Starting and running an online casino – things to know and understand
Online casinos are an extremely profitable business, as gambling in general is, and the industry itself is in a lucrative transition state where new and upcoming operators have the best chance to make the most out of changing laws and regulations. This is not to say that setting up an online casino will be easy, immediately profitable, cheap, or without difficulties. There are a lot of things to consider and the field requires loads of expertise, especially if you want to run a successful casino. The possibilities however seem almost endless at the moment, and if done the right way the profits will certainly soar sky high.
There are lots of things to consider when starting the process. First you need to decide the jurisdiction, which ranges from offshore locations like Curacao, Philippines or Kahnahake, to traditional gambling heavy countries like UK or newer license providers like Malta and Gibraltar. All of these have their good and bad sides, and they might be up for a change in the future anyways. Then there’s the backend of things such as banking, how to process the money in your system, where to get the games, which games and what providers, how to run the everyday operations of the company like customer service and player retention, where to locate the servers and other questions of infrastructure. Of course all of this also requires knowledge of laws and operations, including marketing and technology. Then again, you can simply opt for a turnkey solution, where most of these issues are solved by a third party that offers consulting services, or perhaps go for a white label solution where all you need to worry about is the brand image; though again, these all come in different packages where you have more or less control over your company. What you require most of all is knowledge and understanding of how the current online casino market and economy works, and of course simply hard work.
Of course the process doesn’t stop there, like with many other types of businesses the first year is the most difficult and will see most companies fail. Couple this with the fact that the golden age when you could just open a casino and see people flock in in droves is over (if it ever existed), and if you want to entice new players and see old players return you need to have a product that is either as good as the competition or preferably offers players something new in a way they haven’t seen before. Luckily there are plenty of possibilities for this, and the most celebrated and successful casinos are those that have chosen to take risks by giving the players a whole new experience. In a sense what you will do is gamble on a far larger scale as you can never be quite sure what the players will like. Upfront the biggest cost will come from licenses and infrastructure, and a capital of several hundred thousand is required by most jurisdictions for even starting operations. This doesn’t mean that your costs are immediately huge, as that too depends on how you run the casino.
Localisation, localization and the market
Try to please everyone and you end up pleasing no one. Localisation, or localization depending on your market, generally means adapting your product to different areas. When it comes to online marketing and casinos however localisation means building a service for specific market with the rules and wants of that market. This further extends to the kind of gambling services you offer, for example betting for UK customer or slots for Nordic countries, and it is not something that you can only ignore at your own peril. For the purpose of this article however we will stick to online casinos and not delve into other products, though the general trend is currently for gambling operators to offer a full range solution for all of these.
This means that you either require knowledge of the market or need to do the proper research: what kind of games are you going to offer? What kind of games do customers from each country play? How can you market and advertise in these countries? What are the niches you can invest in and expect a return from? What is already offered for players and how can it be improved? Localisation in other words is a lot more than just translating your website to multiple languages. Knowing and understanding the market is essential for running a successful online casino and this means both understanding the player base and the competition.
Like in most things related to internet it’s important to find your niche. At the moment most big operators are running several casinos sites instead of offering all their services to all players via a single site. This is even important if you decide to go with the route of turnkey and white label solutions: you might have the best possible games and a range of payment options but it makes absolutely no difference if the people in your target area don’t simply play those games. Understand the market and you’re ready to take the first step.
Marketing
Most casinos use the vast majority of their budget to market their services. Mostly this means internet based marketing, as the current laws and legal requirements often forbid direct marketing, and in some cases there are national monopolies that forbid any marketing at all. Luckily those are in the minority, and their laws are bound to change in the future and most importantly they cannot force their laws on companies that operate from countries where gambling is a legal business. The marketing world is of course completely different for the big players and the small and new start-ups, with the former being able to pour in millions upon millions on different campaigns.
There are two primary keys to success: creativity and coverage. That is you need to get your name out there, and you need to get it there in such ways that the customers will remember your casino. It’s also important to make sure you run no false advertising, as customer will never come back to your site if they don’t get the bonus they are promised, or if the site simply does not offer what is advertised. Again knowledge comes into play; there is no point marketing fast withdrawals if they are actually slow, nor saying you have the best games if everyone else has the same games. Again you need to find your niche and build and market it in a way no one else does, or simply be better in it than anyone else. For new casinos this is extremely important, and something that requires a lot of thought to come up with a sound strategy. Know your audience, know yourself and know your product.
