Net revenue affiliate commission calculation
I’ve been a sportsbook/ casino affiliate since 2005 and went full time in 2009. Over the years casinos have come and gone, schemes have changed terms, closed and re-opened.
There are two main types of commission models for the casino affiliate. Revenue share and CPA (cost per acquisition). CPA is very straight forward, you get a commission when someone signs up and deposits a set amount. For example, the casino might pay £50 for a player that deposits £20 but someone who deposits £10 will not trigger the CPA payment.
The sharp reader might think why would a casino pay £50 for a player who has only deposited £20. Surely, a clever affiliate can just get people to deposit £20 and then split the £50 commission, £25 each. The player will not lose any money and the affiliate gets £25. This actually does happen and is perfectly acceptable to many casinos. Cashback sites are the best example of this, you can really get £50 cashback by depositing £20. It’s at least £30 of free money. That’s a topic for another blog post maybe.
This topic is about rev share. This is the prefered method of commission for both parties. Rev share is a bit more complicated than CPA. You get a percentage of revenue, this is almost always net revenue but some programmes have told me it’s gross revenue. Typical rates for the casino are 25-50% depending on how well you can negotiate and how many FTDs (first-time depositors) you can send.
So what is net revenue?
The simplest explanation is gross revenue minus expenses. Gross revenue is what the player loses over a lifetime. So a player signs up to a casino with £100, loses that, the gross revenue is £100.
The expenses are bonus costs, gaming costs, banking costs, POC (point of consumption) tax and customer service costs. There may be others but they’re the main ones. POC is for the UK only at the time of writing but I can imagine other geos adding it soon. For casino games, POC is 21% and is payable on bonus money. That’s the reason why many casinos don’t offer big sign up bonuses anymore. It’s a lot of tax to pay.
The other expenses are harder to put a value on. How much does the software cost? How many bonuses did the player get? Did they just get the signup bonus or some other ad hoc bonuses to get them to play more?
This makes determining your net revenue quite hard. It’s only really possible, short of asking for a breakdown when you get your first player and are sure they have lost all the money they have deposited.
My first sign up
Today I logged in to an affiliate account and had a player sign up. This is the only active player I have at this casino. I can see the deposit amount and the net revenue. From that, I can tell you how much this casino deducted.
So the player deposited £649 and I got a net revue of £480.26. That’s 26% (£168.74) of the total in fees. That’s not actually bad at all. Considering they have to pay at least £136.29 in POC tax. I suspect this casino might not have taken that off as an expense.
So my 30% net revenue share at this casino is actually 22% of the gross. Most players just deposit £10/ £20 and give up so my expected commissions are going to be £2.20 or £4.40. It sounds like a good reason to switch to CPA or another revenue model.
Why rev share?
The reason why I stick with rev share is that it can be more lucrative in the long run. Even though most players are small, you will get the occasional big player who is very profitable. The commission is usually paid for the lifetime of the player so you can get regular income long after you stop sending traffic, in theory at least. In practice, the casino will drop your commission or close your account if you stop sending players.
If you suspect a casino affiliate programme will close, then getting a high CPA might be better. The negotiations are a lot trickier for that though and you really do need some volume. I was talking to a big affiliate at LAC one year and he said they expect £500 CPA and get rid of any casino that underperforms really quickly. Realistically a small affiliate might get £50-100 CPA.
Rev share is the prefered method of casino affiliation payments. It can be lucrative but watch out for net revenue calculations. Most casino affiliate managers won’t tell you or don’t know, so you have to try and guess from your stats. On your first player or a time period where you know a single player has lost all that they have deposited, you can work out the deductions.
In my case, the casino deducted 26% from the gross. So my 30% net revenue deal turned out to be 22% of the gross.