Waterhouse VC’s Tom Waterhouse explores the role of affiliates in growing US opportunities and highlights specific front runners in the market.
Affiliate marketing pays external publishers to generate traffic / leads. There are two main revenue models for betting affiliates: revenue sharing and cost per acquisition (CPA).
Under a revenue share agreement, affiliates receive a long-term trailing commission that is a percentage of the total loss of the referred customer. The CPA model includes a one-time payment per customer. In general, customers earned through affiliates are only recognized after making a deposit and effectively coordinate incentives between affiliates and operators.
Affiliates are often characterized as “necessary evils” in many industries because they can be effective acquisition channels, but at the expense of control.
In our experience, they are important channels for emerging gambling markets like the United States. In mature markets like Europe and Australia, affiliate marketing is not a growing revenue opportunity. As a result, we are currently focusing on affiliates who are well-positioned to grow in the fast-growing US market.
In the United States, businesses are competing to acquire land and acquire as many customers as possible. US operators, large and small, have spent up to $ 1,000 to acquire customers in pursuit of significant market share. However, marketing budgets are currently under serious pressure.
With the increasing importance of cost of capital and profitability, operators are far less willing to overpay their customers without clarifying their lifetime value.
our Last columnSeveral US-only operators, such as Churchill Downs and Wynn Resorts, are rapidly shrinking their marketing efforts with a focus on profitability. Despite this headwind, affiliates are in a position to generate significant revenue from their operations in the United States.
Better group
Based in Denmark with over 2000 content sites and applications, Better Collective (BETCO: SS) is an industry-leading affiliate. Over the last 18 years, Better Collective has acquired over 250 operator clients, including bet365, FanDuel and Coral. These clients sell their brands through Better Collective’s website portfolio, leveraging more than 65 million monthly visitors on all sites.
Better Collective is the largest listed affiliate with a valuation of $ 760 million. With annual revenues of about $ 280 million, the United States already accounts for 46% of this total, demonstrating the magnitude of the opportunity in the state.
The company’s US operations increased revenue and EBITDA by 435% and 469%, respectively, in the first quarter of this year. Due to the slow development of each state in the United States, we believe our affiliates in the United States will be very successful in the next five years, depending on the pace of legalization.
The niche audience of each state of the United States will be a particularly valuable asset for future M & A activities after the US market has matured. We believe that targeted media channels such as podcasts, newsletters and radio shows will be an important acquisition tool for businesses looking to develop a niche audience. Affiliates like Better Collective are focusing on such opportunities, such as the acquisition of The Action Network, which distributes various podcasts and daily newsletters, for $ 240 million in May 2021. Launched in 2018, Action Network’s media platform primarily provides sports news, insights, odds, and unique betting tools and data. The company also has subscription products such as Action Pro.
Better Collective is headed by founders Jesper Søgaard (CEO) and Christian Kirk Rasmussen (COO), each owning 19.4% of the company. I was impressed by Better Collective’s management, which has completed 27 acquisitions since 2017. Despite the execution risk associated with the heavy M & A strategy, the company’s adjusted earnings per share (EPS) increased from $ 0.28 in 2017 to $ 0.67 in 2021. Major combined annual growth rate of 24.5%.
Better Collective is the only listed company in the same industry group that has generated positive capital returns for investors since its listing. Despite operating in a relatively mature industry, the company is headed by a well-coordinated and proven management team focused on growth.
Since its inception in August 2019, Waterhouse VC has achieved a total return of 1,874% as of June 30, 2022, assuming reinvestment of all distributions. See the long-term performance table below.
The above information regarding Catena Media, Gambling.com, Raketech, XLMedia, Better Collective, Churchill Downs, and Wynn Resorts is based on publicly available information about the company and should not be considered or interpreted as financial instrument advice. please give me. Waterhouse VC has a better collective position. The information contained in this document is general information and does not constitute an investment or other advice. Readers should refer to and trust professional investment advice specific to their individual situation.