Popular methods are direct ads, keyword based brand names, brand names that are memorable and easy to recognize, sponsoring anything and everything that might produce results, email lists, good and proper search engine optimization, and of course affiliate marketing. Affiliates are perhaps the most important of these as they tend to handle much of Google traffic when it comes to anything casino related. For your casino the importance lies in finding the methods that produce the best results. This requires both time and investments, though as a startup the third choice is to be creative and find the methods that give the best bang for buck. Just because the top casinos spend million if not hundreds of millions on google pay per click ads doesn’t mean you have to. Don’t forget your existing customers either; though people tend to remain loyal to brands they like they won’t hesitate to move on if all your ads and bonuses are directed at new customers. Something as simple as dishing out free spins on the days people get their paycheck is a surprisingly effective and cheap method of getting some deposits in.
Affiliates
Affiliates generally make anywhere between 20-40% of the profit from all the customers they bring to your casino. This figure sound high, but on the other hand without it the customers are going to head somewhere else and you will surely end up empty handed. Strangely enough most players are completely oblivious even to the existence of affiliates, which makes it ever more important to make sure you both deal honestly with affiliates and only deal with honest affiliates. Allowing your partners to send out false advertisements or promise bonuses and promotions that don’t even exist will see the blame land on you. Likewise, if you end up screwing the affiliates it will soon backfire and you will see a significant drop in both revenue and new customers.
So what is it that affiliates do? Quite simply they attract customers. In most cases this is done via websites that specialize in gambling and online casinos and keyword optimization through Google. Googling anything casino related, from possible bonuses to slot reviews and strategy articles, will return a website that is targeting people who google such things. Even brand names tend to return a third party website rather than the online casino as a result. This means that you need to appreciate and deal with your affiliates in an honest manner, and most of all you need to pick them carefully to make sure you get most out of your investment.
Software and games
The most important things in your site are the games, without them there is nothing to play and no money to be made. Secondly there is the software behind everything that runs the website, the casino and everything from player accounts to money transfers. All of these need to run in a perfect form and manner, and match the customer expectations. There is nothing more frustrating than building a brand, a marketing strategy, a network of affiliates and choosing the right games to entice the maximum amount of players only to see them leave your website because it takes too long to load. Keep it simple and fast and most importantly make it function through different platforms.
One often overlooked aspect of online casinos are the back end systems. Whilst a startup might do well with a system where all payments are checked and approved by payments personnel, or documents that are thoroughly checked by security staff these quickly come bottlenecks when the amount of customers skyrockets. Make sure to choose and pay for a system that scales properly, and leaves your staff with time to concentrate on something else than manually handling repetitive tasks. Invest in the right software to make sure you don’t need to pour in money later on, or in the worst case to rebuild your whole infrastructure from the ground up because you cannot take advantage of the success you’ve achieved.
Strictly speaking the games you choose depends on the solution you choose for your online casino; going the white label or turnkey way might limit your choice, whereas offering games from multiple producers might require a more expensive and complicated setup for the online casino itself. That is to say, offering Wagerworks, Net Entertainment, Every Matrix, Soft Swiss, and IGT games or a mix of any other producer all on the same casino site will require a lot of coding and testing to make sure everything functions correctly. Especially so when you throw in mobile devices. On the other hand offering games from just one provider limits your choice of games, which in turn limits the amount of players. Again, research and know your audience and you know what to offer.
Mobile and desktop platforms
Mobile gaming has surpassed desktop gaming in the recent years, perhaps because it is just simpler and possible to use from anywhere. Of course this also depends on your target audience as older generations tend to use desktops whereas younger generations will use their smartphones for everything. In any case it is impossible to build a successful casino brand these days without incorporating mobile devices into the mix. Luckily, most game producers have realized this as well and have gone for solutions like HTML5 which don’t really require any extra work to have them working on both desktops and mobile platforms. Do keep this in mind if you choose to go with white label solutions, as there are still some software producers that have not taken full advantage of smartphones and tablets; and some whose most popular games are only available for one of the two systems.
