The online casino and sportsbook business is booming, and the revenues that a well-run online gambling platform can generate are a tempting prospect for investors and entrepreneurs. But how do you climb to the summit of online casino success? Before starting the long, hard ascent to the top, you’ll have to pin down the basics and gear up. In this article, you’ll find out everything you need to know about starting an online casino.
With gambling’s long, long history of inflexible demand and the constant innovations of the modern world, there’s never been a better time to find out how to start an online casino than 2020. Online gambling’s near future looks like a bright one: market research firm H2 Gambling Capital predicts that global iGaming revenues will rise above $117 billion within the next five years. To get an idea of how fast the industry is growing, consider this: revenues only hit $58 billion in 2018. That’s not just growth; that’s an explosion.
- Explore the global online casino market
- Find your territory
- Interested? Ok, business plan!
- Gather your capital
- Establish the right corporate structure
- Getting a gambling license in 2020
- Hire the right staff
- Online casino platform software
- Quality game content
- Verified payment systems
- Marketing: player acquisition and retention
- Customer service: keep your players happy
- How can Slotegrator help open an online casino?
While hungry entrepreneurs everywhere are feeling tempted to try their luck with online casinos, scrupulous business strategists are planning out every single step on their path to the riches of the iGaming landscape. But as running a casino is not a game of chance, but skill, you’ve got to give your all to keep up with the competition.
Leave it to the professionals
As a leading software developer in the iGaming industry, we are always ready to share our industry knowledge and advise operators on any complicated issues they may face. Moreover, our solutions for developing and launching online projects, as well as our gambling license acquisition services, can save you both time and money. Fill out the form and our managers will contact you shortly.
In this article, we’ll cover the foundations an operator has to get familiar with before asking himself a question: is he up for the game, or will he wind up getting played? Would-be operators — behold, your roadmap for how to launch an online gambling business.
Explore the global online casino market
New markets are opening up around the world as more and more countries are acknowledging the potential of the state economic benefits brought by choosing to regulate the gambling industry. Meanwhile, technology is advancing at blinding speed, knocking down barriers left, right, and center and creating countless opportunities in untapped territories for investors to take advantage of.
While every sector of the world economy was reeling from the recent crisis, online businesses of all kinds — from food delivery to online retail — had a leg up when it came time to adapt to the quarantine lifestyle. Online casinos were no different — they haven’t escaped unscathed, but the flexibility of the iGaming industry certainly cushioned the blow. Operators instantly adjusted their content offerings to the new reality, leaving the players’ experience with little interruption.
Huge amounts of iGaming revenues are produced by online sports betting, which was eviscerated by the postponements and cancellations of major sports leagues and championships around the globe. But without real sports, bet-starved punters turned to virtual sports and esports betting. Operators offering live casino streams with real dealers witnessed jaw-dropping spikes in revenue as homebound players turned to them for a social outlet as well as entertainment. Meanwhile, estimates of the crisis’s negative effects on the industry have already begun to flatten, and revenue estimates look rosy.
Find your territory
While iGaming may be a global industry, you’ll still have to narrow your focus. Picking a target market will be one of the initial stages of establishing an online casino, and the decision you make will in turn shape many critical aspects of your business. Here’s a quick outline of what to consider.
The regulations governing the gambling industry differ from region to region, from country to country, and sometimes even within countries themselves. Regulated markets are commonly referred to as white markets, and regions where gambling is prohibited are called black markets.
Some countries have a mix of regulations — or a complete lack of them. These are called grey markets. In some cases, certain administrative divisions of a country will regulate gambling but others won’t, and sometimes authorities will not license gambling operations but also will not restrict players within their borders from visiting offshore sites.
The degree of regulation will be the first thing you should consider. While some operators choose to pick their way through the volatile landscapes of black and grey markets, white markets offer much firmer footing; clear regulations might present a hurdle or two, but knowing what rules to follow ensures your casino won’t be blocked or shut down. You will also look at regulations when choosing the jurisdiction for acquiring a gambling license. Some gambling authorities forbid their licensees from targeting certain geographical areas, so you’ll have to make sure your gaming license allows you to face your desired target market.
