Shedding Gold

One of the most significant features of the affiliate space within the past year or more has been the M&A activity that has taken place, particularly among the biggest listed players. Looking at the data provided by Citizens Bank going back to May 2022, it lists 27 deals involving 13 separate buyers.

Within that list, there are two obvious trends that help explain a lot of what has happened within the space and give broad hints as to what the sector might look like as we head into 2024.

Most obviously, and certainly dominating the headlines in the latter half of this year, the continued rise of Better Collective and its increasing dominance of the affiliate space is hard to miss.

Of those 27 deals since May 2022, seven involved the sector behemoth with one of these, the deal for Playmaker, also accounting for four more transactions which it completed over the period.

That last deal at $189m (£150.5m/€175.4m) was the second largest that Better Collective has completed and once again emphasised how the affiliate is now not just the predominant gaming affiliate but also, per its strategic aim, an increasingly important sports media player.

Talking about the deal on the company’s third-quarter earnings call, chief executive Jesper Søgaard said the company was “well underway with this transformation.”

“We have proven that we can make better businesses out of the many digital platforms we have acquired over the years that cater to large audiences of sports fans and further improve the quality of the content for our millions of daily visitors,” he added.

Ships that pass in the night

But if Better Collective rolling up ever more and ever bigger targets is one major theme, then the other is the example of a company heading in the opposite direction. As Better Collective continues to dominate, the erstwhile market leader Catena Media has also been busy, but wholly on the other side of the M&A equation, divesting itself of large chunks of its business.

As recently as the first quarter of 2022, Catena Media generated revenues of €45.2m for the quarter, helping contribute to revenues for 2022 as a whole of €133.8m. However, after a series of sales of key parts of its European and global operations, revenues for the quarter just gone came in at just €13.3m, its lowest quarterly revenue total since the fourth quarter of 2016.

For the first nine months of 2023, revenues hit €66.4m while the total for the last 12 months stands at €93.8m.

The effort to shear away the elements of Catena Media that don’t have a footprint in North America has all been done under the auspices of a strategic review that Catena says is now complete.

Accompanying its third-quarter release, Catena announced its last divestment, this time of its Italian-facing affiliate interests to two buyers for a total of €19.8m, one of which was later revealed to be Oddschecker Global Media which bought the SuperScommesse business.

In total, Catena has brought in €76m from the various sales including €6m for its UK and Australian racing-based assets, €5.2m for ‘other’ sales which includes its paid media business, Acroud, and the biggest deal of the lot, €45m for AskGamblers which was sold to GiG in December last year.

It is the latter deal which has proven to be the most contentious, not down to what was said at the time but rather because of a to-and-fro between Catena Media and GiG after the deal was done.

The Daly grind

On the early part of Catena’s call with the analysts in November, CEO Michael Daly stuck rigidly to the script. The divestment, he said, was about “streamlining the organisation and equipping us for the next chapter in our story.”

“The plan formed during that review was about focusing the organisation on stable regulated markets to drive sustainable growth in our business over the long term,” he added. 

“As part of that, we have evaluated various markets for stability and growth potential and weighed that against the benefits of divesting assets in those markets in order to improve our own financial stability. With the divestiture during the quarter of the UK and Australia businesses and post quarter of the Italian casino and sports businesses, we now complete the divestment actions laid out by that review.”

However, it was his latter comments made in answering a question about the AskGamblers deal that was of more interest.

When asked about GiG’s comments from its own call with the analysts a week or so before, which suggested the company was having a lot of success in turning the AskGamblers business round, Daly went on the defensive.

“I don’t know that I can comment particularly on what they are doing,” he told the questioner. “I know when we had AskGamblers, we were continually being sent letters from countries that said that our operations were targeting those countries, and we were turning them off.”

He said that Catena had contemplated retargeting such grey and black markets but had opted against the idea.

“The challenge we had was if we did that, we would have to probably consider splitting the company into two companies: one that focused on regulated markets and one that focused on grey or even black markets, now in Canada and other places that are outside of the legal provinces.”

Instead, he suggested Catena opted to stay on the side of the angels. “We weren't sure that our investors would want to see that split of the stock in terms of giving them something that was a much greyer or black market.”

