With most affiliates either resetting or tightening their belts in the US, Sportradar’s $30 million deal to buy XLMedia’s US assets showed it moving in a markedly different direction. Did the data giant take advantage of a cheap deal, or might it see something nobody else in the market does?
In 2009, Kyle Scott Laskowski founded a small sports blog, mostly focused on the Philadelphia Phillies and his other hometown sports teams.
Over the next few years, the blog began to gain a following and become a full-fledged sports media outlet.
In 2018, the repeal of PASPA – and Pennsylvania’s decision to be an early mover on legal sports betting and igaming – offered a new opportunity. Already familiar with digital and affiliate marketing, Laskowski took advantage and struck deals with sportsbooks looking for new customers.
By early 2022, Laskowski sold what was once a humble sports blog to XLMedia in an eight-figure deal. It was part of an American buying spree for the London-listed super affiliate, which also acquired sites like Saturday Down South and Sports Betting Dime for around $75 million combined.
Unfortunately for XL, but luckily for Laskowski, that era may have represented close to the top of the market. The last three years haven’t been as smooth sailing for US-facing affiliates.
The strongest sign yet that US-facing affiliates have been struggling came in October, when two of the sector’s biggest players, Catena Media and Better Collective, told investors that they’d miss profit targets – and informed employees that jobs would be cut.
Just weeks later, XL announced that it would sell its US assets, for $20 million up front and a potential $10 million earnout, to data giants Sportradar.
End of the gold rush
It’s not just the most visible companies in the sector that have seen a slowdown either.
“The heady days of 2021-22 seem to be over,” says Will Armitage, co-founder of BestOdds. “Now we’re knuckling down and valuations are coming back with a bump.”
Armitage notes, though, that some of the big affiliates’ challenges weren’t just about wider trends.
“They overheadcounted,” he says. “I don’t think that’s a word but you get the sense.”
The heady days of 2021-22 seem to be over. Now we’re knuckling down and valuations are coming back with a bump
Dustin Gouker, founder of Closing Line Consulting, also sees a difference between some of the listed affiliates and the rest of the market.
“Even the basic model – create a good site, backlinks, good content – that’s still working,” he says. “I don’t think the affiliate business is a bad business to be in, but if you’re reporting to shareholders who expect growth, that’s tougher.”
There are a few challenges that have undoubtedly hit the whole sector, however.
“It’s been a really difficult time for affiliates for a couple of reasons,” Alex Windsor, CMO of GameTime Digital, explains. “Working online as an affiliate in any niche seems to have got harder, mainly due to Google. They’re constantly releasing algorithm updates that favour big publishers.”
One of the biggest challenges that affiliates have faced can perhaps be best explained by looking at one of the flagship assets that XL bought: Saturday Down South.
Focusing mostly on college American football’s Southeastern Conference (SEC), Saturday Down South should be thriving in the middle of a thrilling six-way title race between teams from five different states.
But of those five states, only one – Tennessee – ever legalised online sports betting.
Growth hits the buffers
After a wave of legalisations, new state launches have trickled to a halt over the last two years.
“People have been waiting for the floodgates to open,” Laskowski says.
And given the way the US market works, new launches are vital for affiliates. Revenue-share affiliate deals typically require expensive licence fees and onerous paperwork requirements, meaning most affiliates will opt for cost-per-acquisition agreements instead.
When a state opens for business, those CPA deals will bring in plenty of cash for affiliates, but once a player has signed up, there’s no consistent income stream the way there would be under a revenue share deal.
As a standalone property, it is profitable, but integrating it now is making it really strongly valuable
“The business for the first 5-6 years was taking money upfront and there was a critical mass of players coming in the door day one,” Gouker says. “And that was great because there was a ton of money coming in.
“But that created a problem because then there weren’t many other opportunities, there was no opportunity for organic growth.” The focus on CPA isn’t just a matter of preference either. The red tape involved in securing a revenue share permit, Armitage says, can be “hellishly difficult” to manage.
Windsor agrees: “There’s quite a large fee to get the revenue share licence. And it isn’t just the initial fee. The paperwork to get the licence by affiliates is, I’m told, pages and pages and pages.”
So given the challenges, why would Sportradar buy in?
“When the news was shared with my team, we were all scratching our heads,” Windsor says. “It does seem a strange play. They’re going down a different route but maybe they can bring something different.”
Was it just a chance to bring in an extra income stream on the cheap, or might the data behemoth see something in the US affiliate market?
Value play or rounding error?
Boss Carsten Koerl’s comments during November’s earnings call suggest a little of both.
“As a standalone property, it is profitable, but integrating it now is making it really strongly valuable,” he says.
Koerl noted that the deal helped expand Sportradar’s margins, but also said that affiliation was “the missing piece in the 360-degree proposition which we had”.
What does that mean? Well, it’s not totally clear. Sportradar didn’t make its own announcement explaining its plans when it struck the deal.
Outsiders see some potential in the idea of one of the industry’s major tech firms getting involved in affiliation. Gouker notes it isn’t the first vendor to get into the affiliate game. He says the deal is reminiscent of GeoComply’s acquisition of Betting Hero.
“For ourselves as a mid-tier affiliate, it’s a sign of validation,” Armitage says. “I think they see it as a value trick. I don’t think they’re the type of business to splash cash on a whim.
“Does this mean they’re going to hoover up other mid-tier affiliates? We’ll see.”
With a colossal supply of data at its fingertips, does Sportradar have something new to offer that more media-focused rivals don’t?
“They’re very well connected in a way that other affiliates wouldn’t be,” he says. “They’re one of the main providers for UEFA, MLB and the NHL. The influence and connections they have will put them in a much greater position than other affiliates will.”
Laskowski can see that as a potential path for the site he founded, and still roots for.
“Because Sportradar is not a traditional affiliate company, I think there could be some interesting outcomes for the assets and the ability to convert readers as affiliates because they’re a tech and data company,” Laskowski says – before adding, “That’s the charitable view.”
I would have been more encouraged if there was a press release saying, ‘We’ve entered the media game’
What’s the less charitable view?
“This was a pretty cheap deal for Sportradar. For them, it’s a rounding error. “I would question how invested they are in the assets, and I would include the assets I founded.
“How much interest do they have in actually growing a media brand that they acquired? I don’t know. “I would have been more encouraged if there was a press release saying, ‘We’ve entered the media game.’”
If Sportradar has big plans for its new media assets, it’s keeping them close to its chest so far.
Daniel O'Boyle
Daniel O’Boyle is a journalist who has covered the gambling sector since 2019. He worked as news editor and managing editor for iGB and most recently was business news editor for the London Evening Standard.