There are other legal complications to keep in mind. Some countries are considered high-risk areas for money laundering and fraud, which could complicate partnerships with financial institutions, who often impose very strict due diligence processes.
Players can face varying obstacles limiting their ability to gamble, including technological and regulatory restrictions. Financial institutions in some countries refuse to process gambling-related transactions, as they are prohibited from doing so by law. When you’re looking at different markets, take a particularly deep dive into available payment methods, as your casino will be very short-lived if you don’t offer your players the payment processing workarounds they need.
You should also consider what marketing strategies you’re able and willing to use. Some regions are highly restrictive when it comes to gambling advertising. If you can’t proactively go after the players through contextual advertisement online, you’ll have to make sure your site is well optimized for SEO so players find your brand when searching for an entertainment outlet. We’ll take a closer look at popular and effective marketing strategies later on in this article.
Once you’ve gotten a handle on regulations, it’s time to turn your eye to the players themselves.
Demographics and demand
Learn as much as you can about the target audience. The number of potential players is one statistic, but there are plenty of other lenses to look through to evaluate potential revenues. What is the average age and gender of the players? What about the average salary? How much disposable income do they have? Is there a cultural passion for gambling? What kind of gambling activities does your target audience prefer? And through what means can they swiftly conduct monetary transactions such as deposits and withdrawals?
Player intent varies, and their habits will affect many aspects of your online casino. Some players like to bet big, making a massive deposit every month and hitting the slots whenever they have a free moment. Other players deposit more modest (but still regular) amounts, like in low-income markets, where punters tend to make large volumes of low-value bets.
Knowing the betting habits of the target market will give you a clearer picture of not only what kind of revenues you can expect, but how to calibrate things like bet settings and wagering requirements, as well as what promotions you will wind up using. Bet settings and promotional strategies are two things you’ll pinpoint when analyzing your competition.
Study the strengths and weaknesses of the brands that are already established in the area. Analyzing their game offerings and bet settings (minimum and maximum bets) will give you an idea of how players in the region wager, and the payment systems they use will tell you how players in the area make deposits and withdrawals.
Looking at their player acquisition and retention strategies, like bonuses, VIP and loyalty programs, tournaments, and other promotions (more on those later), can give you an idea of what players are responsive to. What’s more, studying what other casinos do provide will let you see what they don’t. Once you have a full picture of your competitors’ operations, you can identify the gap in the market and design a unique offering to fill it with.
Initial investment and operating costs will vary across markets, so the amount of capital you have on hand will have a big influence on your decision. You will want to calculate an approximate budget to cover aspects such as obtaining a gambling license, paying fees and taxes, business registration, etc. Each jurisdiction has its own features and sets its own requirements, so if the cost is too high, you may want to consider a more affordable option.
Interested? Ok, business plan!
If you fail to plan, you plan to fail — the players are the ones who are here to gamble, not the business owner.
A business plan is not only a necessity for operations, but for applying for a license or even attracting investors. Having a clear, well-thought-out strategy will help you secure the substantial amount of cash you’ll need for your initial investment.
Here’s a quick breakdown of the points you’ll need to outline in your business plan.
Purpose of the venture (Executive summary)
In this section you should describe the goals of your business and the needs of the market that it plans to address, as well as the organization of your business. You’ll also need to provide an analysis of the target market and an outline for your sales and marketing approaches.
Make a clear outline of your organization, including the corporate structure and whether it is a partnership, corporation, or limited liability corporation. You should also provide information on the stakeholders and other key players, as well as making staffing projections.
The market analysis section of your business plan should break down how your business fits into the landscape of the industry. This section needs to show the demand for your product or service and an analysis of the target market, as well as a breakdown of industry trends. You will also include an outline of your pricing plan and detail exactly how you’ll market your online casino, including your budgets and marketing channels.
You can give your investors (and yourself) a good idea of the level of success you can expect by working out turnover projections for at least the first three years of operation. Starting with some expectations of what you should be able to accomplish is necessary to keep track of how your business is doing.