It’s not only games you need to worry about though. First of all, though mobile devices are quite powerful these days they still lose out to desktop devices in processing power and screen size. This means that although your website might work perfectly well with minimal load times on a normal PC with an internet connection it might not do so well in a smartphone with 3G or 4G connection. Testing and proofing your systems to this end is quite important. But likewise, it’s important to make sure all the necessary functionality is still there even if you decide to offer a lighter mobile version of your casino site. There’s very little point in offering a mobile site that doesn’t have the payment functionality or customer service: both will certainly see your customer switch to other services where these are present.
Planning in advance is important here as the two platforms function differently and anything new or any changes made need to be done on two different platforms. It is not simply a matter of adding new games but also making sure the functionality remains perfect on both. When designing mobile functionality you can go two ways: a basic mobile website or through purpose built apps. This in turn adds another layer of difficulty as at the moment Android App store doesn’t allow anything gambling related, meaning that you need not only have the app but an easy way of installing it. As an interesting tidbit quite a few brick and mortar casinos have gone the way of giving visitors the ability to play games in through their mobile devices from anywhere in the premises.
Customer service
Customers will contact your casino for three primary reasons: to complain, to ask for help and to sort out issues with payments. Excellent customer service is essential for the success of your casinos, and the pitfall that sees most casinos lose customers. This is especially true when online casino companies transition from the start-up phase into bigger companies. Most often this means that the staff that has been there since the beginning moves into other roles and new staff are hired into a secondary role, with customer service losing much of the experience and interest it requires to function perfectly. And once customer service starts to degrade it is very difficult to bring back to the level of excellence required, and it will almost always lead to a significant reduction in brand value and eventually customers.
When answering customer queries speed is always of essence, as is ease of contact. The primary methods of contact are live chat, telephone and emails. With the first two you should seek out to answer in seconds, whereas emails in general should be answered in hours. Some companies offer fax and snail mails as further options but these are generally speaking quite useless when it comes to an online business, though they are useful in certain situations where for example verification documents cannot be delivered any other way. Though most customers appreciate being able to contact the services in their own language English is enough to cover most European markets. Of course if your niche is targeting specific markets it is quite useful to offer customer service in those specific languages you are seeking to entertain.
For a startup there are no significant costs, depending on the structure you decide to go with, as most of the time the staff can function as part time customer service when so required. As such customer service is not generally an issue for startups, but for companies that wish to take the next step in their quest to conquer the casino markets. This again requires the proper planning and set up from the get go. Quick and clear answers with fast resolutions are necessary for any kind of real success. Companies that ignore customer service do so at their own peril.
VIP customers are a chapter on their own right, and again something that needs to be set up early. Though all customers are welcome to spend their money it’s the big players that really bring in cash. And even if they don’t expect to win every time they do expect proper service and for their queries to be prioritized. This further extends to all kinds of banking issues. Trust is an important factor, so if you promise excellent customer service and fast withdrawals it is imperative that you keep your promise, and offer no excuses when you can’t.
Ready to go systems – turnkey and white label
When starting an online casino you can build everything from scratch, incorporate third party solutions, or opt for turnkey and white label solutions. Turnkey solutions are generally offered by specialized companies that help with legal issues as much as the whole design process. This is not a partnership as such, but rather a system where a third party helps you get the casino off the ground for a fee. This is not to be confused with white label solution where some or almost all of the functionality is provided by a software publisher.
There are several white label solutions offered by the bigger software providers like EveryMatrix, and these comes with pros and cons that are good to know. First of all you’ll be giving up a significant portion of your profit to the solution provider, and in turn also don’t need to pay expenses when it comes to the infrastructure, customer service, banking solutions or legal issues. This of course always depends on what you end up choosing with choices ranging from a simple framework system to a situation where you are only responsible for controlling your brand and image. The downside is that if you are not responsible for customer service or payments you are not in control of them either.
