THE NORDICS
Figure 4: Cherry Gaming affiliate acquisitions
PROPERTY DATE FEE + EARNOUT Game Lounge (51% share) January 2015 $3.4m Finnish affiliate network July 2015 $1.2m Moorgate Media December 2015 $4m Interclick August 2016 $1.5m UK/Germany
JapaneseCasino.com December 2016 Unknown Japan
or three times more profitable than many
operators.”
Meanwhile, Catena’s sole focus on
digital marketing sets it apart from the likes
of GIG and Cherry Gaming (see Figures 3
and 4), which have similarly been making
acquisitions in the space but as businesses
are also focused on other areas of the value
chain.
Superficially, Catena’s strategy bears
similarities with XL Media, though as
Andersson points out, the latter has
diversified from the time of its 2014 float
when it was almost wholly concentrated on
the gaming sector.
Definitely pursuing the same strategy
are taking part of the game long term.”
He says the valuation model looks at
eight to 10 various parameters depending
on the category. “Some of the parameters
are SEO, size, content quality and
history. Needless to say you need a deep
understanding of SEO.”
Robinson of RB Capital disagrees with
Holmberg and Andersson. “In addition
to their optimal cost structures, simple
economic forces would suggest that the
value of affiliates will rise as a result of
increased demand,” he says.
“The more savvy affiliates will recognise
the scope for increased valuations and will
work to maximise the value of their assets,
“Many affiliates operate at very attractive margins of 60%,
if not more. This is harder for the larger players to achieve”
Ben Robinson, RB Capital
as Catena, albeit not with the same listed
share price rating, is RakeTech and its chief
executive Michael Holmberg agrees that
in time the market will likely consolidate
down to a “handful of companies that will
substantially grow in size”.
“As on the operator side, there will be
rapid growth by competitive newcomers,
that will obtain market share and compete
for traffic with the well-established larger
companies,” he says.
With €70m to spend, Holmberg says the
company has already begun negotiations
with – and is evaluating – around 20 leads.
“We have an ambitious acquisition strategy
and a dedicated team in place to follow
leads and ensure we find as many suitable
companies as possible,” he says.
... will lead to higher prices?
But he insists, much like Andersson at
Catena, that prices are not on the rise and
says RakeTech has a “very clear view of the
market and how to evaluate these assets”.
“From a value perspective we don’t see
any reason why prices should go up given
that our competitors know how to do their
math, which we assume they know if they
thus increasing their overall chances of
selling their businesses at a good price.”
On this last point a related parameter
is people and the key value they hold
within these companies. Ihre points out
that the most successful sites are driven by
webmasters “spending 24-hours a day on
this”.
Interestingly, those very people’s actual
value is virtually impossible to quantify.
“Once they have left the building, the
biggest asset has gone with them,” adds
Ihre.
Andersson disagrees, although the
company’s prospectus when it floated in
Stockholm did make the point that the
number of highly-skilled professionals
within the online casino SEO space was
“very limited”.
“We’re building brands,” he says,
pointing to sites such as AskGamblers,
Slotsia and SBAT, which runs sites such
as SBAT.com, FootyAccumulators and
AccaTracker.
MARKET FOCUS
Finland
the value of the affiliate networks that are
being acquired comes down to some simple
metrics.
“Assuming they are keeping their
traffic scores, then yes these deals are
worthwhile,” he says. “The key is buying
good businesses and keeping the staff.”
Where the consolidation will have an
effect – in the long term – will be with the
operators. Andersson portrays the affiliate
acquisitions of GIG and Cherry as “nice-
to-haves”, but Cotton points out that these
businesses are hoping to control more of
the supply chain.
This is reflected in GIG’s recent results
which showed that of the 36,100 new first-
time depositors its affiliate arm Innovation
Labs had referred in 2016, 19% were
directed towards its own brands, which
include Guts.com and Rizk.com.
“Will other operators join the chase?
Generally, they have gone the other way in
terms of acquisitions and have spent more
time looking at games developers and other
services,” says Cotton.
“That said, Sky Betting & Gaming has
Oddschecker and others are likely to look
at it and it might be a sensible strategy. So,
yes, I’m surprised others haven’t taken that
route.”
Looking ahead, the obvious issue for
affiliates is if the biggest of them keep
getting acquired, there will need to be
independent ones ready to step in.
Additional reporting by Jake Pollard
Supply chain control
Luke Cotton, head of analytics and data
at Digital Fuel Marketing, suggests that
iGB Affiliate Issue 62 APR/MAY 2017
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