it’s the responsibility of the operator to constantly innovate.

Stuart Ballan:

That’s not comparing apples with apples. Firstly, the playing/betting opportunities measure player retention in a small number of months, whereas lottery measures the same in years. Gaming players deposit, and subsequently use some of those funds, a spin at a time. In lottery, they do not deposit and leave funds sitting as a balance; they just purchase tickets or bet on lottery outcomes, consuming the payment immediately. Whilst gaming/ sports betting is played by a minority of the population, the gamblers, lottery targets the vast majority, globally. Lottery is not about one draw a week and then wait for next week. On the contrary, the different brands offer many combinations and permutations of ticket purchases and syndication, spanning many lotteries, with a wide range of pricing to suit every player, and on a recurring basis, so a dedicated lottery player will have no shortage of adrenalin.

Yuval Ganot:

The question is not relevant, in my view. The potential of the average lottery client is far higher than for casino or binary, the reason being that a strong operator in the secondary lottery market understands what makes an interesting and attractive offer for lottery clients. It’s also worth remembering lottery jackpots are huge compared to other games, making the lottery, making these products very sexy for clients worldwide. You are however right that operators are also dealing with this issue by offering more of the big lotteries, side bets, and much more.

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