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Dragons' Den investor Theo Paphitis entered the world of affiliate marketing on last night’s show, handing £200k to web entrepreneurs Emmie Matthews and Ed Stevens for 30% of their business.
Their site, GamingAlerts.co.uk, offers odds comparisons and an alert system from “major online casinos, online poker rooms, online bingo sites and online sportsbooks”.
They seem to have landed a pretty good deal. Even though they revealed that they also ran a media planning and buying agency for gambling companies (no conflict of interest there then), and gave away almost a third of their equity, the publicity won’t have done them much harm.
According to their release, £200k is also "the single largest amount ever awarded on the immensely popular program”.
Matthews projected that they could earn £1.2m in sales and £740,000 profit in year 1, adding:
"The top affiliates that we will be competing with are easily making a million pounds a year, so we feel it's easily achievable."
Related research:
Affiliate Marketing Merchants Report 2007
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Consumers criticise comparison sites
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We all know that there is a lot of money in the gaming / gambling world online and that top affiliates can earn a lot. However, we also know that it is a VERY competitive market place and is getting VERY hard to become a super affiliate these days if you're starting from scratch.
Relying on a good URL / name and some PR off the back of the show doesn't seem enough to me to invest that kind of money at that kind of valuation.
However, my biggest concern (were I a Dragon in this case..) is that if they really think they can make almost three quarters of a million quid PROFIT in Year 1 then why on earth do they want or need investment? So either they are wrong in their projections, or they're crazy to give away 30% of their company - either way a bit worrying.
Then again, perhaps the domain names alone are worth the investment.
Ashley Friedlein
CEO
E-consultancy.com