iGaming Daily

Ted (00:03.533)
An unforgiving U.S. media landscape continues to challenge Katena Media in 2024. Last week, the affiliate PLC published its Q3 trading update, confirming ongoing declines in revenue and a beta as accounts report a 40 million impairment charge to streamline the business. Despite rebalancing its books, Katena remains committed to the U.S. as its growth market for sustainability and long-term value. With new CEO Manu Starn

at the helm of a beleaguered PLC. Can he steer contend immediate towards stability as new vultures eye its underperforming assets? I am Ted Memwear and joining me today we have SBC America's editor Jess Welman. Jess, how are you doing? And happy, is it Labor Day today in the States? Okay, sorry, my mistake.

Jessica Welman (00:53.509)
No, it's Veterans Day today in the States.

Ted (00:59.629)
and thanks for taking time to discuss the Star Perk.

Jessica Welman (01:02.057)
No problem. Yeah, mean, full disclosure, I think it's good to get this. used to work for Katina. I was with the group for about three years. I haven't been with the group since 2021, but that's why we figured I should come on and chat with you.

Ted (01:12.76)
Okay.

Ted (01:16.801)
okay. So it's interesting because you'll have a good perspective of what's happening and also what's happening to the media landscape in the States. So let's go to the cold face and we know that Katina is in trouble, but what do the numbers reveal about its current predicaments?

Jessica Welman (01:40.127)
I think that the big realization was that they had not really thought about how to streamline their organization particularly well. We've seen they did a couple of rounds of layoffs in the past year or so. The first one was like shared sources. The second one touched editorial a little bit. This most recently at layoff the week before they announced Q3. I based on who has been let go. It seems like.

They, for the first time, are really thinking, how do we maximize the value of our editorial team?

Ted (02:19.308)
So interesting there. When we talk about underperforming assets and on accounts they're booked in a 40 million impairment and that's directly attributed to underperforming sports betting websites. Why specifically is it going through kind of these choppy waters with its sports betting portfolio?

Jessica Welman (02:49.513)
So I think that if you look at the US affiliate scene in general, that what you saw across every company was that from the repeal of PASPA up until about, I'd say, I don't know, a year and a half ago, a year ago, it was just a gold rush, right? We had, with the pandemic, so many states rush into legalization. We're now at the point with Missouri where we have 39 states.

Ted (03:07.566)
Mm-hmm.

Jessica Welman (03:19.317)
And it's real easy to make money as an affiliate when you have new markets opening up all the time. You know, you just mobilize and get ready for that market to, to go. You do your best. think the hardest thing for affiliates back in this period was trying to age your website enough in advance of a state launch to rank for it. But now that we have reached the point where one, there are simply not a lot of states left to legalize and

Ted (03:25.923)
show.

Jessica Welman (03:49.415)
Two, the pace of the legalizations has slowed down tremendously. Everybody, not just Katina, BC, Excel, we haven't seen GDC stuff yet, but I'm guessing it'll be somewhat similar. like, yeah, turns out when most of your financial success is because this one time thing of a market opening up is like, then.

Ted (04:04.91)
Mm-hmm.

Jessica Welman (04:18.843)
Yeah, you can't replicate that. You can't just like make more Colorado's, you know.

Ted (04:25.24)
But, okay, can you reflect back on that kind of initial sugar rush for US media, I get media, and how that has kind of impacted the business long term? I mean, how the good old days came back to of bite these companies.

Jessica Welman (04:41.905)
yeah. so Stan said as much and I listen, he's going to be more honest about this than a lot of people because he wasn't there when this was happening, you know, like it's much easier for him to be like, well, clearly this is where it went wrong. Whereas I don't know if like Gillespie or Peterson or some of these others are, are so guard are going to acknowledge this. He's like, we didn't build brands.

They, there was no future proofing in what they were doing. was, okay, well we have 200, 500. I wouldn't be surprised if it was thousands of keywords that we're tracking where we rank on Google for them. And that is the sole determinant of how we run our business. And now that you are at the point where all of the people who are Googling new signup bonus have kind of dried up, I think Stan and others realized like,

None of the content sites in our portfolio have a particularly committed audience. None of our brands have really been built as for the purpose of bringing people back over and over again. And because we didn't do that and because this very easy revenue stream has dried up, we are now in a position where we are behind the eight ball compared to some of their competitors, like BC by comparison.

