Gonzi and Associates

Prevention is better than cure – by Christopher Dalli & Kristina Mulligan, Gonzi and Associates

With all the ongoing developments in the iGaming sector across EU member states, affiliates and operators alike are faced with the ever-increasing struggle to comply with various requirements imposed in different jurisdictions; but whilst operators are typically backed by legal teams and affiliated law firms, this is rarely true for the affiliates.
Words by Christopher Dalli & Kristina MulliganGonzi and Associates.

Christopher Dalli

Christopher Dalli speaking at one of the workshops during Affiliate Grand Slam in Tallinn

Gaming operators everywhere cannot function without affiliates, never mind look to grow and attract new audiences from various jurisdictions. Despite this and even though affiliates today are playing a bigger role in increasing an operator’s profitability by bringing the operator high-value players, they should remain wary of the terms being offered by some operators as well as the current regulatory climate. It therefore goes without saying that a healthy relationship between the operator and the affiliate is crucial for the success of both parties, but with that being said, the success of this relationship is often met with many hurdles.

To this day, commercial terms in affiliate contracts are quite flexible, with no set rules governing whether affiliates should be paid on a fixed-fee basis, per acquisition, revenue share or by implementing a hybrid approach. This, albeit being great for business may place affiliates at contractual risk. This article will look to highlight certain clauses and issues that in lieu of legal teams, affiliates should be on the lookout for when contracting with gaming operators.

When and how much should I get paid?

(Determination of Compensation, Commission Structure and Volume Caps)
When it comes to reviewing the commercials within agreements, these three factors are often not given much importance at the time of registration, but are factors which bear substantial weight on the affiliate and on the terms agreed upon.

Before entering into any form of agreement, affiliates must determine what the compensation is being paid for; operators may distinguish between paying an affiliate per click, per registration or on the basis of share revenue. This is essential for the affiliate as it is crucial to direct the marketing with the objective of achieving those metrics, and can drastically change the expectation of commission payable. Many operators offer ‘lifetime commissions’, whereby commissions are paid to the affiliate not just for the first referral, but for every subsequent customer payment to the operator. While these are being phased out, when offered, affiliates must be aware of the obstacles of such lifetime commissions. Firstly, operators will often rely only on cookies containing an affiliate ID to track referrals, which in isolation, are not the most reliable source in calculating long-term referrals as they may be blocked or overwritten. Affiliates should therefore take it upon themselves to take a close look at how referrals are tracked, and suggest measures such as database matching, whereby the operator would be able to match the affiliate’s ID with the customer’s record for months and years to come (and should routinely do so).

Moreover, lifetime commissions may sometimes be qualified by stating that such payouts will continue to apply only insofar as the affiliate generates a number of new referrals each month. This is important to be aware of since while delivering leads below the threshold will usually mean that fees may be carried over to the next month or until such threshold is reached in aggregate, there can be instances where not reaching the threshold will lead to the suspension of the affiliate account.

Conversely, operators may set volume caps for each affiliate, putting forward a maximum number of referrals or leads that that company may receive from an affiliate within a specific period or for the lifetime of the relationship. It is the affiliate’s duty to ensure that where a cap exists, this is acknowledged so that the flow of customers into that business is managed accordingly, so as to avoid sending clients to that website free of charge or to inadvertently end up causing the termination of the affiliate account. Affiliates must note that a number of operators are advertising affiliate programs without negative carry-over, whereby a negative result would be taken into account for the calculation of the next payout to the affiliate. It is the opinion of this author that affiliates should be wary of programs which do not account for negative carry-over (particularly when offering revenue share percentages in the region of 40-50%) as this would surely not be a sustainable business model and will inevitably lead to the revision of the terms and conditions of the affiliate program.

Are affiliate terms and conditions set in stone? 

To account for situations such as the above and due to a dynamic market, operators are advised to include a clause allowing them to not only change their terms and conditions unilaterally, without the prior consent or notification of the affiliate, but also give such changes retroactive effect. If for instance the terms and conditions in existence upon my entering of the agreement provided for the grant of lifetime commissions, this could not only be changed at any given point, but such commissions could be removed retroactively. Amendments may also include retroactive commission structures, minimum referral thresholds or volume caps which did not exist at the time of entry into the affiliate program.

