The Massachusetts Gaming Commission held a roundtable that could impact how many sports betting advertisements consumers in the state will see in coming months.
The public meeting held Feb. 27 centered on the role marketing will play in the Massachusetts online sports betting market. A launch date is set for March 10, but affiliates still need clarification on what they are permitted to say in their messaging, as well as how they can earn money from sports betting operators.
Representatives of key affiliate marketing companies, sports betting operators and a few industry experts joined the MGC for a nearly two-hour meeting. A vote to finalize regulations on affiliate marketers in Massachusetts is scheduled for later this week.
The meeting signals a shift in the MGC’s view of marketing of sports betting in Massachusetts. Previously, language in state sports betting regulations banned affiliate marketers.
“No sports wagering operator may enter into an agreement with a third party to conduct advertising, marketing, or branding on behalf of, or to the benefit of, the licensee when compensation is dependent on, or related to, the volume of patrons or wagers placed, or the outcome of wagers.”
Earlier this month, the MGC indicated it was striking that language. It has less than two weeks to formulate regulations that will serve as “guardrails” for the affiliate marketing industry.
Revenue sharing vs. CPA model
Language in subsection 256 struck fear in some of the major affiliate marketers in the sports betting industry. But on Monday, three of the largest affiliate marketers in the US had a voice in the MGC roundtable.
Michael Daly, the CEO of Catena Media (which owns PlayMA), Max Bichsel from GDC America and Karl Pugh from Better Collective almost spoke with one voice as they advocated a fair affiliate marketing model in Massachusetts. The three affiliates lobbied for a combination of Cost Per Action (CPA) and revenue share.
The main question for the MGC is the possibility of “opening the door to rev share,” said Commissioner Eileen O’Brien, who also mentioned a potential cap on revenue sharing.
In a revenue sharing model, affiliates who deliver a customer to a partner sportsbook receive a percentage of the amount that customer wagers in the future. Such a model is often attractive to affiliates who cannot afford to pay a license fee, because it can result in long-term revenue.
But O’Brien stressed she does not want consumers marketed to by affiliates simply because “they bet a lot,” as opposed to qualifying them in a responsible way. Daly explained that Catena and other companies cannot see who the customer is, and so there is no way to target individuals to spend more on online sports betting.
How prevalent are affiliate marketers in sports betting?
Jeff Ifrah, of Ifrah Law PLLC, who represented the affiliate companies during the MGC meeting, said 30% of people who register with a sportsbook online come from an affiliate marketing website. In most cases, the affiliate is paid by CPA, which means affiliates essentially get a “bounty” for each registered customer that comes from their website. That bounty is the same regardless of how much that customer wagers with the sportsbook.
Daly and Bichsel revealed that about 90% of their revenue comes from CPA agreements with sports betting operators.
However, one sportsbook supported a balance in affiliate models. Jennifer Roberts from WynnBET told the MGC, “we choose both rev share and CPA, because it provides flexibility in how we engage with customers” and it “ helps (WynnBET) have a better relationship with affiliates because we pay the best way.”
A decision on the model for Massachusetts sports betting affiliate marketing could come as early as later this week. Still, MGC Chair Cathy Judd-Stein promised that efforts would be made to release new regulations by March 7.
Does affiliate marketing protects consumers?
Affiliate representatives emphasized the dangers of an online gaming market that does not allow affiliates to fill a vacuum that illegal offshore operators exploit.
Citing the investment Catena and others have made in Massachusetts pre-launch, Daly stressed that offshore sportsbooks would like free reign in Massachusetts.
“If (major affiliates) stop putting out content, you’ll see the (offshore) operators appear,” Daly said.
Bichsel noted it’s like “trench warfare” for GDC America to compete against offshore operators. He said his company and other affiliate marketing leaders have partnered with traditional media outlets to ensure those outlets are reporting accurate and legal information. If they don’t, search engine results pages will show illegal operators who prey on unwitting consumers, Bichsel said.
“(We want to) take up the search real estate in Google,” Bichsel said, “as a way we defeat offshore (sportsbooks).”
In states where online gambling is illegal, or ones that have tight restrictions on sports betting affiliate marketing professionals, consumers often see what appear to be legitimate sportsbook ads that are actually offshore operators. The affiliate representatives at the MGC meeting said those offshore companies are not restricted by US regulators and pose a threat to customers who may end up being defrauded and have no course of action to protect their deposits or dispute a bet outcome.
Cory Fox, senior counsel for FanDuel, noted that denying affiliate marketing “gives the illegal operators additional oxygen.”
Affiliates stress their role in bettor education
Affiliate representatives also argued they assist in educating consumers about sports betting and responsible gaming. Websites operated by affiliates must adhere to strict language policy, avoiding misleading terms like “risk-free,” “free bets,” and “open bets.”
O’Brien noted that she saw a story run by CNN leading into the Super Bowl which mentioned illegal betting markets, such as the length of the national anthem performance.
“That was appalling to me,” she said.
Daly noted that even a major news organization like CNN could produce content that unknowingly helps offshore operators and could harm consumers. That’s because they may not have the expertise to understand what is legal in every jurisdiction.
Ifrah, who has worked in several states lobbying for gaming legislation, chimed in on responsible reporting.
“Newspapers sometimes pick up (illegal offshore betting) stories without realizing,” but affiliates try to be accurate because “they know they can lose their license.”
Brianne Doura-Schawohl, of Doura-Schawohl Consulting LLC, commented that her organization focuses on protecting the “vulnerable youth” through “pull marketing.”
With pull marketing, affiliates attract qualified customers via organic search traffic, as opposed to “push marketing,” which is a buckshot approach to blanketing the airwaves with messaging.