The financing section will be a chance for you to show off your mastery of spreadsheets. Here you’ll offer a run-through of all the numbers, including your personal financial contribution, annual income projections, a break-even worksheet, projected cash flow statements and a balance sheet.
Gather your capital
For licensed operations based in Europe, a ballpark number for the amount you’ll need to get going is $140,000. Below you’ll find an estimated breakdown of expenses, both before and after launch.
Establish the right corporate structure
Your corporate structure will depend, in part, on your choice of jurisdiction — you will have to establish a local business wherever your license is issued. Your operation might be a partnership, corporation, or limited liability corporation, depending on the regulations of your licensing jurisdiction and any other jurisdictions where parent or subsidiary companies are located.
The limited liability corporation is a very common corporate structure for online casinos. In this kind of company, shareholders are only liable for the value of their shares, meaning they won’t lose the shirt off their back if the venture goes under and the company’s debts exceed its capital.
Sometimes, you will need to establish multiple companies in order to comply with the regulations of your licensing jurisdiction, your target market, and countries where any subsidiary companies (such as payment processing companies) are located.
As an international business, online casinos will often have to navigate restrictions and requirements in various countries, sometimes resulting in highly complicated scenarios. It’s often best to employ third-party jurisdictional services that have a wealth of international experience and can assist you in remaining compliant across borders.
We offer consultancy services and complete package solutions for gambling license acquisition that include:
- Gambling jurisdiction and business advisory
- Gambling business corporate structure incorporation
- Opening bank accounts
- Gambling license application
Getting a gambling license in 2020
The choice of licensing jurisdiction is a critical step in the early stages of an online gambling business. There are a number of jurisdictions around the world that offer online gambling licenses, each with its own licensing process and requirements. Some licenses enjoy international recognition, but authorities in many countries require operators to have a license from their regulatory body. For example, to face the UK market, you’ll need a license from the United Kingdom Gambling Commission.
Why you should get a gambling license for your online casino
Some operators flinch at the cost, complication, and time commitment of getting licensed, instead choosing to cross their fingers and hope they can fly under the radar indefinitely. However, the heavy fines most countries impose for organizing illicit gambling activities are just the beginning of the problems you’ll face if you decide to run an unlicensed casino.
Banks and other financial institutions are often wary of gambling industry representatives, due in part to concerns about money laundering, and most financial institutions won’t allow you to open an account without a license. It’s also common for quality developers of game content and other software to only cooperate with licensed operators. Payment service providers, as well, typically insist on a license.
Remember — iGaming has a worldwide community of game developers, software providers, and other professionals. A license makes you a member of that community, enhancing your odds of making critical connections that can boost your business. Expanding your professional network will also help you keep up with changes in the industry. Additionally, having a license establishes your casino’s credibility and trust and helps improve the reputation of the iGaming industry.
Finally, experienced, habitual players — the kind you want — check for a license before considering whether or not a casino is worth their time and money. A license shows players you’re trustworthy, not a fly-by-night operation that’ll accept their deposits and then disappear into the ether. It’s a sign that you’ve been vetted by authorities and the payment systems you use are verified.
What should you consider when choosing a licensing jurisdiction?
YOUR LEVEL OF EXPERIENCE
First-time operators who have yet to build a substantial enterprise often apply for a license in a jurisdiction with comparatively lower costs and simpler requirements, while more established operators who have gained some brand recognition might want to expand into new markets.
For example, a new operator might opt to get licensed in Curacao, which is cheaper than several other jurisdictions. A more established casino with more financial resources looking to conquer new territory might seek a license from the Malta Gaming Authority, which many feel carries more weight.
Some jurisdictions, like Curacao, offer a single license that allows the holder to offer all types of gambling. However, many other jurisdictions offer separate licenses for each type of gaming. Often these are separated into such categories as casino/RNG, sports betting, peer-to-peer games like poker, and fantasy sports. It’s important to note that poker regulations depend on whether the jurisdiction in question classifies it as a game of chance or skill. If it’s considered a game of skill, a license might not be necessary. Also, different gaming content providers have different license requirements. They might, for example, require their partners to have a license from either Malta or Curacao.
