Physical casinos are very similar to theaters, bars, and shows when it comes to making money. Sure they will raise funds from the people playing, but a lot of their income comes from the bar.
Because online casinos don’t have this additional income, you may wonder how they make any money. The answer, of course, is in the casino games.
How Online Casinos Make Money
A House Edge
A house edge is a formula used in most gambling games that allow the casino to earn a profit from the game. Depending on the games being played, this could mean earning 5% of the total amount bet by the players.
The house edge means that you will not win most of the time, however, it doesn’t mean that the player cannot win at all. Instead, the statistics put the casino at an advantage.
Regardless of which game you play, the casino will always take at least a small portion of the total players’ money.
Pay to Play
Most online casinos will only allow you to play if you have money in their online account. This means you cannot go into debt, and you will not owe the online casino any money. Instead, the money is taken from you directly.
This prevents the casino from accumulating debts that need to be paid out to winning players.
Secondly, most games will have a paywall. This means you need to bet a certain amount to join in.
Advertisements
Some betting companies will allow advertisements to run between games or along the sides of the game. This is most common during free games so the casino can still make money off the game even if no payments have been made.
Some online casinos will give you the option to become a premium member. This upgrade often removes advertisements for an additional fee.
How Online Casinos Entice Players
Free Games
To get players to join their online casinos, most advertise free games to new players. However, before you get access to the free game you need to create an account. Some casinos go a step further and require a minimum payment into the account to allow you to play anything at all.
However, the free game and (sometimes) free account setup allow players to enjoy the experience which is designed to get them hooked into playing. They can also see the platform they are playing on and the cheap cost to play, making paid interaction one step closer.
Subscription Bonus
Once new players have signed up for the casino, the business wants them to stay. This often means offering premium packages.
As we said before, some may offer to remove advertisements, however, there is normally a tier system involved. The first tier might be the adverts, while the second could be first access to new games. The third tier could be free-play-tokens every month while a fourth could be access to private chat rooms for serious players.
These bonuses and rewards are designed to make the players want to play more and interact with the website.
How Much Does It Cost To Run An Online Casino
Less Customer Facing Staff
The costs of a business often come down to product, equipment, staff, rent, and licensing.
In physical casinos, there would be a dealer on every table, security in every sector, bar staff, and more.
However, in online casinos, customer-facing staff are almost nonexistent. The company would only need enough staff to cover a 24/7 customer service chat for those that need extra help using the software or dealing with a complaint.
More Software Engineers
Although there would be less customer-facing staff, this doesn’t necessarily mean that the staff level overall would be low. Instead of working on the front floor, there would be more people working on software management.
They will need to ensure that the servers can handle the number of people on the platform and that there are no bugs in the system. When bugs are found the engineers need to work quickly to solve the issue to allow customers back onto the platform again.
High-Quality Software
Along with engineers working on the software, a large casino company would need to buy or create access to the server. This often means either spending hundreds of thousands of dollars on a buyout program to own the software, or paying royalties of between 15% and 50% to have access to the software.
The casino would likely prefer the buyout offer but may begin its journey on royalties as they build up customer reputation.
Licensing
Although online casinos would be working in the wild west of the internet, that doesn’t mean they exist outside the laws of the country or state.
Some states in America have not legalized gambling which means allowing people from those states to use their software would put the online company in breach of the law.
For the states that do accept gambling, each casino needs to be licensed and regulated to avoid scamming the players or putting them at risk of addiction.
Most online casinos will want to have access to all locations which allow their software. This means paying for licenses in every state and country they have access to.
Winning Payments And Reserves
Lastly, the casinos have to prepare for the unlikely event that all of their games payout on the same day. This means they have to have the maximum payments for every game in their reserves at all times.
With all of these bills and charges, this means that an online casino will cost around $2 million to set up and run.
A successful online casino should expect to break even after 2 to 5 years.
Summary
Online casinos make money through the games they put on their website. These games will have a house edge which allows the sight to earn a percentage of all the bets made.
They will also make money through advertising and paywalls.
The finances are used to maintain the high-quality software and keep the winnings in reserve for payments.
