1to1 – Cherry’s Burvall on the company’s affiliate ambitions

1to1 – Cherry’s Burvall on the company’s affiliate ambitions

Friday, September 16, 2016 Posted by Andy McCarron
Chief executive opens up on recent M&A

Cherry Gaming cemented its position in the affiliate market when it’s Game Lounge business – acquired in January 2015 for €1.6m – paid out a further €1.5m to buy up the assets of the largely German-facing affiliate marketing business Interclick. The deal demonstrates how consolidation is having a ripple effect across the sector. The reformation of the supply lines at Cherry changes elements of its marketing model and has widespread implications for the affiliate sector. Below Cherry Gaming chief executive Fredrik Burvall explains the rationale for his company’s recent moves.

Totally Gaming: Going back to the original Game Lounge deal, what is it that you think is so attractive about the combination of operator and affiliate marketer?

Fredrik Burvall: First, Game Lounge is a solid and growing business with a highly-skilled team in SEO and affiliation. This was attractive to Cherry, especially as the agreements Game Lounge had with its customers were revenue-share deals which created long-term value for both Game Lounge and Cherry Group. A key battleground in today’s market is finding a way to reduce the cost of player acquisition while still bringing in high-value customers.

Game Lounge has a genuine solution to this challenge. Second, the acquisition of Game Lounge was also a significant development for Cherry, as we immediately launched our first white label, SveaCasino.com, and then followed up with SuomiAutomaatti.com. These utilised Game Lounge’s skills to bring high-value customers to the websites, while Cherry’s platform and experience in operating online casinos made it a natural fit. The deal with Game Lounge has increased volumes at a much lower cost, both for Cherry’s current brands and the white-label brands. We recognise that the affiliate market is a very important part of the online gaming industry and this deal has added a great deal of value to Cherry.

TG: Generally, why do you think the affiliate space is going through a consolidation phase?

FB: The industry in general is consolidating and volumes will enable scale of economies – this presents plenty of opportunities for Game Lounge as well as for Cherry. The strategy for Game Lounge, as it is with Cherry, is to grow both organically and through acquisitions. Game Lounge focuses on adding new markets or adding strategic SEO link networks. It is important for us that the acquired affiliate business has a long-term view and is happy to adopt a revenue-share business model that is based on high-quality SEO rather than just a shorter-term affiliate business built purely on CPA models.

TG: What in your opinion are the dangers in buying affiliate marketing businesses?

FB: To eliminate, or greatly reduce, the risks, due diligence is vital. This needs to cover how strong the business’ SEO is, if the revenues are correct and that there is the potential to achieve solid growth when Game Lounge’s competences are added.

TG: With regard to Cherry's strategy generally, following on from the ComeOn deal, are you willing to talk about your strategy here?

FB: The acquisition of ComeOn strengthens Cherry’s position in online gaming against competitors in both Scandinavia and other European markets. It provides great opportunities for continued international expansion while ComeOn is also strong in sports betting which will add both volumes and competence to Cherry. Both Cherry and ComeOn are growing considerably faster than the market as a whole, which facilitates further investments in existing brands and continued expansion into new markets. We will add several strong brands and will profit from the strong entrepreneurial spirit within ComeOn. Both Cherry and ComeOn share the belief in having a multi-brand strategy, and ComeOn enjoys a strong position in each of its main markets. We strive to apply a 360-degree strategy and strongly believe that our diversification – with more business areas focusing on different elements of the gambling value chain – provides numerous attractive opportunities going forward. Cherry is well positioned for the future with a number of expanding areas which are all growing faster than the market.

TG: The Scandinavian markets are something of an epicentre for M&A of late for instance, but also new companies springing up. How do you explain the market dynamics in Scandinavia?

FB: The DNA of many gambling companies is based in Scandinavia. There are strong skills in technology evolution and many companies have talented people that have worked in the past within the original Cherry Group which contained Cherry, Betsson and NetEnt. A number of brands that target the Nordic region have focused heavily on the customer experience, just like we do at Cherry, and I think this is paying dividends.

TG: What other markets are you aiming at?

FB: We are looking at different opportunities when it comes to regulated markets like the UK and the Netherlands. There are also a few other fast-growing markets outside Europe that are on our radar.

Totally Gaming says: Against a backdrop of Paysafe acquiring Income Access and other recent M&A in the affiliate space involving Catena Media and Gaming Innovation Group, the Game Lounge by Cherry make a lot of sense. The importance of lifetime value over player acquisition costs is one of the more important drivers in the industry right now. More M&A deals affecting the marketing space are likely.

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