Understanding the affiliate ecosystem
Published 20th December 2016
I have a lot of experience with affiliates as a white label operator and want to give you some of my best advice on negotiating with operators so you can do a good deal. For tier 1 or tier 6 operator brands alike, affiliates are a critical part of the igaming ecosystem. This is due to a combination of factors:
- High profitability per customer - In segments like financial services, if you’re able to send converting leads to a mortgage provider, every lead will be worth several hundred pounds. In igaming, lifetime value can be in the thousands if you find a whale, so it makes commercial sense to get in the ring and generate converting leads.
- Organic traffic - Affiliates generally get their traffic through organic search. Google is largely OK with the affiliate ecosystem because it serves a useful purpose to the user: helping decide which operator to join. That’s why at the London Affiliate Conference, for instance, much of the programme concerns SEO; it’s the dominant source of traffic for affiliates.
- Risk - Affiliates are the commission-only salespeople of the internet and bear the risk on behalf of the operator. For taking this risk, affiliates get a revenue share or a cost per acquisition bounty per qualified lead. When you add all this up, you get an efficient low-risk pathway to new acquisitions. Before I set up Oshi, I remember thinking how I could use all my SEO skills to rank the site, get a ton of traffic and avoid the need for affiliates. But as it turned out, I decided to deprioritise SEO. Very simply, I didn’t want the risk.
Risk versus reward
When I look at those times in the past before Oshi, where I’ve ranked top of page one for big phrases like ‘online casino’ on google.co.uk, I was surprised by how little business these trophy phrases generated. It was many years ago and I can’t remember all the numbers, but it was all very underwhelming. Once I accounted for salaries, overheads and actual marketing spend the return on investment wasn’t that good. If profitability is so-so, and you have the downside risk of a severe penalty giving you a nosedive in reputation, loss of all your organic conversions and the stress and hassle of getting reinstated, SEO starts to look less compelling.
I would say on the whole, most operators feel the same way as I do. SEO is something worth actively considering but not aggressively pursuing. There are always exceptions of course. Why it’s worth being an affiliate I recently had a conversation with the owner of a tier 1 affiliate network. He said he loved being an affiliate today because he knows brands are nervous about SEO and he brings in huge amounts of business that operators are screaming for. He can more or less name his price. If one operator doesn’t convert, there will be hundreds of others that can be tested. If you’re a serious player, you’re in a powerful position.
Have you noticed how the operators are desperate to build relationships with the tier 1 affiliates? It’s because three productive tier 1 affiliates are worth 100 tier 3 affiliates. Put simply, it makes economic sense to give these mega affiliates the best revenue share and the most attention. If, however, you’re not one of these ‘hot’ affiliates, getting that deal comes down to negotiation. This is where I get to the ‘tools, trips, tricks’ part of this article. Since I’ve been talking about Google quite a lot, I’ll go through the negotiation framework Google uses. It’s based on the book Getting More by Stuart Diamond.
Set your goals
Focus on the right goals for you. Everything in your negotiation with an operator takes you to that end point you’ve decided on. They say you get what you wish for, so set sensible goals that you would love to achieve. For you as an affiliate, obviously, it’s doing deals with the right operators and getting the maximum revenue share or CPA deal you can. Pitch sensibly. If you want a 55% revenue share, or £300 per confirmed lead and you’re just working off a little WordPress site that doesn’t seem to have any traffic, you’re setting your targets a little high.
Why? Because affiliate managers have heard all the big stories before. If you blow your credibility it will take a lot of work to earn that credibility back. If you lowball, you will get deals, but it’s going to be a lot of effort to negotiate upwards even when you start to perform. On revenue share for a casino like mine, 35% rev share is a good number. It leaves the operator with some room to work with and it’s a lot better than the usual 25% introductory revenue share big operators offer.
Do your homework
To negotiate effectively, you should know who you are negotiating with. There are two tools you can use for free that will give you an overview of any operator.
- SimilarWeb.com will tell you where an operator gets most of its traffic from, the main referring sites, whether it’s got much organic visibility and some useful information on audience interests.
- SEMrush.com will give you a rough idea of where a site is ranking, which in turn tells you how much uptake a site has in a country.
If you use these tools on your own website, you can see how close of a match you are to them. Every operator has a niche and it’s a case of matching up you to them.
