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

The company, like a growing number of sports media newsrooms, generates revenue from referring its readers to sportsbooks and gambling operators. 

But unlike traditional affiliate models—where retailers like Amazon pay publishers like Wirecutter on a cost-per-acquisition basis each time a customer makes a purchase—The Sporting News uses a revenue-share structure, meaning that it receives a percentage of the lifetime value of the new customers it sends to gambling operators.

“When it comes to delivering a customer to a platform with a longer use case, it is short-sighted to take a one-time fee,” The Sporting News CEO Rich Routman said. “If I send someone to a streaming platform, and they spend $10 a month for five years, why would I take a $20 bounty? I’ll take $2 a month for five years.”

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The model enables The Sporting News to act more as a long-term partner to the sportsbooks it works with, sharing in their successes by generating revenue when their referrals spend money. This year, the sports-betting industry in the U.S. is projected to generate $7.62 billion in revenue, according to Statista.

Interest in this kind of model has risen as publishers look to diversify their revenue streams.

While affiliate marketing and commerce are critical in these efforts, they are challenging because publishers have to stack up thousands—if not millions—of individual purchases to make the operation worthwhile. 

But revenue-share models let publishers generate recurring income from the customers they generate while placing the onus on them to source quality referrals—a dynamic similar to performance advertising.

Potential in other publishing sectors

The revenue-share model is commonplace in Europe, where the sports-betting market is more mature. The Dutch firm Better Collective, for instance, projects 2023 revenues of $345 million, according to company filings.

But it’s rarer in the U.S., where the federal government lifted its ban on the practice just five years ago. So far, only sports publishers have embraced the model, as it functions best in industries in which customers have high lifetime values.

But there is no technical reason why it wouldn’t suit other media companies with similar market dynamics, such as software sales or subscription services, said Bryce Widelitz, vice president of publisher innovation at partnerships management platform impact.com.

“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.

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In the gambling space, the model requires sportsbook operators to apply for licenses in each state where they operate. Some, including Massachusetts, have outlawed revenue-share 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.”