The Online Casino Business Model: How Does It Work?
It definitely works. The rise of the remote side of the industry is clear about the demand for online casino products and services. In the UK, for example, a study revealed that 17% of the population gamble online, equating to revenues of £5.3 billion ($7.3bn) for the online market alone each year.
And, searches for online wagering platforms are on the rise, not just in the United Kingdom but in the United States and around the world. Still, the result doesn’t explain the success story. For that, we need to consider the business model and how it attracts players, old and new, and keeps them engaged.
Online platforms have an advantage over their land-based cousins due to their scope for expansion. In a traditional casino, the number of players spending money on gambling is limited to the property’s floor space. However, this isn’t the case with a remote e-commerce website as an increase in bandwidth allows hundreds of people to play at the same time.
From a revenue perspective, this is ideal because it lets virtual providers turn larger profits and boost their bottom lines. To put this into context, the market surpassed $55 billion in 2019 and is projected to hit a peak CAGR of 16.5% from now until 2026. Plus, it’s a sustainable model, as game developer Steam highlights.
In March of 2020, the online gaming platform hit a record of 20 million users, with around 6.4 million of them playing a game. This shows that the growth won’t stop anytime soon as the technology means that milestones are being reached and passed.
A side-effect of the sector’s expansion is the role of casino offers in signing up and onboarding customers. Promotions provide added value for shoppers, which is why every business from retailers to restaurants use them to appeal to consumers. Unfortunately, it’s not a sustainable long-term solution as it often results in a loss.
Online casinos have flipped the world of sales on its head by creating an eternal state of added value due to their superior revenue streams. Also, they take many forms, aiding the user experience by increasing flexibility and ensuring offerings are exciting. For example, a single deposit can result in a 100% cashback offer up to the same amount.
Alternatively, a casino bonus might be a no-deposit offer of up to $25, or free spins to use on slot machines or at roulette tables, such is the diverse range of offers for new customers who are interested in placing a bet. Unlike most companies, online casinos can rely on promos to grab people’s attention.
Higher House Edge
Of course, the games advertised can be the ones that give the casinos the best chance of recouping their investment. After all, there’s nothing to say they must give cashback on sports betting. Instead, they tend to be slot machine-centric.
This is because the average house edge of a slot is anywhere between 1.5% and 10%, depending on your slot machine of choice. Even better for online casinos is the fact that slots are the most popular game by far, helping them to double down on their profits.
Online casinos rely on hefty profits and plenty of players to keep their business models running. At the moment, they have plenty of both, which is why the industry is growing at a rapid rate even compared to other sectors.
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