Covid-19's impact on affiliates: “Never before have our revenues been so quickly reduced”

When Arsenal manager Mikel Arteta tested positive for coronavirus on 12 March, forcing the club’s first-team squad into isolation, it signalled the beginning of the end for the Premier League in the near future. Shortly after, all matches in England were suspended alongside a pan-European shutdown of football, leaving slim pickings for bettors. The only countries to stubbornly continue with domestic football included the likes of Belarus and Nicaragua, two nations ruled by autocrat presidents who have dismissed coronavirus as little more than the sniffles.

The dearth of action forced bookmakers to serve up odds on Ukrainian table tennis and esports competitions, as well as count on the consistent, 24/7nature of virtual sports and casino gaming to plug the gaping hole in their sportsbook offerings. Yet while the pandemic has understandably delivered a hammer blow to betting operators’ revenue streams, sport-focused gambling affiliates have also been impacted by the near-sporting blackout this past two months. It really has been a curveball of epic proportions for some businesses.

Match abandoned

For Jamie Knowlson, the pandemic has been the single biggest challenge his business, Checkd Media, has confronted. He was just 20 years old in 2012 when he co-founded the sports marketing and affiliate firm behind popular online betting community FootyAccumulators. Eight years on, Checkd Media has been forced to furlough 20% of its 60-odd workforce at the company’s Manchester HQ as part of the UK’s Job Retention Scheme whereby the UK government covers 80% of staff wages for those who would otherwise have been laid off. At the time of writing, the government has announced the scheme will be extended to October.

“Without a doubt, it has been the hardest challenge for me but I’m lucky to have some fantastically strong people with a wealth of experience around me to lean on, which makes handling these sorts of situations that little bit easier,” Knowlson tells EGR Marketing. “If this happened a year in it would have just been me trying to think of what to do.” While Knowlson concedes that Checkd Media, which climbed four places to 13^th spot in this year’s annual EGR Power Affiliates rankings, doesn’t have the “deep pockets” of certain rivals, retaining a “start-up mindset” has been an asset in the current climate. “It means we could move quite quickly,” he states.

“We saw 20% of the business was at risk because of this situation and we were looking at laying those guys off, but the government launched the furlough scheme and that 20% went straight onto it. Some guys are working four-day weeks from home, but we’ve not really seen any drop in productivity, and communications are still flowing in Slack. We have been lucky a lot of the team have been considerate of the situation when we had to sit down and talk to them. It’s been tough having those conversations because 80% of your income is still great but people have mortgages and families… we’ll be looking to get as many of those guys off furlough as soon as possible.”

Sporting blackout

Almost 150 miles south of Manchester is the head office of OLBG (Online Betting Guide), a sports betting community platform that has been around since 2002 and a regular fixture on the EGR Power Affiliates list. Not surprisingly, cancellation of most sport has been difficult for an affiliate tipster business covering over 20 sports and operating in 16 markets around the world. CEO Richard Moffat says: “We have ridden many waves which have reduced our earnings, including large-scale horseracing cancellations due to weather, closure of affiliate programmes and increases in taxation, but never before have our revenues been so quickly and significantly reduced.”

On an operational front, OLBG staff have been working from home for years, “so we didn’t require much adaptation”, Moffat remarks. “And unlike many of our competitors, we don’t pay content writers to create short-term content such as event previews. Our community creates the content for us around events. The beauty of having a community empowered to create user-generated content is that it has been able to adapt quickly as the sports available to bet on have changed.”

For example, after UK horseracing shut down from 18 March, interest among the OLBG community switched to Irish racing (later closed on 24 March), followed by racing in the US and Australia. “We also provide horseracing tips for racing from UAE, France, Canada, South Africa and Hong Kong,” Moffat explains, although he admits the cancellation of this year’s Grand National – the largest single race of the year with some £300m bet industry wide on the four-a-quarter-mile steeplechase at Aintree – was the “biggest loss” so far.

That said, OLBG has noticed its community acquiring a taste for new sports. “With our US traffic, we saw a huge increase in interest in AFL [Aussie Rules Football], which began to be televised there to fill their gap in live US sport. The Americans seemed to really take to the sport. We already covered esports and have expanded in some areas as the interest in that has escalated, and our football tipsters have quickly become experts in the Belarus Premier League. So, as sports return, whatever comes first we will have good coverage.”

What’s the score?

The rise of the smartphone a decade ago paved the way for sports fans to have information at their fingertips. Moreover, lightning-fast results and live scores on the go. The app that went on to secure a coveted position on many football fans’ smartphone home screens was Flashscore. The company behind the service is Prague-based Livesport (10th on this year’s Power Affiliates rankings), while its Livesport Media arm is responsible for Oddsportal,com, Livescore.in and BetExplorer.com.