Keep your emotions in check
We are all human and driven by our emotions. If you find out that an affiliate manager is an idiot, it makes things difficult. But if you’re a good negotiator, you should be able to deal with idiots really well. Give your negotiation the best chance of success by depersonalising and abstracting the business from the relationship.
The odd thing about affiliate marketing is that most operators don’t have a unique proposition. They can’t offer you 90% revenue share, for instance, so they fall back on taking you for dinner and trying to be your friend. I’ve also noticed different nationalities have different positions on friendship and business. It seems the Italians love it if you’re their best friend and you do business with them, whereas the Germans like to keep everything very separate (I’m generalising terribly here).
Only you can decide how you want to play the friend/business game. My view is to be a nice, straight, down-the-line person and stay away from getting personal about anything.
Every situation is different
Most affiliate deals are pretty straightforward and standard. What varies are the affiliate managers and their perception of you. That’s why negotiation frameworks are great, because they don’t tell you exactly what to do in every case, but they give you an overview where you can fill in the gaps yourself.
Incremental is best
Taking one step at a time when negotiating is really important. I mentioned earlier it’s best not to ask for too much upfront and it’s so true. I’ve had pitches from affiliates asking for some crazy tenancy fee on a junk website. The only thing that affiliate did was destroy their credibility with me. I’m never going to take that person seriously again. It’s the same with every affiliate manager you will ever come across.
Doing your homework means you can gauge their situation. Let’s say you’ve done the analysis, you know your traffic is the right kind of traffic for the operator and you know they’re on a charge, buying media all over the place. Then you can ask for tenancies.
With rev share as I mentioned before, my advice is to find a happy medium between asking for a good rev share and keeping your options open for an upward revision on rev share if your promised good traffic is beginning to materialise. It’s important to do that upward revision on rev share when everyone is still in the honeymoon phase because if things don’t go so well later on, it will be impossible to cut a better deal for yourself.
Trade things you value unequally
Each party values different things in different ways. A big operator might care a lot about brand building, or pushing some campaign they’re working on. You might know that certain real estate on your site is prominent, but doesn’t really get conversions. You have a bargaining chip to offer banner space for a campaign on your site. No one values everything in the same way. You can trade off different things as bargaining chips to get what you really want.
Find their standards
Operators like to be consistent. It’s easier for them to manage their brand and general administration. What are they doing on other affiliate sites? Are they getting high-ranking placements on lists? Are they fussy about how their brand is presented? What kind of reviews do they get? What’s the story they’re putting out? When you know this, it’s much easier to line up with the affiliate manager, showing you know what you’re talking about and you are a great site to work with.
Be transparent and constructive, not manipulative
People are more perceptive than you think. We must be perceptive in order to function together. That’s why good affiliate managers are generally straight, but the ‘noobs’ sometimes behave like turkeys. Fortunately, those people don’t hang onto their jobs very long and the brands they represent are often not worth dealing with anyway. You can leverage yourself into a good deal, but if one party isn’t happy there will be no tomorrow.
Always communicate, state the obvious, frame the vision
It’s amazing how many people don’t communicate. They guess things and don’t ask basic questions. People somehow assume the other party they are negotiating with knows everything. That’s not always the case. If you’re dealing with an affiliate manager who doesn’t really care about you because you’re not one of his favourite tier 1 sites, it’s important to make the facts simple for this person. That might be writing up a summary about your website, or reiterating certain key points in your conversation.
Framing the vision is all about helping that affiliate manager understand what it’s all going to look like. How your site will look with their brand on it, how your users will love them because you know they’re a good fit, how you’re going to generate lots of nice business for them. Once that affiliate manager sees the value in you, you’re ready for a good deal.
Find the real problem and make it an opportunity
Shit happens. Sometimes a negotiation goes flat or downhill. In those situations, sometimes it’s stuff that has nothing to do with you. Maybe the affiliate team doesn’t have enough managers and so they don’t want to deal with anyone but tier 1 affiliates? Maybe they just don’t believe you? In which case, you failed because you didn’t match yourself up to them properly. Whatever the reason you’re getting pushed back, it’s important to probe and find out what’s really going on. Once you know the answer, shift your negotiations so everyone’s happy.
The bottom line
Operators need you. There’s no getting around the benefit of working with affiliates. As a middleman, you’ve got to get the traffic, but how well you monetise ultimately comes down to how good at negotiations you are.
If you get a 20% rev share because you’re a ‘nice guy’, versus 40% because you took one hour to do some research and ask for what you deserve… that could be the most valuable hour you’ve ever spent.