Online betting giant Sky Bet and its associated gaming brands sent notice two days ago that they will be shuttering their entire affiliate program effective 2 October 2017 in response to mounting regulatory pressure.
In an e-mail sent to affiliates, Sky Bet explained that Affiliate Hub (which is the name of Sky’s affiliate program) will become inaccessible beginning 2 October and that one last round of payments will be made. Sky betting and gaming will remain active as a customer-facing gambling operator, but all revenue sharing agreements between Sky and its affiliates will be terminated.
From the e-mail:
“As you will be aware, the regulatory landscape in which the industry operates is developing and maturing and operators are experiencing increased obligations regarding their regulatory responsibilities and level of compliance. In order to continue to operate in a compliant manner, we feel that operating the Programme is no longer viable and that managing the output of affiliates presents a significant risk to our business from a regulatory perspective. It is for this reason that we have chosen to terminate the Programme.”
Affiliate Programs in a Nutshell
Affiliate programs are a means of marketing in which third-party individuals and organizations refer customers to online betting sites in return for a commission payment. The most typical example of an online betting affiliate is someone who runs a gambling information website and recommends specific betting sites to readers.
When a visitor to one of these affiliate websites clicks a link to visit a betting site, signs up for an account and makes a deposit, the affiliate earns a commission fee. This commission fee can be a one-time lump sum payment, but the most common model is a recurring revenue-share payment scheme in which the betting site pays to the affiliate a percentage of each referral’s lifetime earnings.
Full Disclosure: OnlineBettingSites.com earns affiliate income. We attempt to provide unbiased information and value to our visitors, and that is how we generate revenue.
The majority of the largest brands in online gaming around the world rely on affiliate programs as one of their key marketing methods. Risk is low for operators due to the way the model works. Affiliate websites advertise for operators, but only get paid for the referrals who sign up for an account, make a deposit and place wagers.
Speculating on the Rationale for the Decision
The timing of the decision ties in with a recent push from the UK Gambling Commission to hold online betting sites more responsible for the actions of their affiliates. Four developments in particular can be identified as most likely having something to do with Sky’s decision:
- The UKGC has fined at least two operators for misleading advertising found on both the operators’ websites and on the websites of their affiliates. In both instances, the UKGC specifically mentioned affiliate websites but only took action against the operators.
- The UKGC is showing increasing willingness to levy massive fines on operators. In a case that did not involve affiliates, 888 was fined nearly £8 million.
- Recent media coverage has painted affiliates in a negative light
- Cost of regulatory compliance
Fines for Misleading Advertising
This past June, the Gambling Commission levied a £150,000 fine on Lottoland for misleading advertising. After investigating, the Commission found that Lottoland had failed to make it clear that the website allowed people to bet on the outcome of a lottery, not to actually participate in that lottery.
A statement from the UKGC laid some of the blame on Lottoland failing to properly manage its affiliates:
“The Commission’s investigation found that Lottoland also failed to make it clear in its third party marketing, website and social media promotions that consumers were betting and not participating in a lottery.”
Lottoland was not the only operator fined in 2017 for actions that were, in part, blamed on affiliate advertisements. In May, online bingo operator BGO Entertainment was fined £300,000 for misleading advertising on its own and its affiliates’ websites.
It should be noted that Individual affiliates were not targeted in either case. In each case, the UK Gambling Commission assigned blame squarely on the operators and it was the operators who paid.
UKGC Not Afraid to Levy Large Fines
The UK’s top regulator has recently shown an increased willingness to levy severe fines on operators found to be in breach of regulations. Last month, 888 was fined £7.8 million for failing to protect at-risk gamblers. The 888 case had nothing to do with affiliates, but it did show the UKGC means business.
We can imagine from Sky’s point of view that the stakes are higher than ever before in light of that massive fine levied against one of its rivals. Even though that case did not involve affiliates, it shows that there is not much room for error lest Sky Bet find itself on the receiving end of a hefty fine.
Negative Media Coverage
The Guardian published an article this week painting affiliate programs in a negative light. In the article, The Guardian details the inherent conflict of interest in tipsters who also serve as online betting affiliates.
The most damming allegation in the article is that there is a widespread practice of tipsters purposely giving bad advice to their followers because those same tipsters share in the losses of customers they refer to betting sites. The article makes a number of allegations along those lines, including a claim that one tipster recommended 57-straight losing bets.
