When I started as an online poker affiliate in 2005, the most commonly available compensation structure was Lifetime Revenue Sharing (LTR). This model persists in the industry today, having survived a lot of scrutiny over the years.
Unlike Cost Per Acquisition (CPA), where an affiliate earns a flat fee for each new customer referred, LTR is a long term model that rewards affiliates based on customer behavior over time. For all new customers an affiliate refers to a gambling site, the affiliate is paid a percentage of the revenue they generate for however long they play on the site. The percentage is usually something between 20-35%. It’s a pretty good deal; a person clicks your link one time, and you can earn money from that click for years to come. But if you think it sounds too good to be true, you’re mostly right.
Why affiliates like revenue sharing
I’ve worked on several large affiliate businesses, and I’ve seen what kind of revenue the biggest customers generate. In poker, a single high volume player can be worth thousands of dollars each month to their affiliate. Large affiliates who have referred thousands of players can earn millions.
Even better, after a while this income starts to feel like passive income – everyone’s favorite kind! Your month-to-month earnings fluctuate, but in the short term there’s little correlation between the work you do and the amount of money you get paid. It feels like free money.
Why operators like revenue sharing
Operators, like most companies, love free publicity. With LTR deals, they don’t have to pay up front to get their banners and links plastered all over a bunch of websites. Affiliates invest in trying to bring new customers, and the operator only has to pay for it once those customers start generating revenue.
This is a particularly great model for a new p2p (i.e. poker, DFS) gambling site. New sites need a lot of customers to build sustainable liquidity, and while they are in the early stages of building, those customers generate very little revenue for them. LTR allows them to punt their marketing spend to the future, when they’ll (surely!) be making millions and be able to afford it.
What operators won’t say
When you sign up for LTR, there is always a clause in the agreement that states something like, “xxxx, inc. reserves the right to terminate this contract for any reason at any time, and shall not be liable for any commissions after the date of termination.” If you ask the operator about this, they’ll usually tell you that this is to protect them from affiliates who cause brand damage or engage in underhanded tactics. They may even sincerely believe what they’re telling you.
One day, however, particularly if the operator becomes big, they will realize that the amount they’re spending on affiliate commissions each month is not justified by the value they’re getting from their affiliates. And at this point, they will figure out a way to cut down that number.
Cutting down affiliate costs can be done a number of ways. The operator can cancel affiliate contracts altogether and stop paying; this is often done in the case of an affiliate who has sent many players in the past but is no longer sending new players. Or they can retroactively change the terms to where the affiliate is only paid for a limited time for each referral, as PokerStars did in 2015.
They can also choose to lower commissions, either by reducing the percentage of revenue shared or by otherwise manipulating the final number that is used to calculate commission. In extreme cases, valuable individual players are removed entirely from an affiliate’s account.
Nothing lasts forever
Regardless of what you’re told when you sign up, these deals do end. It is never as simple as signing up players and getting paid forever based on their activity. Of course it’s marketed as such, but it doesn’t work out that way.
If you earn commission today but aren’t sending enough players to a site to keep them happy, they can use your existing agreement as leverage to push you to promote them more. They can use it to try and get favorable treatment in your editorial content. The more you earn every month, the more leverage they have.
CPA can be a tough sell for new affiliates, who are usually offered bottom-of-the-barrel prices. But it has other benefits – mainly getting paid today for work you did today.
Moreover, CPA is the kind of business deal that can actually work fairly for all involved. If one side feels like they’re not getting appropriate value, they can renegotiate or simply opt out of continuing. Nobody gets hurt – when it ends, you’re both squared away.
If you’re successful as an affiliate in bringing value to operators, you will quickly be able to negotiate higher CPA’s. The operators will want more of the traffic you’re sending, and you can leverage that traffic into fair market rates. And if the operator doesn’t want to pay you a fair price, they can’t make you work with them.
I’ve seen quite a few articles about this topic over the years, and around 100% of them recommend LTR. There’s certainly upside and allure of passive income, but don’t fall for it. You’ll end up having your hands tied on future decisions, and the deal won’t live up to its promise. Get paid today for the work you do today, and you’ll be in a better position to plot out your own direction and accomplish your business goals.