Online gaming affiliates earn $684 million in 2007

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We all hear stories about how much money is being made by online gaming affiliates with some sources stating that its the most profitable industry to be in for affiliates, but how much money is actually being made by affiliates in the online gamling sector?

Rather than base this on stories from individual affiliates and online casinos, sportsbooks, poker and bingo rooms, lets have a look at the facts. There are figures out there that estimate the size of the online gambling industry, we know how much (on average) affiliates contribute
to the online operators’ bottom line at a gross level, we also know what the average gross to net conversion percentage is and we know what an average commission percentage is so we should be able to work out what gambling affiliates are making.

According to figures from industry gaming consultants, the online gaming sector outside North America is estimated to have been worth approximately $8.0 billion in 2006 and will grow to $14.6 billion by 2010. There are no figures available for the sector within North America
as the operators that are taking US players are doing so illegally(!) and do not disclose their profits.
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From these figures, we can have an educated guess that the global online gambling sector is worth at least $9.5 billion in 2007.

From talking to numerous sources in the online gambling industry, GamPay knows that affiliates make up around 30% of an online gaming company’s profits with around 70% coming from direct channels.

From the gross profits, online operators make a number of deductions before paying affiliates at the net level. These deductions include such items as chargebacks on credit cards, processing fees and software providers fees. Whilst this varies from product to product and from operator to operator, a typical gross to net conversion is 20%.

The last piece in the jigsaw is the average commission that an affiliate receives. As you can see from our comparison matrix, an affiliate can earn between 10% and 60% of the players lifetime value. The most common starting point is 20% with the most common ceiling at 40%, which again varies by product but gives us a happy medium of 30%.

So let’s put all this info together to come up with a value for the amount of money that gaming affiliates made in 2007.

To do this we take the value of the market and keep 30% of this which is attributable to affiliates, we then take away 20% which is the gross to net conversion factor and finally take 30% of this total value which gives the affiliate’s revenue share.

The sum for this is:

9,500,000,000 * 0.3 * 0.8 * 0.3 = 684,000,000

So there you have it. The money made by gambling affiliates in 2007 will be more than $684 million. What a great industry to be in!!!
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