How Regulation wiped out 92% of the affiliate revenue – Lessons learned from the Danish Casino Affiliate Market

Last month the Swedish Government announced that it will move towards regulation of the Swedish gambling market. This change will affect not only the online casinos but also the casino affiliates. If you are an affiliate and does not plan ahead, you might be in for a very nasty surprise. Lessons can be learned from Denmark, a market that became regulated 5 years ago. Read the rest of this article and the experienced affiliate Jens Hokka will tell you what you need to do to save your affiliate business.

Question: What is your background and how long have you been an affiliate? 

I launched a Danish casino site called in 2000, basically explaining how easy is was to win from the casinos’ generous welcome bonuses with low wager requirements. Word of the site spread through word-of-mouth.  Half a year later it got on national news in Denmark; immediately laying down my servers while also laying out my future for many years to come.

In the following years, the authorities got stricter toward gambling advertising and after receiving a warning letter, I accepted a position from a gaming operator, while was relocated to Malta where it was run by a partner. The site continued to generate traffic, but a large part of the income came from “old” revenue share.  In late 2014 I returned to managing the site full time again.

Jens Hokka,

In what way did it become harder to be a casino affiliate in Denmark after the regulation?

From one day to the next most of the income disappeared. That is especially true for an affiliate that had been around for a long time where the largest part of the income came from revenue share for customers acquired several years earlier.

How did the regulation affect the earnings?

I had a look the income we had in the years leading up to the regulation. 86% of that income came from casinos that DID NOT initially acquire a Danish license. Additionally, 6% came from casinos that lost their license in the following years. That leaves a puny 8% coming from casinos that have kept the license through to today, meaning basically a complete wipe-out of any revenue share customer we acquired in our first 11 years of operation. Since then several casinos have re-entered the market, including our old top-earner, but with a whipped-out customer base, meaning that the old revenue-streams are lost for good.

The Danish Music Corps, here seen contemplating the latest changes in Googles algorithm

What were the biggest surprises with the regulations?

The biggest surprise of the effect of the regulation is how successful the local (and new) operators have been, and how many international operators have failed. 5 years after the gaming law went into effect in Denmark, the online casino market is dominated by local casinos that did not exist 6 years ago. Their pitch into the market has been different for each casino, but all with a local touch: Danske Spil – the old gaming monopoly – is unsurprisingly one of them. Tivoli Casino used their 170 years of established brand power to sell their casino while Spilnu was launched by a small casual game developer, but won over the Danish hearts by pure Danish charm and humour in their TV ads. No international operator has found similar success.

For sportsbetting the situation is different, as Unibet – that was also strongly present before the regulation – is currently a strong number 2 after the old monopoly.

Is the Danish Casino Affiliate market dead?

Absolutely not. The flip-side of the fact that many casinos left the market, was that many casino players – including the high-value-players – became homeless. Those players needed to find a new casino to spend their money, and if you were the affiliate to point them to their new favourite casino, you could ensure a high revenue stream for years to come. Almost all the new casinos have affiliate programs, although the old gaming monopoly, Danske Spil, considers all their registered lottery- and sportsbook players existing customers, and therefore makes it virtually impossible for affiliates to dust up additional leads.

The online casino market has grown steadily every year since the regulation, and while international operators mostly dropped out the first years after the regulation, the overall larger size of the market today is allowing new operators to enter or re-enter the market and be successful. After some tough years immediately after the regulation, this is now boosting affiliate earnings as they can position themselves to send some of the first and most valuable customers to these new casinos.

Still, due to gaming taxes, the earning per customer is lower than in unregulated markets, so in order to get the same income as in an unregulated market, the volume of players needs to be higher.

The Danish flag, now subsidised with a 20% casino tax.

How should the Swedish Casino Affiliates prepare for the change?

Sweden has a number of successful online casino operators that are all expected to seek a Swedish license, so the drop in revenue share is most likely going to be less dramatic for Swedish affiliates than it was for Danish. Still, it is important to realize that the most important assets that will continue post-regulation are the traffic drivers – websites, email databases, Google rankings, etc. – and not the revenue share customer base.

In preparing for the cut-off date the focus should be on ensuring these traffic sources: Try to sign website users up for a newsletter, try to ensure Google rankings for keywords that casino players may use to find new casinos post regulation, and make sure that your site answers the questions the players have about the new regulated casino market. Interesting fact: Casinopenge’s highest ranking page today in 2017 is an article that told which casinos had acquired a license when the list was published.

You should consider your revenue models leading up to the regulation, as revenue share customers may be short-lived. Ideally you will go for CPA agreements in the year leading up to the regulation and then immediately shift to revenue share, once you know that a casino has acquired a license. The casinos of course have the exact opposite motivation, so you may not be able to get many casinos to go along.

After the change, what should Swedish Casino Affiliates do to survive?

If you run a website, you will need to remove all unlicensed casinos, or you might risk getting your site blocked or other legal problems. Also, you need to be aware of advertising rules that comes with the regulation. If the Swedish law ends up being similar to the Danish, that includes writing that your content is sponsored, and including terms along with the offer, ie. include information about wagering requirements and similar or at least include a link to the terms.

To harvest the benefits of the regulation, you should consider new traffic sources that becomes available such as Adwords and other advertising channels that were previously blocked. As many of these are bidding-based there can be a first-mover-advantage: Initially the competition can be lower which makes the bids lower, and the high-value-players still haven’t found their new home.

Your revenue will undoubtly go down after the regulation kicks in while your expenses go up if you launch advertising initiatives, but you will be laying the foundation for your future revenue stream, so it is the wrong time to hold back.

To summarize:

  • Get out of Revenue Share with casinos that won’t get a license
  • Realize that your biggest assets will be the traffic drivers
  • Be aware that the regulation might affect how you display things
  • Explore paid advertising
  • Be ready for a land grab when players need to find new homes

We thank Jens Hokka for the advice and wish him good luck!