Inside Asian Gaming

February 2009 | INSIDE ASIAN GAMING 13 Cover Story of Kongzhong Corporation, a Beijing-based company listed on Nasdaq since 2004 and specialising in wireless value-added services and wireless Internet services. Challenges “A lot of sites are making a living off the affiliate market. I have personally invested in many sites that purposely do business and make money from affiliates,” Mr Yang told the Casino Affiliate Convention at The Venetian Macao. He did however have stark warnings for newcomers to the market. “Affiliate marketing in China is pretty dark. There’s a lot of fraud. A lot of people get cheated—mostly in terms of not getting paid. A lot of [domestic] sites themselves are also doing fraud to try and get money from foreign affiliates or domestic affiliates,” explains Mr Yang. “It’s a question of whether you can catch these guys who try to cheat you.” “The principle marketing method of affiliate programmes right now is the cost per click [CPC] model. No one does the CPM [cost per thousand] because it’s too easily defrauded,” suggests Mr Yang. Beware the cheats “Even with the CPC model it’s still pretty hard to track down fraud, because you get a lot of traffic tricks. It appears it [the traffic] comes from real users, but it’s actually a virus software that’s opening up these locations, or something that’s defrauding the system,” he explains. “More and more people are moving toward the cost per action model. For example with registration,” he adds. An important disadvantage with the cost per action system is that the costs are typically higher than CPC and there is still no guarantee of avoiding fraud says Mr Yang. “For example, filling out a registration form or filling out a form—something that requires human action that you can track— even that has a lot of fraud. Affiliate farming “There is a huge disparity in wages among people in different parts of China. So these guys hire a bunch of people from a remote part of China, then put some money ‘behind the bar’ of an Internet café, then get the local people to download and fill out forms all day. “When you track them, sure they’re real users. But they’re definitely not users that you want. These are guys who are earning a very low wage. They don’t have the money to pay for services on your site. It’s fraud,” says Mr Yang. The best solution and the one least vulnerable to abuse is probably the revenue sharing model, says Nick Yang. “Right now a lot of people want to do the revenue sharing model. So if you bring in someone who pays for services on my site, I give you a cut. It’s only this way that you can truly avoid someone defrauding the system.” Even the mighty search engine Baidu. com was publicly accused last November by China Central Television, the country’s state-owned broadcaster, of bending the rules on its search engine results in favour of companies that had paid for adverts on its site. On17thNovember 2008, Baiduappeared to admit the claims, issuing an apology which stated: “We put too much effort in competing technically with Google, and in doing so overlooked our advertising system and its management.” “A lot of online companies come to Asia and all they want to do is to get into China. But that’s probably the most difficult place todoonlinemarketing right now,”Chris Sanderson, Managing Director of Affilitude, told the Casino Affiliate Convention held recently in Macau. Affilitude is an affiliate management and marketing firm, focused on four core areas of business: sports books, foreign currency exchange, casinos and poker in the South East Asian, Australian and Indian markets. “The markets in Southeast Asia are smaller, but that’s relative,” says Mr Sanderson. “There are 72 million people in Thailand. Vietnam also has a large population. New opportunities “Depending on what games you’ve got, I would certainly look at countries like Thailand, Malaysia and Vietnam, which are grossly overlooked by a lot of online gaming suppliers,” adds Mr Sanderson. “They are actually probably the easiest ones to get into in terms of the size of the population and the growth of the Internet. You’ve also got less risk of running foul of the government, or less risk of being unable to persuade them you should stay open.” As well as the size of their populations, there is considerable use of English online, states Mr Sanderson. “In Thailand for example, anyone who’s educated and online will be able to read and write English. It’s the same in Malaysia, the same in Vietnam. There is also a growing understandingandeaseofaffiliatemarketing in those countries.” Alternatives to China Online gaming companies may be better to look at markets with fewer barriers