If you look at their portfolio, Action Network is a site. It's a site with famous writers. It's a site that people know and recognize and respect and go to. And I don't really know if Katina has one of those in their portfolio at the moment.

Ted (06:27.37)
Really, really interesting talk. And it's funny that you mentioned like that kind of brand building principles, you know, not just building SEO websites, but building websites that people keep on referring to and keep on going back to. And in that as well, I mean, do you think that these, the revenue makeup, we've seen so much talk of the...

of leadership wanting to kind of modify the revenue streams and going towards kind of more sustainable rev share from away from CPAs. But do think those initial big kind of three digit CPAs impacted the affiliate strategy?

Jessica Welman (07:08.381)
think it was less CPAs and it was more first time depositors, FTDs. Is that somewhat because they weren't doing rev share and that wasn't really the way, I don't think anybody was really doing rev share at the beginning of this in the US. I think the issue is less about the structure of how they get compensated and more the...

Ted (07:13.336)
Chill, BAM.

Jessica Welman (07:36.977)
And you've seen operators kind of push back on this. They do have to kind of find a better way to compensate affiliates for the quality of customer that they're bringing. Because in a lot of these new states and new rollouts, I think some of this backlash and some of the people like Rush Street who have pulled back with some of these affiliates is because they were bringing bonus hunters to the site. They were bringing people who were going to

to hit the deposit, get the offer and then leave and that's not really beneficial to the operator.

Ted (08:10.67)
But I think that comes with a caveat too because that is as much down to the sportsbook as it is to the Infinies and how they protect, yeah.

Jessica Welman (08:20.041)
And they reassess those bonuses too, right? I mean, I don't know how much attention you paid to this. When New York launched, Caesars was offering a $3,000 deposit bonus that they had to pull after like six weeks because it was just like, we don't realize how many people were going to do this. So yeah, like it's for sure on the operators too that they were going super offer heavy in a way that normal people are like.

Ted (08:32.642)
Mm-hmm.

Jessica Welman (08:49.417)
I'm not a person who wants $3,000 of my money in a sports betting app. I think that's not the average customer. And certainly you want the VIPs and the big ones, but a lot of people were taking advantage of it. So you're right there. But now that these states are a little more mature and you still don't have great permeation on the sports books, right? Like if you look at the percentage of the population in these states that are playing, it's still like teens.

Ted (09:12.878)
Mm.

Jessica Welman (09:18.651)
So there's room for affiliates to go find other customers. That's not the issue. It's that they have to go about finding them now that the ones that are motivated to seek out affiliates have dried up. And I think that's really where the shift is going to happen. And that's why Stan was so big on brand and building brands in.

that editorial reorganization was towards making sure that the assets that do have the closest thing to a following like the lines, legal sports report, play USA, have the support that they need because those people are going to be the ones that are gonna pay the bills. It's not gonna be these people that just like randomly put in bonus code search into Google anymore. If that makes any sense. You're looking at me like I'm crazy.

Ted (10:10.102)
No, no, because I think, look, the US market and what it's gone through, it's very unique. But I think one of the reactions here is what is the overall view of affiliate marketing as a discipline by US operators? Because it was always going to take a different take to what is played out in Europe. And do...

Do you like some DraftKings, your FanDuel, your Pens? Do they look at affiliate marketing and go, look, we need this, this needs to be part of a marketing mix and we view this as a long-term sustainable marketing channel.

Jessica Welman (10:52.265)
Affiliates will always be a part of it. They provide a lot of information and context that operators can't really do for themselves. And so I think they will always be a piece of it. are the days of the $400 sports CPA gone? Yeah. You also, I think,

What's happening now too is we're reframing the concept of what an affiliate looks like. Most of these affiliates are SEO driven affiliates and SEO is important. I'm a person, I think everyone on our team is always like a little ugh about SEO, but it plays an important role. However, I think we had a discussion on a panel with affiliate leaders in Lisbon.

There is an understanding that just the way that technology is proceeding, you can no longer expect customers to come find you. You as an affiliate have to go to where people are. So that's why DraftKings and FanDuel and these sites are looking at influencers. They're looking, you know, they're thinking very granularly and niche and that what's really shifted is that went from we need to find publications for

Ted (11:55.06)
Sure

Jessica Welman (12:13.939)
people in a specific state to more, need to find micro fan bases. We need to find that group of people that are just like super, super jazzed about the Columbus blue jackets and get our content and our offers in front of these eyeballs. So that's where it shifted a little bit. And again, there's gonna be a place for affiliates because in most states here, you need to have a license to be an affiliate. So you can't really just like call up.