The cost of the license is, obviously, an important consideration. Application, license, and renewal fees, as well as other costs associated with the application process, are different in each jurisdiction. The amount of start-up capital the operator has on hand will likely provide a defining constraint on the decision. The total cost of the license will also depend on how many types of gambling you want to offer. If the regulatory body in your chosen jurisdiction offers different types of license for different types of gaming, you’ll have to pay a separate license fee for each of them.
And, as always, don’t forget about taxes. While governments in some jurisdictions charge little to no gaming taxes, others can have a complicated schedule of fees depending on revenue. Some offshore jurisdictions also charge little or no corporate tax.
THE LICENSING PROCESS
Every jurisdiction has its own licensing process, and they are often highly complex and very bureaucratic. Due diligence checks can be very thorough, sometimes including background checks conducted through international law enforcement agencies, and applicants must usually complete a long list of paperwork.
The time frame for licensing can also play a large role in the choice of jurisdiction, as it can vary greatly. Newer operators are often drawn to the six-week process of Curacao, while more established brands have the resources (and the patience) to wait out the six months it takes to get a license in Malta.
Many new operators choose to navigate the complicated licensing process by engaging jurisdictional advisory services, as the legal complexities of establishing an international gambling business can easily leave operators scratching their heads (or bursting into tears when they see the mountain of paperwork they have to fill out).
Hire the right staff
An online casino is no one-man show. You’ll need a team stacked with specialists. Luckily, the iGaming industry is big and getting bigger, and as cultural stigmas against gambling lessen over time, the pool of talent you can choose from grows. Licensing jurisdictions can turn into a talent magnet as iGaming professionals gravitate towards them, so they are a good place to look for staff. Here’s a quick guide to some of the people you’ll need on your team:
Online casino platform software
An online casino platform is the engine that drives an online casino website. The software provider attends to the core platform features and integrations, so choosing a vendor for developing a custom casino platform is a major step in setting up an online casino business. The site’s functionality and the quality of the provider’s technical support are crucial when evaluating the investment, and the scope of the services provided by the supplier will also affect the price of project development and maintenance.
Typically, the operator has two options for equipping the casino platform — by choosing to purchase only the core solution and attending to the development of the frontend and third party software integrations by himself, or by going for a complete suite (known as a Turnkey solution), where the platform provider takes care of the technical development of the casino from the backend to the front according to the customer’s wishes, and might offer additional operational services on top.
Below, we’ll take a look at the major technical aspects of online casino platforms that you have to keep in mind when choosing a software provider.
Platform features and functionality
Gambling platform software needs to be secure, reliable, and functional. Your platform is a bad place to try and pinch pennies by using cut-rate software that just barely covers the essentials. Go for mid- to premium-quality software that has decent technical support and potential for further development.
The server your platform is hosted on should have a high bandwidth to allow for as many players as possible while ensuring a fast loading speed. Every fraction of a second counts for SEO and UX, as players will bounce from your site to a competitor’s if it is not fully and instantly responsive.
Just like world-famous land-based casinos, online casinos draw an international mix of players. To make them all at home, your platform should also be available in multiple languages, starting with the language of the target market.
Choosing a flexible platform will enable you to customize it by integrating additional modules and third party software. The following are must-have features of a casino platform:
- CRM system
- Marketing tools
- Content management system
- Reporting system
- Financial and fraud modules
- Player segmentation
- Live chat
User experience should be first and foremost on your mind when it comes to your software. At every step of the way, you should envision the player’s journey through your platform. Imagine them finding your site and setting up their account for the first time, making their first deposit, and exploring your casino lobby. How smooth is their journey? How quickly can they find what they’re looking for?
To go from first impression to first spin, the platform needs to be easy to navigate. Registration and deposit buttons should be obvious and clearly marked, as should different sections of your platform, like casino and sportsbook. Game offerings should be organized according to common player preferences, like volatility and game theme. Players should never have to look hard for something that they need — they’re likely to give up before they find it. But don’t stop at making your platform inviting; go for engaging.
