Would Legalized Online Gambling in the USA Send Offshore Affiliate Marketers Packing?

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For the moment, no affiliates who promote offshore casino gambling are in danger of losing their livelihoods. The USA is facing a host of domestic problems, the least of which are debating and legalizing online gambling. Offshore casinos will continue to operate successfully for at least another 4-5 years. If, however, Nevada allows casino giants to go fully online in the next 2-3 years, that 4-5 years will come quickly and might push some affiliates out of the market entirely. Further, unless a Nevada gaming company acquires the accounts of an offshore casino and honors its agreement to affiliates (both possibilities not likely) the offshore gaming industry will go bust almost overnight.

Even the Most Well Financed Offshore Online Casinos Can’t Compete with Vegas

In the early years of the online gambling industry (the late 1990s into the early 2000s) the general public had the impression that online casinos and sportsbooks were shady operations being run out of hotel suites in Central America, with little intention of offering fair games or paying players. In a few cases, this indeed was the case, but eventually “less” crooked online gambling operations took over, taking the market away from the creeps.

Despite the fact that most online gambling operations are well organized corporations, the average person still thinks they are in league with organized crime. This perception was piqued when CBS’s popular news magazine, “60 Minutes”, did a special called “The Cheaters”, an expose about the offshore online poker industry and the scandal surrounding Absolute Poker’s rigged tournaments. Many people take anything “60 Minutes” reports as gospel, and rumors persisted about sketchy offshore companies, dodging USA authorities by operating in tax havens and countries where online gambling is legal.

Many of the “best” online casinos operating in Curacao, Costa Rica, or Panama have more than enough money to pay winning players, offer competitive bonuses, and maintain a well staffed customer support center. It’s not uncommon for online casinos to have offices with 50 or more people answering phones and assisting players, NOT including an internet marketing team that advertises the casino with an affiliate program, PPC, or organic search engine optimization.

When – and if – Vegas gets involved, even the most well financed, highly profitable online gambling sites will get run out of town, and with them, affiliates who promote their properties for a monthly commission check. There’s absolutely no way a 100 person operation in San Jose, Costa Rica could compete with the likes of Steve Wynn, Sheldon Adelson, or the Fertitta Brothers, all of whom are multi-billion dollar gambling moguls. Getting rid of offshore competition would be like a squashing tiny bugs: a few will be able to run and hide, but eventually market forces and highly trusted Vegas brands will take over online gambling almost immediately.

Online Casino Affiliates, Exit Stage Left?

The average online casino affiliate who makes a living from their websites gets between 25%-50% of net gaming revenue from their referred players on a monthly basis. Getting paid reliably can be a pain, but overall it is still a worthwhile vertical to promote, especially if you can drive large amounts of traffic through your casino tracking links.

What would happen if “the luxor online .com” opened up for business, and several other Vegas super powers followed suit (Ha. 🙂 )?

The first point of contention for affiliates would be the fate of all the USA players they referred to an online casino merchant. If the casino dies, so does your income. The only exception would be if a Vegas gambling company decided to “buy out” offshore casino client lists and continue to honor affiliate agreements. The chance this will happen is remote.

First, why would a Steve Wynn or MGM Grand need to get mixed up with an offshore casino? Their brand name and marketing ability alone could bring in more players in one week than an offshore casino might have after years of business. No doubt, there would be legality issues surrounding the “offshore buyout” option, and it wouldn’t be worth the trouble.

Second, as rich as these Las Vegas gaming companies are, they still have a bottom line to meet and investors to please. The idea of paying out an affiliate 40% of net gaming revenue each month would not sit well with the number crunchers. In fact, some companies might not even bother with an affiliate program in order to save money, operate efficiently, and be more profitable. The reason offshore casino affiliates can demand high compensation is because these businesses are small and starving for new blood. A successful affiliate program is a matter of life or death, not a neat marketing ploy.

The companies that DO open up an affiliate program will remunerate affiliates much differently than current industry standards. For example, TwinSpires.com, Churchill Downs legal online horse betting site, can’t pay affiliates a revenue share for legal reasons, so affiliates promoting this brand get a measly one time CPA payment. The only selling point for Twin Spires’ affiliate program is that it is considered legal in the USA, and therefore is not in conflict with the UIGEA (Unlawful Internet Gaming Enforcement Act). They are well aware of this fact, and can low-ball affiliates as a result.

Chances are, any Vegas based online casino affiliate program won’t be much different. There would NOT be any revenue sharing opportunities unless current legislation is rewritten, so “Treasure Island Online.com” would only pay a CPA. The size of this CPA would depend largely on how badly the respective gaming company wants new players and has the IT capabilities to implement a good affiliate program. Again, the average USA citizen looking to gamble online will almost inherently trust “Mandalay Bay Online.com” long before they set foot in abccasino.com located in Costa Rica.

Our guess is Vegas online casino affiliate programs would be a small marketing arm of their online operations, that would be considered expendable and only utilized if other traditional marketing methods were failing. Shareholders of Wynn Resorts wouldn’t pay a $250 CPA for a new customer. They can mass market for less. If lucky, affiliates might get the same as what TwinSpiresAffiliates.com offers: $60-$80 per player depending on how much traffic you send.

The days of getting four or five digit monthly commissions from whales would be gone. No matter how much profit your player produced for an online version of a Vegas casino, you probably wouldn’t get more than $100 for the referral. It would suck, but it would be the “New Era” of online gambling, largely lost on customers who might not even know that their current losses at some offshore casinos make some affiliates quite rich.

To be sure, we’re not at “Affiliate Armageddon” just yet. Affiliates at the top end of the market will adapt, retool, and start promoting legal USA properties if allowed to do so. Top affiliate managers will be firing off resumes to Las Vegas companies starting up their online marketing efforts, hoping to get hired and work their magic in a (finally) legal venue. Otherwise, if you’re not up to snuff, it will be a slow bleed until you find another industry to promote or close your own sites.

It might be time to start looking around and diversifying, just to keep your income flow constant if and when the legal situation for online gambling in the USA changes in favor of Las Vegas or Atlantic City.