But then he suggested this is what the buyer of AskGamblers, GiG, had itself done. “They are doing a different strategy than we were able to do with our focus on regulated markets, which we believe to be sustainable and also would not jeopardise the licences in those sustained and regulated markets by doing activities in markets that had declared themselves either grey or black,” he said. “So that was what we couldn't do. And to what they are doing specifically, you’d have to ask them.”

Back to the source

So naturally, this is what iGB Affiliate did. Milorad Matejic is the director of SEO and publishing at GiG. He said the company was “delighted with the performance of the AskGamblers business.”

“We see a higher share of traffic from regulated markets and a lower share of traffic from unregulated markets,” he added. “The same trend applies to revenue.”

Matejic pointed to some of the nuts and bolts of making any acquisition work. “The most obvious signs that things are going well are that traffic to the websites and conversions are growing, that employees are motivated and engaged, and that previously identified synergies are being fulfilled,” he said. 

“The most important KPIs in our business are the number of referred players, revenue and profit margin.

“However, it can take some time to see these KPIs grow, so we also look at metrics such as website visits and search engine visibility. If these trends are good, we know we’re on the right track.”

Offering an insight into the processes any acquirer goes through once a deal is wrapped up, Matejic said that when GiG acquired AskGamblers the company “took stock of the potential for synergies between our assets and teams.” 

“At the same time, we identified gaps between our assets that we could quickly fill, such as content coverage, up-to-date offers and partner mix. This gave the sites an almost instantaneous boost, making winning over the hearts and minds of the teams we had acquired easier,” he said.

“We knew from the beginning that we would have to migrate the websites to our in-house platform to improve performance and allow them to grow. We also knew that this process would take some time, so we implemented interim solutions to improve crawling, geotargeting, conversions and other impactful aspects of the websites.”

Matejic pointed out that AskGamblers.com is one of the industry’s “most iconic” sites and one which “genuinely helps its users.” “For us, it was of paramount importance to unleash its full potential by improving its visibility in search engines so that more people would visit it,” he said. 

“We’re happy with how that has played out as traffic to the website has grown exponentially, and there is still so much room for improvement, which we expect to see in the coming months and years.”

GiG has followed the AskGamblers purchase with a second major acquisition with the deal to buy Kafe Rocks for €35m in November. Matejic suggested the lessons GiG has learnt from AskGamblers and other M&A deals means the integration of another set of affiliate brands holds no fear for the business.

“With AskGamblers, and now also with Kafe Rocks, we’ve identified significant potential for growth of those assets and the organisation in general through the application of our processes and technological solutions, ranging from the website platform to our BI system and SEO know-how,” he said.

“In my estimation, it’s important to leave room for the integration process to develop organically and let the synergies play out in a controlled manner. You can’t apply the same template on everything, especially in this dynamic environment.”

Running on empty

Industry figures doubt whether Catena Media went to such lengths when it was on the acquisition trail in the last decade when it racked up 30-plus acquisitions between 2014 and 2020.

“I don’t think Catena was ever built to integrate and realise synergies,” says Ben Robinson, principal at RB Capital. “It rolled up at such a rapid pace that it didn’t allow for this.”

Similar sentiments come from another industry source who preferred to stay anonymous. “It is not that the danger is growing too fast, it is doing bad deals or too many small deals,” they suggested.

“In many cases, it is actually more work to buy a $10m business than a $100m business. With the bigger business, you get more mature processes in terms of finance, product and HR. You get a deeper bench of talent. You probably have more serious auditors and better financials. All in all, it can be a lot smoother a process with fewer surprises.”

Or as another affiliate industry insider who preferred to stay anonymous said: “Catena was a game plan that was executed exactly as it wished. You buy strong assets and let them run at a high pace as long as possible but never have a plan to consolidate tech and other parts.”

The game moves on

Regardless of the track record on M&A in some quarters, the truth of the matter is that there will surely be more deals in 2024 as the relentless logic of the economics of bigger deals and larger entities continues.

Robinson certainly believes there is more to come. “There’s a palpable uptick in activity which, barring any unforeseen black swan events, should persist for the next 18-24 months,” he predicts.

“As is typical with mature markets, consolidation often leads to a small number of entities gaining dominance in the sector. This might very well be the trajectory for larger affiliates.”

It seems certain the big will get bigger. Whether they necessarily get better, though, will depend on the behind-the-scenes work done post-acquisition.