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Massachusetts regulators agreed on Monday (March 27) to adopt a revised rule governing third-party affiliate marketers that would permit a traditional “cost-per-acquisition” (CPA) model while limiting models that include a contracted revenue share.
The Massachusetts Gaming Commission (MGC) has been debating various affiliate regulations for weeks after enacting initial regulations that effectively prohibited both CPA and revenue share models, significantly limiting the ability of affiliates to function in the state's nascent sports-betting market in a profitable manner.
The commission agreed earlier this month to put a temporary waiver in place allowing both models while it continued to investigate further and elected Monday to enact a compromise.
The new regulation prohibits operators from entering into agreements with third parties “in exchange for a percentage of net sports wagering revenue earned from users that the third-party directs or causes to be directed to the operator.”
The previous rule prohibited agreements where compensation was dependent on or related to the volume of patrons or wagers placed, or the outcome of waivers.
The new rule, commission officials say, would permit cost-per-click and cost-per-action models, including agreements where affiliates receive a percentage of player deposits, but would bar agreements where affiliates are paid based on a player’s net wins and losses.
Operators and affiliates say that permitting the traditional CPA model helps to bring in customers actively looking for sports-betting options rather than targeting passive users who do not want to be bombarded with sports-betting advertising.
“It is standard industry practice to pay marketing affiliates on a cost per acquisition (CPA) basis,” said Cory Fox, vice president of product and new market compliance for FanDuel, in public comments filed with the commission. “This is in line with marketing practices in many other industries where compensation is provided for referrals.
“We strongly urge the commission to clarify that compensation of marketing affiliates is authorized based on the number of patrons they assist the operator in acquiring, while still prohibiting compensation based on player activity (amount wagered, amount won or lost).”
“By prohibiting CPA and revenue share in favor of CPC, operators will instead focus their marketing budgets away from pull advertising (such as agreements with marketing affiliates) and towards push advertising,” added Katherine McCord, an attorney representing affiliate marketer Better Collective.
“Push advertising is shown across all age demographics and doesn’t include the same responsible gaming resources and educational content that marketing affiliates provide,” she said.
Commissioners were split on the merits of allowing CPA-based affiliate marketing, as the commission has consistently been wary about the volume and content of advertising surrounding the state’s sports-betting launch, but ultimately agreed on the compromise.
“I’m not comfortable yet taking down the guardrails altogether, and I don’t believe that’s being proposed,” said Cathy Judd-Stein, the commission’s chair.
“I'm okay with CPA moving forward, because I believe that it will actually curb the onslaught of general advertisements that people are seeing and actually will target those who are seeking out information to play in the market and actually make wagers,” added commissioner Jordan Maynard.
Commissioner Eileen O’Brien said she would prefer that the initial language remain in place, but pushed for operators and affiliates to use the data to help identify problem gambling trends.
“Going with this language, and allowing any kind of rev share for me is contingent on really wanting to make sure that we look at what the data usage is allowed, and putting an onus on them also to be more proactive in terms of intervention, and responsible gambling messaging as we go forward.”
The new language will take effect on April 14, following the expiration of the previous waiver that the commission approved earlier this month.
