Having set up industry bespoke ‘Affiliate M&A’ advisory TAG Media, Founder and Managing Director Tom Galanis speaks to SBC on business consolidation entering the affiliate and player acquisition sector
Galanis, an industry affiliates and player acquisition specialist, details the changing market conditions and business values of industry affiliate marketing practices that have led to M&A becoming a reality.
SBC: Hi Tom, great to catch up. Why has TAG Media developed an M&A advisory service for industry affiliates?
Tom Galanis: We felt it was a service the industry badly needed. Most affiliates own and operate their own small businesses, which, aside from the business of building sites and systems that allow you to drive the traffic needed to at first survive and then flourish, requires hands on responsibility and, generally, on-the-job learning about the administrative elements of running a business – from accountancy to legal. Finding the time to ensure that your business is sale ready is a whole other challenge, and one most affiliates simply don’t have the time to focus on – at a time when M&A has never been so prevalent in the iGaming industry.
SBC: For igaming sector affiliates, how are market conditions changing and why has M&A become a reality or option for stakeholders?
TG: If you want my honest assessment, if you’re an affiliate operating an established network of performing sites, now is the time to consider an exit. There is a huge trend towards trade consolidation from a group of acquisition hungry affiliates. We have just seen Askgamblers.com purchased for the princely sum of €15m – seeing a company with significant reliance on a single website (which makes the purchase inherently riskier than that of a performing network) achieve circa a 6x multiple.
Why has this come about? I don’t think it’s an exaggeration to say that there is somewhat of a landrush going on between a bunch of Scandinavian folk holed up in the restaurants and bars of Portomaso. These are groups that have profited immensely from the lucrative grey market activity they, as affiliates and affiliate/operators, have driven in Sweden, Finland and Norway, in particular – and are now looking to reinvest in .com/.co.uk affiliate portfolios that offer the more stable platform that a regulated marketplace, such as the UK, brings.
SBC: The industry has seen operators buyout or acquire stakes in popular affiliate portals. However, does this trend not represent a conflict between the affiliate and its service of referring traffic to multiple operators?
TG: I would be hard-pushed to say that there is benefit to the affiliate industry in operators buying out portals, but there are inevitably exceptions. The ownership of the Gaming Innovation Group, who operate Guts casino and the iGaming Cloud platform, were first and foremost affiliates. They understand the importance of affiliate traffic. They almost certainly comprehend the fact that operators have ‘owned’, either officially or unofficially, or held stakes, financial or otherwise, in many leading affiliate portals and the big traffic drivers that currently exist or have existed at the top of the food chain in the past 10 years, with many either swallowed up or mothballed when the conflict of interest has become apparent and seen them regurgitated in another guise. This has long since been in practice in the shadowy corridors of some SEO offices in South Africa, Gibraltar and Tel Aviv.
There are certainly fewer and fewer independent affiliates operating at the zenith of the industry than ever before. Many that remain are those that advocate for players and punters, rebutting interest that might lead to the conflict you refer to. If they ever choose to sell, it is likely that the due diligence on the interested party will focus greatly on player management backgrounds, if they have operator history – something that stands GIG in good stead.
SBC: Does affiliate M&A signify the consolidation of marketing services within the industry? In the long term can smaller operators and publishers compete within affiliate marketing space?
TG: I’ve been immersed in this industry for 11 years and I have never ceased to be amazed by some of the personalities and Cinderella success stories that continue to emerge from new affiliates to the extent that I have complete faith that this will continue in spite of such consolidation. I believe it will be the smaller, single site operators that will suffer the most from affiliate consolidation, with the likes of Catena Media and XL Media seeking inevitably pricier network-wide deals that only the big boys can afford as they seek to achieve ROI on their acquisitions.
SBC: With affiliate M&A becoming a reality, do national regulators need to revise policy on affiliate marketing with regards to online gambling laws and business practices?
TG: I am a firm believer that the iGaming affiliate industry ought to have a unified formal representation in the shape of lobby branches to broader gambling associations that carry influence on public policy, laws and business practice, such as the RGA in the EU/Europe. It’s a massive ask to convert this to a global presence, but with the growth of the likes of XL Media, the muscle that individual affiliates can bring to the party is growing.
SBC: Finally, as affiliate marketing becomes more professionalised how do you see its relationship changing with the gambling industry?
TG: Affiliate marketing’s relationship with operators and the industry at large resembles an epic tug of war. As affiliates have sharpened their business practices and grown organically or through M&A, so the operators, either through necessity with POCT, or gruesome, bloody-minded cost cutting measures, have sought to squeeze their margins and occasionally cut them off completely. My prediction is that we’ll see a full shift away from the traditional revenue sharing model in time and as gambling regulation spreads, with today’s affiliates bracketed together with media and ad networks – and even TV advertising as programmatic marketing grows – functioning on a range of media deals that will continue to include CPA.
Tom Galanis – Founder & MD – TAG Media