CasinoCityTimes.com

Gurus
News
Newsletter
Author Home Author Archives Author Books Send to a Friend Search Articles Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Recent Articles
Best of Bradley Vallerius

Gaming Guru

author's picture
 

Gambling portal webmasters endure the UIGEA

21 November 2006

The busiest operators all the way down to the smallest affiliate marketers have struggled to come to grips with a new reality in the aftermath of the UIGEA's passage almost two months ago. But while the response of operators has been widely publicized, the plight of the portal webmasters has gone untold.

With the fleeing of most of the largest operators from the American market, so too went a lot of the most profitable affiliate programs for U.S.-focused gambling portals.

Some webmasters hope to compensate for the loss of revenue from American players by replacing them with Asian and European players. They are therefore translating their sites into foreign languages, such as German, Italian, Spanish and Japanese. Some are expanding their revenue potential ever further while making their localization of sites even more complete by promoting games like backgammon or mahjong to the areas where these games are most popular.

A lot of U.S.-focused portal sites have also had to drop affiliate programs they may have had longstanding relationships with.

"You've got the two largest Internet gaming companies in the world-- PartyGaming and 888-- pulling out of the U.S.," said Warren Jolly, CEO of the Casino Affiliate Programs. "That will force any affiliate to have to broaden their relationships and work with some of the smaller guys that are still private, even some of the newer guys who just came into the space."

Some portals have even adjusted their layout and interface as a result of the UIGEA. Casino City, for example, has updated its database of online gaming properties with information about which jurisdictions are off-limits to certain operators.

"We are also building a geolocation infrastructure to determine the likely location of a visitor to our site," said Casino City CEO Michael Corfman. "The end result will be that if someone accesses our online.casinocity.com site from, say California, we will by default show them which sites will accept players from California. We will also allow visitors to change the geographic location to another US state, Canadian province, or country anywhere in the world."

Beyond making changes to ensure their business remains viable, many portals are also taking steps to make sure they are legally safe as well. Some site owners are relocating their servers to foreign countries for fear that the U.S. Justice Department may one day order Internet Service Providers to shut down gambling portals.

Jolly says another trend, at least among high volume affiliates, is switching from revenue sharing referral agreements to CPA referral agreements.

"In dealing with the affiliates and operators that are still doing business in the states, I would be very surprised to see any of the larger guys continue to do business on a revenue share basis if they're still sending customers to the U.S. or any of the other countries in question."

Considering the high volatility of the American market, it may just prove safer for affiliate marketers to take a one-time payment for each player rather than risk assuming the lifetime of an American player will last long enough to mature into a large enough yield.

But not all webmasters may be willing to accept such a dramatic change to their business model as switching to CPA agreements. Matt Naffah, an account manager for Casino City thinks many webmasters would rather leave the gambling industry than make the switch from revenue sharing to CPA.

"Most webmasters have the talent to become an affiliate for other products such as pharmaceuticals," said Naffah. "Switching from revenue share to CPA will significantly decrease their monthly income and I believe will make it unappealing for webmasters to continue in the gambling industry."

"Also, many affiliate programs pay very low CPA, and some may not even have CPA as an option," Naffah added. "For the affiliate program, it is a risk to do a CPA campaign, especially with the state of the industry today. Affiliate programs do not want to invest in players, above all U.S. players, because they do not know how long they will be able to play on their respected sites. With revenue share, the webmasters are paid a percentage of their players' net loss."

For one reason or another, quitting the game is a route a lot of portals have already taken, even some that have been promoting online gambling sites for years.

"We've seen guys definitely hanging up their hats and saying 'its not worth the hassle for me anymore,'" said Jolly. "Some are just not willing to take the risk."

Despite the rapid and dramatic shift in the landscape of the online gambling industry, gaming portal webmasters generally did not report a significantly negative impact on their revenue one month after the legislation's passage.

According to a poll of affiliate webmasters in the GPWA forums, ten of eighteen respondents reported that their October revenue was either about the same or more than five percent better than the preceding month. One affiliate said revenue was between 5 and 15 percent worse, two said revenue was between 15 and 25 percent worse, one said revenue was between 25 and 40 percent worse, two said revenue was between 40 and 60 percent worse, and two said revenue was more than 60 percent worse.

"I've had a slight dip, but nothing disastrous," said one respondent who uses the name 'bingoadvantage'. "Some of my affiliate accounts are hurting while others are thriving. Seems to depend on how the program handled the transition. Some of the sites broadcasted a complete disregard for their players."

Corfman thinks some of the increases are just natural month-to-month fluctuations that can easily mask an underlying change. "When a webmaster has a good month, that will overwhelm smaller negative effects due to changes in the industry resulting from the legislation," he said. "In Casino City's case we saw some of the largest changes we have ever seen in relationships with particular properties. In some cases customer acquisitions increased as much as 300%, and in other cases we saw similar declines. Our overall average was slightly down form the month (less than 10%). Smaller portal websites dealing with those properties that benefited could have easily seen significant increases whereas smaller sites dealing with properties that suffered as a result of the changes could easily have had significant decreases."

Jolly chalks affiliates ability to adapt up to their broad level of diversification. "No one had a strict following to 888 or Party, everyone was kind of working with companies across the board," he said. "Having Microgaming still in the space and having only disallowied 11 states was definitely making up the majority of the casino revenue. So a lot of the affiliates that didn't just stick to one brand are not seeing a huge impact negatively.

"I would say a lot of the guys that we deal with our seeing an increase because there is less competition on the operators' side," added Jolly.

Corfman thinks a heavier hit to portals' revenue could be just around the corner however. "In terms of November, I think revenues will generally be worse than October. The reason is that much of the turmoil resulting from the legislation took a while to manifest itself, so I would expect the negative effects in October will be relatively muted compared with the effects in November."

"I expect revenues to stabilize in December as we adjust our activities to reflect the new market conditions," add Corfman.

One good sign at least is that the winter months are traditionally the busiest time of the year for online gambling companies.

Gambling portal webmasters endure the UIGEA is republished from Online.CasinoCity.com.
Bradley Vallerius

Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

Bradley Vallerius Websites:

www.FortheBettorGood.com
Bradley Vallerius
Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

Bradley Vallerius Websites:

www.FortheBettorGood.com