Although ideally, affiliates ensure that operators are not given the authority to implement retroactive terms, in a situation where it may be too late to renegotiate, it is operative that the affiliate keeps records of the terms and conditions that were in place when the agreement was entered into and preferably at various sporadic points of the relationship between the parties. This will prove invaluable if an affiliate is faced with having to prove that he is owed funds when an operator refuses to make payment.

Be aware about affiliate obligations 

Most affiliates I have spoken to have always maintained one thing, they don’t know contracts – they know google. Nevertheless, it is imperative that affiliates are aware of the obligations they are agreeing to upon signing up to the terms and conditions. Affiliates will more than likely be obliged to ensure that they do not use an operator IP without the operator’s consent, that they do not attempt to ruin the reputation of an operator (review your copywriters) as well as the payment requirements which have been mentioned above. Furthermore, agreements may also include a clause stipulating that the operator’s reporting information will prevail where there is a discrepancy between the information provided by the affiliate and that provided by the operator.

These terms and conditions won’t be highlighted by the operator when signing up to an affiliate program (and amazingly the link on the registration form can even lead to a 404 error in some cases) and therefore it is up to you as the affiliate to responsibly review the terms you’re agreeing to. Should you be in the position to negotiate your own agreements with operators, it is important to make it crystal clear whether commission will be dependent on the introduction of new depositing customers or whether the payment will be due for a marketing campaign, even if no referrals are actually introduced.

A note about data protection

In 2016, affiliate marketing came under rigorous scrutiny by the UK Information Commissioner’s Office (ICO) where in November, the ICO wrote to more than 400 businesses asking them to disclose details on how personal data is sourced and used. The sudden interest was the result of the realisation that situations exist where neither operators nor affiliates are taking responsibility for compliance with data protection rules.

In the UK, affiliates and marketers may only send texts and e-mails to individuals if such individual has given his or her prior consent. Moreover, messages must clearly state who the marketer is, stipulate that something is being sold, and indicate the conditions of such sale. Communication must also give the receiver the option of opting out from further communication. At present, failure to comply with such rules could lead to fines amounting up to five hundred thousand British pounds imposed by the ICO.

It is important to note that currently, local regulations differ significantly in different jurisdictions within the EU, since the current EU E-Privacy Directive simply provides overall goals that Member States may transpose freely into their law.

This will remain the case until 2018, when the General Data Protection Regulation (GDPR) will come into force and crystallise a single pan-European patchwork of privacy rules harmonising segmented laws of Member States, and including within its scope all companies offering services within the EU, whether such companies are established in the EU or otherwise. Since the GDPR is a regulation, rather than a directive, it will become immediately enforceable as law and have binding force in all Member States on May 25 of 2018. Effectively, this means that data will start being audited against new standards, and where it does not meet the standards set up by the GDPR, such information will need to be requested anew along with the explicit request for consumer consent. As was the case with Canada’s Anti-Spam Law (CASL), the GDPR will rely heavily on the complaints of consumers to target more serious cases.

Apart from stricter regulations surrounding the consent, use and storage of personal data, the GDPR will also impose higher penalties for businesses that do not follow the rules laid down, where non-compliance can lead to fines of up to twenty million Euro, or four per cent of a brand’s total annual turnover from, whichever is the higher of the two.

Final remarks

With the advent of the affiliate as a global operation, introduction of further regulation and with the development of the e-commerce markets, it is our firm belief that it would be sensible for affiliates to seek advice before beginning to operate in any jurisdiction to avoid any unpleasant surprises. Such advice will also allow affiliates to have their house in order before guidelines and regulations come into force, whether local or regional, and to be informed as to the terms and conditions which will inevitably affect their operation.

Have you attended SiGMA last year? Relive the highlights from our last show and stay tuned for this year’s SiGMA. Watch out for what we’re branding as the ‘iGaming Village’ this year.

Relive the highlights from our last show and stay tuned for this year’s SiGMA. Watch out for what we’re branding as the ‘iGaming Village’ this year.

Are you an operator looking for top affiliates? Are you a top affiliate looking for a nice treat with like-minded affiliates playing at the same level?

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