Merger and acquisition activity has become an important and persistent trend within the gambling industry. Some of the biggest industry names have combined their operations over the past several years in a bid to address the many challenges the gambling environment has posed to them in an effective manner.
A similar trend is observed in the iGaming affiliate space, particularly in Europe but not exclusively. Over a relatively short period of time, several bigger affiliate websites were acquired in deals worth millions of euros. In other words, there seems to be a growing appetite for consolidation in the iGaming affiliate sector that, according to many, may eventually result in several big names controlling the space.
What Drives Consolidation?
In the time of increased M&A activity, the first question that comes into mind is what are the reasons behind this trend.
It could be said that the M&A deal-making in the affiliate space has been necessitated by the same factors that have driven the massive M&A activity in the larger gambling industry – the ever-changing regulatory environment and the introduction of more and stricter regulatory requirements, including taxes, as well as the rapidly growing competition in the sector. Here it is important to note that although regulatory changes are mainly aimed at operators, these usually affect affiliates, as well.
Who Drives Consolidation?
M&A activity within the iGaming affiliate space began taking form as a trend several years ago. However, there was one particular deal that took place last year and drew larger attention to what has been going on in the sector.
Last August, Malta-based performance marketing company Catena Media acquired iGaming affiliate website AskGamblers for €15 million. The deal was the largest in the firm’s relatively short history and one of the largest, perhaps the largest, in the field.
Such a massive investment on one website is certainly a risk that few would take. Yet, it shows that the iGaming affiliate consolidation trend is here to stay. This statement can be easily proved with the fact that it was in 2016 only that Catena Media made several more multi-million-euro acquisition deals.
The company targeted affiliates mainly in the Nordics, the UK, Germany, Belgium, and Italy, but did not limit its reach to Europe. It became clear in mid-December that it had purchased affiliate assets in the US for $15 million. It seems that Catena Media wants to cement its position in the US market at a time when several states are eyeing online gambling legalization.
Although the AskGambler deal was the one to stand out, it is important to note that Catena Media is not the sole player when it comes to increased M&A activity in the iGaming affiliate space. Two other companies with big appetite for affiliate websites should also be mentioned – Gaming Innovation Group and Cherry AB, which owns performance-based marketing business Game Lounge.
Similarly to Catena Media, the above-mentioned two are also focused on acquiring affiliates that target players from the Nordics, Germany, the Netherlands, and the UK. However, there is one significant difference that deserves to be paid a bit more attention.
While Catena Media is only focused on the acquisition of affiliates, GIG and Game Lounge, which was purchased by its parent in early 2015, own online gambling brands, as well. In other words, they have the convenience of directing traffic to their gambling operations through their own affiliate websites. It is interesting to see whether this model will be adopted by other gambling operators in future.
If Catena Media, GIG, and Cherry/Game Lounge are looked at collectively, there is one particularly important conclusion that can be drawn. All three companies, despite being based in Malta, originate from the Nordics and enjoy significant traffic from the region. This is quite indicative of the growth and strength of the Scandinavian iGaming markets.
What Does the Future Hold?
Judging by the increased M&A activity in the iGaming affiliate space, consolidation will probably extend into 2017 as an important trend. In other words, now may be a good time for affiliate website owners to capitalize on the efforts they have put into their projects.
If the consolidation pace is maintained and accelerated, there may come a time when there will be several bigger players to dominate the iGaming affiliate market and multiple smaller affiliates with smaller market shares.
As to whether those small businesses should be concerned about what the future holds, here we would like to draw a comparison with the film industry. There are, as we all know, several film studios that can afford to produce with great ease mega-budget movies every year. And there are small independent films whose creators struggle for years to produce a single motion picture for limited screening. However, sometimes those small films possess that little something that is capable of capturing greater attention and evoking a big change.
In other words, just as in any other industry, the iGaming affiliate space currently provides room for everyone and even though conditions are challenging and are likely to become even more challenging, smaller businesses should not be that worried, or at least for now.
