How Not to Start an Online Casino

Should you start online casino Recently, starting an online casino became extremely popular, specifically for quick buck chaser. “The house always win” they say, so why not to be “The House“.

Yesterday I’ve bumped into one of the most ridiculous articles on the topic, you can find it here. Basically the author explains how easy it is to start a casino using their software. All you need to do is signup, and the money will start falling on your from the sky.

Unfortunately, that’s not the case and we will explain why.

Some Facts

As you probably know, over 50% of new business go broke within the first year. Online casino industry is no different.

There are two reasons why you don’t hear about it. First, most of casino sites the crash down, never took off. They opened, attracted few players, lost some money and that’s it. At this point the “entrepreneur” decided to cut losses and vanished.

Second, most of these instant casinos were built as white labels (we will explain below). Casino that went out of business looks bad on the company’s resume. Therefore, they prefer to keep the site live at the cost of 100 dollars a year, then to close it officially. That’s why you have plenty “ghost” casino sites, hanging there, without anyone visiting them.

So the House doesn’t always win?

Well, from players’ perspective the house eventually wins, but it costs a lot of money to build the house and to keep it occupied. So the question is not if the house wins, but if it wins more than what it spends.

To understand it better, we need to look at the process of setting an online casino. There are two ways to do that.

How to Start an Online Casino

Custom Solution

That’s the path for serious investors and entrepreneurs. You will need to handle yourself pretty much every part of the business: the site, integrating the games, processing the money, support, fraud, marketing and so on. That takes a lot of money and most important, expertise.

99% of the known and reputable online casinos are built this way.

Of course, you can outsource parts of the process, for example hire a Customer support company and so on, but eventually it’s all on you.

White Label (Plug-and-Play) Solution

On the other range of the scale you have the white labels. Here you get an instantly working casino without knowing a thing. There are plenty companies that offer that service: the build full casino operation using method #1, and then they offer “skins” of their system.

You just need to come up with the name and they will design your site, build it, integrate the games, process the payments, give you customer support, retention, you name it. All except marketing.

What they will ask in return – few thousand dollars for the set up and then a big chunk of your profits. Not even profits, but percentage of the netgaming, usually something like 35% to 40%. Netgaming is the total of players’ wins minus palyers’ losses. And since the house always wins, the white label company always wins.

But what about the casino itself? Here the situation is more complicated. The most problematic aspect and the one that costs the most is marketing. You can buy traffic (media), do ppc, affiliate marketing and so on – all cost a lot of money.

Affiliates for example are the safest way to bring players to your casino, since they don’t charge you anything in advance, but just % of the netgaming. The problem is that they will take another 35% – 45%. So now you are left with something like 10-15% which supposed to cover all the rest.

How Competitive is Internet Casino Industry

Casino is one of the most competitive industries on the internet. There are thousands of them out there. And the main problem with white label solutions is that you are not different than the previous 1000 boys and girls who thought that starting an online casino is a spectacular idea.

I’m sure you’ve been at least once at those touristic markets, which open during the weekends in all big cities and sell various local goods.  You go through the stands, and each shop sells exactly the same toys, souvenirs, etc.

Flea Market

Now multiply it by thousand and 24/7 and you will get the idea of how white label casino industry looks like.

So is there a way?

Of course. There are plenty successful internet casinos and thousands of people who became millionaires. But you just need to know what you are doing and to understand that it’s no easy money.

If we had to make a small questionnaire to help you answer if you should give it a try, it would probably go something like this:

  1. Are you an expert in one or more aspects of online casinos?
    The highest success rates come from online marketing experts. People who know how to generate traffic – PPC, media buy, affiliates, etc. For those – white labels are the perfect solutions.Being an expert in customer support and retention can also work, since you will be able to satisfy the players, keep them happy and entertained.
  1. Are you an experienced high-level entrepreneur and manager?
    The other option is that you just a superb business man and casino is just another industry you wish to enter. If you know how to build and manage a company, how to get funds and sponsors. In that case you should probably set up a custom casino or use the white label in a very limited way.
  1. Are you a hard worker?
    Again, this is one of the most tough and competitive niches in the world. Don’t even think of starting an online casino unless you’re ready to work hard for a long period of time.

We will finish this article with a nice quote of Kin Hubbard: “The safest way to double your money is to fold it over and put it in your pocket.

JimB

Casino Fan, originally from UK.

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