Interactive web design is a common method of enhancing the user experience. Sites with interactive designs can increase user engagement by allowing players to personalize elements of their account and even the game lobby. Personalization is an increasingly important part of player acquisition and retention, factoring into currently-trending strategies like real-time marketing and gamification.
High-quality platforms also often include fully customizable widgets which can allow the operator to display information such as active promotions, new games, recent big winners and current jackpot size. Providing up-to-the-minute information like the running total of a progressive jackpot will add more energy to the casino.
Grab players’ attention with a visually arresting platform. Create a brand with its own look, touch, and voice. Avoid broken images and poor visuals by using the correct image size for the banners and thumbnails players will scan while they’re choosing a game to play.
Unfortunately, online casinos can present themselves as tempting targets for hackers and swindlers. Licensed platform services should come with anti-fraud and anti-hacking security measures. Know Your Customer (KYC) measures, such as manual reviews of ID documents, are critical for preventing bonus abuse and other kinds of fraud, as well as underage and problem gambling. Many licensing jurisdictions require operators to follow KYC guidelines.
Many platforms use Q&A security systems where players choose a question only they know the answer to in order to verify their identity. Software providers sometimes take it a step further by adding two-factor verification, like sending a login code to the player’s mobile phone. Some casino platforms also include a fraud module that analyzes player accounts and flags suspicious behavior such as attempts to open multiple accounts in order to abuse bonus offers.
Quality game content
Let’s get to the essence of a casino platform — the game content. A variety of quality games and bonuses will keep players engaged and satisfied. Game developers are constantly competing with each other to create the next big hit in the world of iGaming, and the upshot of all that competition is a marketplace filled with fantastic games to choose from.
Your casino should have a wide variety of games based on the tastes of the target market. Different regions have different preferences for game themes and volatility settings when it comes to online slots, so make sure you’re offering the most popular games in the region. The same goes for sports betting — demands vary across markets, so make your sportsbook as complete as possible while catering to local preferences.
But the world of iGaming goes far beyond slots and sports betting. Other casino games all have fans who deserve to play from the comfort of their own home. Classic card games like baccarat, blackjack and poker will probably never go out of style. American and Europeanroulette, as well as dice games like Sic Bo, are highly popular in a number of different markets.
You can also breathe life into your brand by offering live dealer casino games, where streaming technology brings games hosted by real dealers in a studio to a player’s laptop or mobile screen. Live dealer studios usually offer live versions of the classic games mentioned above, but also feature money wheels, lotteries, bingo, and other inventive new gaming products.
Variety is essential. Giving players options for new gaming experiences will increase player retention by making sure there’s always something new for them to bet on. Once your operation is up and running, make sure to stay up to date with new releases in order to keep your platform fresh.
Cooperating with the industry’s top licensed and certified game developers will also grant your casino more legitimacy in players’ eyes. The industry is overflowing with game developers, each with their own unique spin on what makes a great online casino game. To ensure your players will always find a game that suits them, you’ll need contracts with a number of different game providers.
If you arrange each agreement separately, your development phase will drag on while your costs quickly add up — a single contract can take 1-2 months to conclude. Save time and money while maximizing your game content offering by using a game content aggregator to integrate games from several game developers into an online casino in a single session by signing only one contract.
Verified payment systems
Fast, smooth, and reliable payment processing is a must-have for an online casino. Deposits and withdrawals should be as speedy as possible to maintain players’ satisfaction and the casino’s good reputation.
You should offer a number of payment methods in a range of currencies. As mentioned above, part of your research into your target market will include restrictions that players have when it comes to payment processing; it’s critical that you support the most commonly used payment methods in your target market.
In addition to handling multiple fiat currencies, you should accept bitcoin and other cryptocurrencies — more and more players are preferring to use their crypto wallets. In short, employ as many verified payment service providers as you have to in order to make sure your players never have a problem making deposits or withdrawals.
While operators will still conclude an agreement with each payment service provider, a payment service aggregator can integrate a wide range of payment services into an online casino in a single session, providing a secure technical solution for payment processing.
Marketing: player acquisition and retention
As an online casino operator, you’ll have two main missions: finding new players and keeping them. There are several strategies that have proven to be effective.
