With Its Novel Affiliate Model, The Sporting News Bets on Lifetime Value

“In order to be compensated not just for the original click, purchase or sign up, you are going to have to prove the value you provide downstream, and then you should get paid more for the proof,” Widelitz said. “If publishers can demonstrate that they send good customers, it would be worth it for the merchant to enhance compensation.” 

For publishers confident in their abilities to refer valuable customers, the revenue-share model offers more upside, according to Sam Savage, a partner at investment firm Savage Ventures.

The Sporting News—owned by a group of investors led by Pax Holdings—is profitable. It generates roughly 35% of its revenue from revenue-share affiliate marketing and 65% from advertising, Routman said.

The challenges of rev-share affiliate

The revenue-share model incentivizes performance, but it also presents its own challenges.

For instance, publishers could uphold their end of the bargain—referring a customer—but walk away with no revenue if that customer spends no money. 

This issue is compounded in the sports betting world, as sportsbooks often entice new customers with free play. In those cases, publishers often only generate money after the bettor has spent the house money.

The model also requires a high degree of data transparency between publisher and retailer. 

For instance, rather than paying a publisher a flat one-time fee, the retailer must track the individual spend of the customer over a period of time—typically between a three-year cap to a lifetime, according to Savage. This has led to concerns over the privacy compliance of sharing consumer data between parties, according to Jill Dorson, managing editor at SportsHandle.

In the gambling space, the model requires sportsbook operators to apply for licenses in each state where they operate. Some, including Massachusetts and New York, have outlawed affiliate marketing for gambling out of concerns for consumer protection. 

Crucially, revenue share setups can appeal more to publishers than merchants, as they cut into merchants’ margins on their highest-value customers, said Savage. 

However, as the affiliate market grows more competitive, challenger brands can use revenue shares to entice publishers to work with them rather than with incumbents. 

The model also encourages publishers to push referrals, as they make more money when people spend more.

“If you are trying to incentivize a publishing partner to re-engage with users, then revenue sharing makes way more sense,” Savage said. “It gets people to spend more money.”