Numerous claims are made throughout the article, but none are backed with hard evidence and no affiliates are named. It all comes across as speculation more than anything else. Having said that, there are certainly affiliates out there who are not reputable – as is the case in any industry.
The Guardian published a follow-up article piling on after Sky Bet closed its affiliate program. This article claims that “pressure is mounting on the gambling industry to end gaming affiliate schemes.” As an affiliate, this is the first I’ve heard of such pressure apart from the usual anti-gambling groups who have been calling for all sorts of things for decades.
What the second article does get right is that the UK Gambling Commission has increased pressure on gambling operators to monitor their affiliates more closely. That much is true, but calling for better monitoring of affiliates is a far cry from pressuring the industry quit affiliate advertising altogether.
Cost of Regulatory Compliance
Sky Bet may have looked at all these developments and decided it would be too costly and expose the company to too much risk in the light of a “developing and maturing” regulatory landscape. Rather than attempt to control thousands of affiliates and risk heavy fines if one or two get out of line, Sky Bet may have opted to just shut it all down.
Playing It Safe or Opportunistic Business Decision?
Gambling affiliate discussion forums lit up when the news broke that Sky Bet will be shuttering its affiliate program and terminating all of those “lifetime revenue” contracts they had set up with their affiliates.
Affiliates are naturally angered by the decision and there is considerable skepticism regarding Sky Bet’s motives. After all, Sky Bet did lure affiliates in with promises that they would receive recurring revenue share commissions for the players they referred.
Affiliates have seen this pattern before, where a gambling operator grows on the backs of its affiliates and then decides later that those “lifetime revenue” contracts are just too darned expensive. One of the best ways to show revenue growth in a saturated market is to simply back out on thousands of long term promises made to advertisers back when the operator needed affiliates.
It would be unfair to say we can see into the minds of the Sky Bet people responsible for this decision, but this is not the first time a major betting site has decided to terminate or neuter an affiliate program. These patterns start to become obvious once you’ve been involved in the industry long enough.
The 2015 Sky Bet Incident
In fact, this isn’t even Sky Bet’s first time doing something like this. Back in 2015, Sky Bet retroactively changed the terms of agreements it had with affiliates. That episode saw Sky Bet suddenly add a new clause to its affiliate agreement that required all affiliates to refer at least six new customers per month. Affiliates who failed to reach that quota each month would see their revenue share cut from 25% to 5%.
This change was retroactively applied even to affiliates who had already sign up with Sky Bet and promoted their brand in good faith on the understanding that all customers they referred would generate a 25% return for those affiliates. Sky Bet just decided one day to stop honoring that agreement.
Sky Bet offered an explanation back in 2015 that is eerily similar to the explanation they gave this week. In 2015, they said “it is necessary to safeguard the longevity and health of the programme in what is a rapidly changing area of the betting industry.”
Yes, Sky Bet is always worried about a “changing” industry and somehow the solution always happens work out in such a way that Sky Bet gets to benefit from the hard work of affiliates while affiliates must bear the burden of this “changing” industry. It seems the only thing that doesn’t change for Sky Bet is their inability to keep their promises.
History Repeats and Skepticism is Warranted
The 2015 episode left a bad taste in many affiliates’ mouths and many chose to leave the program altogether. Some affiliates, however, had invested too much time and effort into promoting the Sky Bet brand and could not afford to leave. Time then passed, memories began to fade and new affiliates were drawn back to the Sky Bet brand.
Almost two years later, Sky Bet has once again changed the terms and conditions and has retroactively applied the new terms to affiliates who signed up long ago. It is even worse for affiliates this time because in this case, all affiliates who sent traffic under an agreement they would be paid revenue share for their referrals have now found that those agreements were never made in good faith.
The people at Sky Bet should not be surprised if affiliates view Sky Bet’s official reason for closing the affiliate program with skepticism. Once again, history repeats itself and Sky Bet continues to earn money off the advertising work done by affiliates who foolishly believed Sky Bet would stick to their word this time.
If this is how Sky Bet treats its own so-called business partners, one has to wonder how Sky Bet treats its customers. It seems there isn’t a low too low for Sky Bet when it comes to easy pickings.