Affiliate marketing is both the easiest and hardest strategy around. Affiliates, often gambling bloggers or streamers, develop a large following and then direct their audience towards online casino platforms for a commission.
At first glance, it seems almost too easy — sit back and let the affiliates drive the traffic your way. It is, after all, a tremendously popular strategy, due to both its ease and effectiveness. But there is a catch — not all affiliates are equally trustworthy, and some insist on partnership deals that exploit new operators. To avoid being conned, you should study the affiliate partnership models that are used in the iGaming industry:
- Revenue Share
The operator pays the affiliate a percentage of the profits generated by the players that the affiliate directs to the site.
- Cost Per Acquisition
The operator pays the affiliate for each player the affiliate directs to the site who makes a deposit and starts playing.
- Hybrid model
This is the combination of two models mentioned above that has lower payout rates.
Bonuses play a big role in the player acquisition and retention strategies of almost every casino out there. There are a number of different bonuses you can offer to entice your players, such as welcome bonuses, deposit bonuses, and reload bonuses, as well as free spins, free chips, and free bets.
When offering bonuses, it’s vital to structure the terms and conditions clearly and explicitly. Bonuses should come with wagering requirements, commonly known as rollover, that require the player to risk the amount of their initial deposit and bonus a certain number of times before they can make a withdrawal. Bonuses also frequently have withdrawal limits.
Wagering requirements and withdrawal limits can seem unfair to players, but there is a very good reason for them. Bonus abuse is rampant in online gambling, with entire forums dedicated to helping fellow bonus abusers cheat the terms of their bonuses by withdrawing their bonus cash without truly risking it. It’s also common for players to try and establish multiple accounts in order to abuse one-time-only offers like welcome bonuses.
While bonuses can draw players in, you’ll need other strategies to retain them.
Loyalty and VIP programs
Rewarding players for their long-term commitment to your site is a great way to keep them coming back. To that effect, many casinos have loyalty programs, which offer benefits and rewards for players who spend enough time and/or money on the platform.
Players who like to make regular deposits and bet big are a critical segment that operators should care about — that’s where VIP programs come in. They are tiered loyalty programs that offer increasing rewards, benefits, and perks as players climb the levels of the program.
Some game developers offer slot tournaments where players have a limited number of money or spins and compete with each other for a prize. Tournaments can be combined with free spins — operators unwilling to offer a cash prize pool can offer free spins instead. With proper promotion, tournaments have proven to increase player engagement.
Adding game-like elements to the overall casino experience is one of the biggest current trends in the iGaming industry. Features like player avatars, experience points, and tailoredandstaggered offers create a more personalized, fun experience and give players a reason to have a lasting relationship with a casino.
Customer service: keep your players happy
Customer service is critical. You’ll need a highly responsive support team, available 24/7 and trained in how to handle the most common customer complaints. It’s also a good idea to have a separate department providing personalized care for VIPs. Additionally, your customer support staff must be multilingual — at the very least, they must speak the same language as the target market.
How can Slotegrator help open an online casino?
If it sounds like starting an online casino can be complex, intimidating, and expensive, that’s because it can. Incorporating a business and navigating foreign bureaucracies are only the beginning of the hoops you’ll have to jump through. Platform development is no easy feat, and the due diligence checks you’ll encounter every time you want to partner with a new game content or payment service provider will be a constant administrative headache.
Many operators choose to cooperate with a software aggregator like Slotegrator to save time and money, avoid unnecessary struggles, and eliminate the possibility of making mistakes. Instead of negotiating a new contract and dealing with a new raft of due diligence paperwork every time the operator wants to add a new game developer, a single contract with an aggregator equips the casino with a full spectrum of games. Cooperating with Slotegrator also streamlines the due diligence process by maintaining relationships with game content developers, who often require less documentation from our clients.
In addition to our game content and payment service aggregators, our Turnkey platform solution can get your online casino project up and running fast, and our legal team can help you find your way through the labyrinth of international gambling licensing and regulations.
Get in touch with our managers today to receive more information on how our tailored business solutions can help you to launch, scale and expand your iGaming enterprise.