Banking
Banking and flow of money are extremely important. If these don’t function properly you are sure to see your customers change to other casinos. This means both deposits and withdrawals must be processed securely, as fast as possible and with perfect transparency. The more options you have to choose from the better for the customer, but it also means your whole system will become more complex, which in turn might decrease processing times, which in turn will affect your services negatively. Building a perfect banking system is as important as having excellent customer service, and the two generally go hand in hand.
Most popular methods include credit and debit cards like Visa and MasterCard(no withdrawals thanks to pesky laws though), E-wallets like Skrill and Paypal and online banking. Not providing all of these is a sure way to drive customers away, especially VIP players. Once again it is important to consider your audience and customer base as most payment methods are country specific, especially when it comes to online banking. Setting up these connections is not the easiest task, and unless you have legal and banking experts in your staff it’s best to trust outside help. Turnkey solutions and white label providers are extremely good in this sense: though again when it comes to white label you risk losing control of the level of support offered. Other methods worth considering are pre-paid cards, vouchers, phone based payment systems, and thirds party online banking systems like Trustly. Crypto currencies like Bitcoin are something worth considering as well, though at the moment they do not play any significant role in the business.
Deposits should always be credited immediately, and withdrawals should be processed within 24 hours. All of these methods must be extremely safe, and there are a lot of regulations that need to be followed. Again, it’s best to seek outside help to make sure that these services are functioning properly and adhere to the word of law. The company needs to be able to process documents and keep them safe from any third party.
The main issue with banking and payments is actually customer knowledge. Most people do not understand how banking works, and tend to think that any delay is immediately caused by the fact that your casino is rogue. As such proper documentation and setting the correct customer expectations is extremely important and quite a difficult task. The methods must be set up for both desktop and mobile versions of your casino.
Infrastructure
Most jurisdictions that offer gambling licenses require that part or all of the infrastructure is set up in the country. This usually means the servers that either store customer information or run the games are physically located in the country you are running your operation from. Most of them also require some level of staffing for these locations. Some jurisdictions, usually offshore, only require backup servers to be physically located within the country. This can be surprisingly expensive to set up and run depending on your license. For example Gibraltar has quite low taxes for gambling companies but on the other hand suffers from expensive IT solutions. When it comes to online casinos 24/7 up time is a requirement, as is security, reliability and of course speed. Nothing will get customer off your online casino faster than slow and unreliable website. Going cheap will means extra expenses in the future.
With the popularity of cloud based solutions skyrocketing there is usually no need to run expensive server farms that are difficult to scale or operate. Internal IT is a requirement as much as internal marketing, but most of these can to an extent be outsourced. Investing in website, application and UX design is more important in this regard.
Partner up
The easiest way to cut costs and ensure success is to find reliable partners. In fact most casinos, at least the most popular and successful casinos, are the product of a group of people who are interested in the field and have the expertise to make the most out of it. This means knowing the law, the technical side of things, customer service, interest in gambling and of course finances. This is also an extremely good way to cut the financial burden of starting a casino.
Staffing is something that will quickly see your budget overcome by expenses. Although building a website is something that anyone can do with a notepad and some knowledge of HTML building an excellent website is something you cannot do without experts in the field of programming, graphics design, legal issues, content writing and user experience design. The single most important thing for your start up, unless you have all the money in the world, is to have the right people to run the business with. Even if you have the money to hire these people it is far smarter choice to seek a group of talented individual to finance through a partnership.
From start-up onward and other products
Most online casinos are transforming into gambling companies these days, and this means offering betting, bingo, lotto, poker, live casino and other products for customers. These are not essential for a start-up, and in fact it is best to concentrate on a single field and niche to start with. But once the success has been reached and the casino starts turning a profit it’s best to start thinking about the future. This doesn’t only include different gambling products but also the whole economy around it. Most big gambling companies are buying up smaller casinos as well as affiliates in order to take control of all possible profits as well as providing different customer groups what they are looking for.
After the success has been gained it is important to keep the package tight in order to remain on top of the game. Once you start expanding staff your company will no doubt change, and someone who is simply paid a monthly wage will work with different motivation than someone who has shares in the game. This is essentially where most casinos also turn sour and forget the reason why they succeeded in the first place. While starting a casino and gaining initial success might be relatively easy keeping it that way is not.