Ted (12:20.683)
Absolutely, yeah, yeah.

Ted (12:27.234)
Mm-hmm.

Jessica Welman (12:42.469)
some 22 year old with an internet following and be like, slap this offer on your content and we'll pay you. They do need to broker through somebody. But you're seeing some of the groups that are more successful, like SGG Media is a group of micro influencers and they seem to be performing quite well.

Betting Hero is an affiliate that continues to perform really well. And what it is is that they're fundamentally different than an SEO affiliate. Betting Hero is about going out to sporting events, to local events, and having actual human beings saying, hey, let me help you download that app on your phone. And let me help you walk through the process. And that's how that model works. And I think we're going to see more alternative models than

Ted (13:06.773)
Mm-hmm.

Jessica Welman (13:31.229)
the Google straight search play.

Ted (13:34.774)
So talking here about alternatives and do you think that there is a cultural clash between these European affiliate PLCs going to North American markets and just believing that they can rely on SEO and a couple of partnerships to make, you know, to make income, to make high income. And then the need to kind of, they're now being matched against kind of more localized.

Jessica Welman (13:57.192)
I mean, whoa.

Ted (14:04.49)
affiliates at a state level who understand kind of local audiences and isn't that just another case of gaming kind of the history of gaming repeating itself where we've seen that at the operator level this year with a lot of withdrawal from the market from European businesses.

Jessica Welman (14:22.281)
think it's a little different than the European operator rush. That, most of them failed because there was no localization in what they were doing. It was just, we're gonna transplant this product that has worked for us over here and we're gonna go put it in a few states. If you look at the big affiliates, Katina, I was part of the group that was acquired, that was originally called Katina US.

Ted (14:26.914)
Mm-hmm.

Jessica Welman (14:51.741)
that is now, you know, the fund, it's 89 % of the revenue now, but that started as a homegrown affiliate company in the US that was brought into the portfolio through acquisition. And I think if you look at most of the media outlets, like the Action Network deal was a huge acquisition. Adam Small's group that had sports handle for BC was a huge acquisition. Affiliates understood if we need to get in front of American audiences,

Ted (14:51.8)
Mm-hmm.

Jessica Welman (15:20.655)
we can't have somebody who, you know, doesn't know when to put a Z where we wouldn't where y'all would normally put an S like that content is not going to land with them. I think that was always that like you. mean, I as someone who worked in the affiliate space for a long time, I sniff out European writers real fast. And it just doesn't sit with us. It's just like, so you don't know what you're talking about is what you're saying. There's.

Ted (15:29.463)
That's very complicated.

Ted (15:48.248)
Sure.

Jessica Welman (15:48.915)
That's just the audience. It doesn't ring sincere. So I think that to give the affiliates some amount of credit over some of these operator failures we've seen, there was an understanding you have to get hyper local. And when you hear them talking about Brazil, even more so than the U S Latin America is one that if you do not have sincerity and localization and what you're doing, you're going to fail. And they fully realize that. But like, you know, to think about kind of where things went wrong.

Ted (16:02.048)
Hmm

Jessica Welman (16:17.903)
that &A moment, most people overpaid a lot for most of these US assets, you know what I mean?

Ted (16:23.182)
Yes, yes, but that's that's across the board though. Yeah, yeah. Which kind of leads me to my next question because. OK. A lot of the incumbents now they're revising their their assets and portfolios and to just present like an opportunity for the bigger fish or other types of.

Jessica Welman (16:26.993)
Yes, correct.

Ted (16:51.818)
incumbents in the media space to buy a cheap iGaming assets or an iGaming media assets as these PLCs are revising their portfolios.

Jessica Welman (17:05.001)
I think the affiliates themselves, I don't think they can, they can &A their way out of this at this point. I think what you're looking at is are groups going to continue to target affiliates and bring them into their portfolio the way like Radar is, Sport Radar is going to do with Excel Media, the fact that GeoComply is now a partial owner and betting hero.

Ted (17:22.136)
Yeah.

Jessica Welman (17:31.305)
I mean, I'm curious your take on it. We talked about it a little on here a couple of weeks ago, Charlie and I did. I guess to me, I understand that there's value in being kind of a robust multifaceted supplier, but it's interesting to me that the people that are the buyers in these situations are turning out to be suppliers for things that are not really media related, know, geolocation, sports data.

sport radar is certainly a little more media leaning and I think you can do a lot of media around that data. But I mean, why do you think it is that the buyers in this market are a bunch of suppliers? It's a bit surprising, right?