To give you an idea of the popularity and ubiquity of Flashscore, it boasts more than 90 million users globally and the app has racked up over 75 million downloads to date. That monthly user count is roughly equivalent to the populations of Germany and Belgium combined. Flashscore covers three dozen sports, although opening the app at the time of writing the only matches taking place were two reserve games in Belarus Premier League and an obscure Under-21 encounter in Turkmenistan between Kopetdag Asgabat and Merw.

This time of the year is usually the business end of the football season in Europe, major golf and tennis events would be taking place, as well as cricket, F1 and darts, while baseball season in the US would ordinarily be in full swing. Besides this, football’s Euro 2020 – scheduled for June – has been postponed until next summer. It all means the number of matches Flashscore provides live scores for has tumbled “from thousands to tens a day”, says Livesport Media director Richard Hájek. “This is closely linked to a decline in website traffic all around. Traffic has dropped down to 10-20% of our standard audience.” As a result, Hájek admits Livesport has been “hit very hard” by the situation.

“At the same time, due to restrictive measures of movement, the whole group has been working from home for many weeks. Of course, all this has been reflected in a fundamental way and will continue to be reflected in the company’s operations throughout 2020, as well as in advertising revenues.” He adds: “At the same time, we communicate intensively with all advertisers; we have provided them with compensation and discounts for an adequate decline in traffic loss, and we are preparing together for a period when traffic will be where we are used to.”

Adapt and overcome

It was 19^th century German philosopher Friedrich Nietzsche who once said: “What doesn’t kill you, makes you stronger.” Indeed, these unprecedented times have given affiliates the opportunity to take stock and invest time and energy in improving and iterating their products. This is precisely what Checkd Media has been doing during lockdown, with its 20-strong product development team working five days a week from home. “We’ve got the guys working purely on the product pipeline, in particular our Betting Hub, with no distraction of sport,” Knowlson explains. “When sport returns, we should see a positive impact.”

FootyAccumulators, which boasts over 600,000 Twitter followers and 338,000 followers on Instagram, has also branched out into poker by running private tournaments for its community on partypoker through a partnership with the GVC-owned poker operator. Held three times a week, these games have been averaging more than 3,000 entries, which has provided a new revenue stream at a time when sports betting traffic on the FootyAccumulators website and app have taken a hit, Knowlson explains.

“Poker will actually be something that will stick with us when we’re back to normal. It has been a success story out of this,” he adds. However, he’s reluctant for Checkd Media to expand into promoting casino gaming, even if it would create a more diversified gambling affiliate business. “Having such a large social audience of 18- to 35-year-olds, we’ve built up such trust, loyalty and engagement with these guys that if we start promoting offers on slots and casino on social media that would be damaging. We want to stick to the community side of things, like poker.”

No quick fix

For our affiliate marketing companies, this Black Swan event has been an opportunity to reflect and re-evaluate future ambitions as the world enters a ‘new normal’, possibly until a vaccine is discovered and rolled out globally. A pensive Hájek, who describes Livesport as a “a stable company”, says: “The truth is that we have learned a lot; we look at our business a little differently – more cautiously. Although we have been trying for years to build a global business so that the crisis in one or two markets does not jeopardise our existence too much, such a situation is unprecedented for us.”

Meanwhile, OLBG’s Moffat says the three main areas of focus for the business continue to be community, development and SEO. “Development is long term, so apart from some minor changes to the pipeline, that has continued unaffected. SEO is also very much a long-term strategy for us, so we have continued to build for the future. Low-margin, performance marketing costs could be cut very quickly though but thankfully part of our strategy is to remain agile, so we have refrained from entering into costly long-term contracts and commitments.”

As for the future, some affiliates heavily focused on sports could very well branch out into other verticals. Indeed, Catena Media recently said it was pivoting more towards gaming by converting traffic from its sports betting brands to casino. In Q1, casino accounted for 61% of revenue and the Malta-based outfit insisted it had “experienced limited negative operational effects” due to the pandemic. On the flipside, Racing Post, which is predominately reliant upon horse and dog racing, has shuttered its newspaper and furloughed 90% of employees.

Moffat says: “The best-case scenario for OLBG will be a short period of loss-making and a dip in our overall growth, but until UK racing and football returns we just don’t know. Longer term and industry wide, we can only speculate. Some have suggested a rapid form of Darwinism for businesses – [several] years’ worth compressed into a short timeframe.”

There is a chink of light at the end of the tunnel for the affiliate industry, however. Football has restarted in South Korea and, more significantly, Germany’s Bundesliga is set to kick off again on 16 May, albeit without fans. Furthermore, players in Spain returned to individual training last week as cautious optimism grows that La Liga can resume at some point in June. Either way, most sport will eventually make a welcome return in some shape or form, unleashing a wave of pent-up demand to have a flutter on live action. That day can’t come soon enough for the bookmakers and affiliates alike.