As a performance marketer, there is a lot to think about when choosing your affiliate program partners. The strength of their brands, possible brand saturation, bonus offers, software platforms, conversion rates and reputation are the obvious ones. For many affiliates, the relationship with their affiliate manager is the most important factor and rightly so.
But there is an often-overlooked aspect of an affiliate program that may affect your business even more than any of those rather obvious criteria. In fact, you could add a substantial amount to your bottom line without really doing much. Curious? Then read on.
The Missing Question – What Do You Really Earn?
“What?” you say. “I know exactly what I earn!”
Quite correct. We all try to do the best possible deals for CPA (Cost Per Acquisition), revenue share, tenancy fees, retainers and even hybrid deals. We then compare the performance of the programs we promote based on the obvious metrics like click to signup, signup to FTD (First Time Depositor), deposits and of course player value.
But are we really comparing apples with apples? In most instances my answer is a resounding “no”, and here’s why.
True NGR and Why It’s More Import Than You Think
Do you read affiliate program terms and conditions? No? Don’t worry you are not alone. We tend to rely on forums and our own networks of affiliate friends to out the programs that pull dirty moves or enforce predatory terms on their partners.
But that’s not the only reason to read the fine print. You need to pay attention so that you can get to grips with one small word that can impact how much you make at the program much more than you think:
A good while back following a discussion with a client, I decided to dig through the terms and conditions of a handful of programs and noticed that most of them refer to “fees” being factored into the calculation of their NGR (Net Gaming Revenue). That seems fair, but in most instances they were rather vague which left me uneasy.
So I started digging around a little. What I discovered was a trifle unsettling. Let me illustrate by way of example:
(Disclaimer: the formula I provide below was constructed from the information found in the terms and conditions of the program and from discussions with the affiliate managers. In my experience very few programs publish a completely crystal clear and unambiguous formula on their website. These two examples are based on two actual affiliate programs but we choose to not to name anyone here.)
Program A: No Added Fees
This is how they calculate your commission:
(Casino Net Gaming Revenue = income (bets) – payouts (total wins) – casino bonuses (after lost) – progressive contribution – third party royalties on branded games – chargebacks (if any) – voids (if any) – taxes when applicable) * Commission Percentage
In this instance as you will see there are no added “service” or “admin” fees.
So if we made a $20 deposit, took the bonus and lost the whole lot, we would have a very simple calculation that ends up with an NGR which is roughly 85% of our total staked amount. This means that 15% has been deducted and goes to things like the software and license royalties. These deductions are totally justifiable.
Program B: 20% “Admin” Fee
Now take as an example program B that uses the above formula but also deducts what they call an “admin fee”. This amount is taken from the GGR (Gross Gaming Revenue i.e. income less payouts) which means that your net commission is calculated from a GGR amount that is 20% less that program A! The rest of their formula remains the same as with Program A. We calculated the effective NGR to be 70.31% in this case. That’s right: 30% of the Gross Gaming Revenue has disappeared before your cut gets calculated.
What the above example illustrates is that two program that promises you earnings of “30% of NGR” will pay you vastly different amounts.
What Are Reasonable Fees?
There are some fees that are completely reasonable and justifiable, including:
- Software licensing,
- Payment processing,
- Gaming license,
- Chargebacks, and
- Progressive contributions.
Where I have a problem is ad-hoc “admin fees” being taken out of the GGR. I am open to debate but my counter argument is simple, if not blunt: Affiliates are not in a position to be passing costs on to anyone so why should the affiliate program?
So What Does This Mean For You?
I am not advocating a witch hunt here, which is why I have no intention of “outing” any specific program. But I do believe that affiliates need to hold programs to account provided that it’s done in a professional and reasonable manner.
Hopefully this article gave you some food for thought when it comes to comparing how well the programs you promote actually perform. We went through quite an elaborate process of auditing the top 25 programs that our clients do business with and this resulted in us shifting their traffic around.
We estimate that this added between 5 and 10% to the bottom line of our clients. This was a result of us shifting more traffic to programs with low or no added fees and in a couple of instances we renegotiated deals with programs that add a high fee.
Check the terms of the programs you promote. If they are vague, ask the affiliate manager to illustrate how they calculate fees using your own numbers. Just using arbitrary examples are often not good enough.
Calculate your effective NGR with the programs you promote. This will give you an idea of what you could be earning if it were not for their “fees”. As you can see from the examples used, the difference to your bottom line could be substantial. Approach your partners respectfully and ask them to clarify fees if this is not clear from their terms and conditions and your own numbers.