Ted (18:11.182)
Look, I am surprised by that move, especially in the States and with everyone knowing kind of the hurdles to growth in that market. However, looking at it from sports traders view, I mean, 30 million to get themselves into a new gaming segment, it's pretty cheap. I think that they can take that risk and build something.

Jessica Welman (18:34.152)
Yeah.

Ted (18:41.216)
I think if that acquisition of Excel media assets becomes quite a solid foundation, it would have proved that by right. And I don't think that it has to be a complete accelerator of a beta of revenues. think that they can take quite a conservative approach to actually building an affiliate network, knowing what's gone on before them. And I don't necessarily think that it would be just for the US alone. I think they're probably high at competencies that they can gain for newer markets in South America.

But yeah, I do kind of more kind of tech plays or tech platform plays in the affiliate space.

Jessica Welman (19:22.407)
Yeah, mean, you know who like not the buyers mainstream media that Stan has said we continue to restructure their their partnerships with more mainstream media. And I think Advanced Local is a company that is still doing some interesting stuff in the space when it comes to, you know, state level regional mainstream media. But that Google update did a lot of things. What it destroyed were those

Ted (19:41.453)
Mm-hmm.

Ted (19:47.874)
God.

Jessica Welman (19:51.145)
partnerships as it should, you know? Like when a business magazine like Forbes is ranking number one for like pet insurance when you search for things on Google, Google's broken, you know? That's not how that's supposed to work. And so I think some of these like slap and play kind of decisions that were happening in these media partnerships where the affiliate is like, hi, here's 30 pages. Each of these pages is 1500 words long.

Ted (20:01.25)
Okay.

Jessica Welman (20:21.085)
here's a 1500 word page about betting on volleyball that I need you to put on your site. Like I think they're gonna be a little more thoughtful about it of, okay, what does the person who goes to Forbes all the time look for and is interested in? And what can we do to appeal to them? And that is the fundamental driver and what's making those content decisions versus, okay, well the value of having a volleyball page in SEO that we can link that Forbes has linked back to us on.

Ted (20:24.461)
Sure.

Jessica Welman (20:49.139)
will drive up our SERP on volleyball betting 22%. Like I think that calculus has gone out the window, which to me, I'll be honest, like thank God, because that's the part of affiliates I hate the most.

Ted (21:00.846)
Yeah, I mean, I agree. And I think this is what's making affiliate, the affiliate market interesting because there's so kind of many verticals at play and plays that are yet to be, you know, settled, which is completely different to what's going on before the U.S. market launched. look, finally, let me bring it back to you and take us out. How are you going to follow this story for the remainder of the year and into 2020 and 2025?

Jessica Welman (21:27.369)
For Katina in particular, I'm gonna see where they're putting their resources. They have a very wide range of networks. There was a point when I was working there, my whole MO was to run the Play Network, which Play USA is kind of the flagship site on that, but the intent was to have Play Texas, Play Colorado, Play California, Play everything, and I've seen them sunset a lot of those regional sites that initially had a fair amount of success.

because they no longer are really bringing in new revenue once the gold rush was over. So from like just as a content person, I think it's going to be interesting to see which brands they believe have the most longitude and which ones have the most ability to kind of create an audience around themselves. And I think what's going to be on the business side of things most interesting is that all of these big affiliate companies seem to be kind of addressing these issues in different ways.

Katina went real heavy into AI. That has been a major project of theirs. They've talked about it on previous earnings calls. Whereas like Jonas, war of Gentoo Media, like kind of on one of our panels in Lisbon, kind of made fun of the idea that content AI is gonna do anything for anybody, you know? So like they don't really believe that's the answer. So I'm gonna be curious.

how much the portfolio kind of diversifies, because the groups that have been hit the hardest were really just pure SEO plays. They didn't have a lot going on in their portfolio besides it. And what directions they're going to take it going.

Ted (23:06.892)
Well, Jess, fantastic. Hopefully we'll be reading all these stories on SBC America. Thanks once again and thanks to the audience for tuning in.

Jessica Welman (23:19.357)
Thank you for being host, so I don't have to for once. I appreciate the break from it. Happy Veterans Day, everyone.

Ted (23:20.514)
Don't worry. Happy Veterans Day.