So, you have been having some thoughts of starting your own online casino, or maybe you are just curious about how it all works.
In this article, we will take you on a journey where we give you insights into how to start and operate an online casino.
We will guide you through the critical points needed to succeed and also look into why some online casinos fail.
Disclaimer: The information on this page is not to be taken as financial advice but only as guidance based on the CasinoWizards team’s experiences and expertise from being involved in the online casino industry for over 15 years. Operating an online casino today is extremely difficult and risky.
Ready? Ok, let’s go!
Money & Expertise
There are many factors you need to get right to successfully launch your own online casino and avoid going bankrupt after your initial launch.
Let’s begin with the most obvious components – Money and expertise.
How much money do you need?
There are few businesses that can be started with small budgets; online casinos are not one of them.
So how much cash do you need?
We have seen all sorts of failed and successful casino operations.
Some started with naïve goals that ballooned into budgets of tens of millions of Euros that were more or less wasted on poor operations and ideas.
Others pulled the plug after they had invested €4-5 million without seeing any profitable outcomes on the horizon.
On the other hand, some started with budgets of less than €1 million and managed to defeat the odds and create a successful business that thrived before they made a profitable exit.
Starting and operating an online casino a few years ago was easier than how things work today. We will get into all those details later on.
However, although money is a critical factor, expertise might be even more important.
Regarding a starting budget, there is no magical number, but let’s say that around €1 million will give you a decent start and some cushion for upcoming expenses.
How to get the capital?
As with starting any business, there are basically three options to get the capital needed to create an online casino.
- You invest your own money
- Others invest in your idea
It’s common to see a mix of the three to get a business started.
Ideally, you avoid loans and focus on investing your accumulated or saved money combined with outside investors’ capital.
Another warning is needed at this stage – Operating an online casino is more complex than ever before, so before even considering investing any funds into an online casino operation, look through the rest of the information found on this page.
Then, discuss the ideas with other people who know the industry.
Why do you need so much money?
There are a few different setups of how an online casino can be operated. Some casinos have +100 staff, and others manage small teams of only a few key individuals.
Some companies have big and fancy offices, and others work entirely remotely.
We will look at the different options, but whichever model you choose, money is needed to get started and run the operation for quite some time before any revenue starts coming in.
Funds to pay winners
Let’s not forget what we are discussing here. You want to operate an online casino, and well, sometimes people win. When you have winners, they want to get paid.
Therefore, you need to allocate budgets to pay for any big wins.
The odds are in the casinos’ favour long-term, but even online casinos can go through rough stretches of seeing more money going out than coming in.
Your database of players might be small, so a few big winners might screw up your numbers big time.
There are two main options for how to set up your online casino.
The expensive option – You can develop your own in-house platform and negotiate all the deals with game developers and payment services yourself. You also need to go through extensive checks to get gambling licenses to be able to operate.
This is time-consuming and requires a lot of experience and expertise. The benefits are that you keep more of the profits long-term once/if you get the ball rolling and become successful.
The cheaper option – You create a “white label” online casino, which basically means that you pay a start-up fee followed by monthly fees and percentages of revenues to a company of your choice that will set you up with everything.
With everything, we mean all the requested games, payment methods, the site, licenses, and the whole package. You decide the casino’s name and the colour scheme, and the rest is handled.
The benefit of operating a white-label online casino is that you get started faster with a cheaper initial investment that requires less expertise but long-term this option will cost you more.
Game providers & fees
So, you want to offer your customers a premium online casino, and to do so, you need to provide them with the best games, right?
So what does all this cost, and how does it work?
Let’s have a look at some examples.
Game studios create the slots and, in some cases, live casino games.
To get access to the games, you need to strike a deal with the game studio to offer them on your online casino.
The bigger/popular the game studio, the more expensive they are.
To list Evolution Games on your site will cost you a hefty setup fee of around €50,000, followed by about 15% of your Gross Gaming Revenue (GGR) earned from their games per month.
In some cases, a minimum fee can be included per month that, therefore, can increase the actual GGR percentage fee even further.
Other game studios can charge around 10% GGR, while smaller and new game studios can charge less.
Not all game studios charge a setup fee, but Evolution and some of the other big ones do.
Did you think that online casinos keep all the revenues for themselves? Well, think again.
Make sure that whoever does these negotiations for you has previous experience of how these deals should be made and knowledge about the going rates. Otherwise, it will be a costly mistake and an obstacle to reaching a profitable business.
Unique selling points
Why would anyone choose to play slots or live casino games in your online casino instead of at an established and popular casino where players already feel safe and trust the operation?
What is your unique selling point?
Keep in mind that most online casinos offer the same games, so there are few variables that distinguish them from the rest.
A few points that can make an online casino stand out from the crowd:
- A unique theme.
- Fast payments and registration.
- Exclusive games.
- Special bonuses and loyalty programs.
- Localized focus.
You don’t have to have a unique selling point to operate an online casino successfully but if you got something, it can increase your odds of succeeding.
So, think properly about what kind of online casino you would enjoy playing at – What would make your online casino unique and a more interesting option compared to everything already out there?
Return To Player Percentages (RTP)
Did you know that most online slots today are released with various payout configurations?
Let’s look at an example.
The best-paying option of Book of Dead averages a 96.21% RTP, but there are another four options to choose from.
The others average an 84.18%, 87.25%, 91.25%, or 94.25% payout long-term.
The lower the percentage, the more the casino will earn long-term and casinos can themselves choose which RTP option of a game to offer its players.
What else? Most players have no idea that these options even exist and automatically assume that they always play on the best-paying version when in reality the opposite might be true.
In fact, we grew tired of these practices and created CasinoWizard.com to guide players toward the highest RTP options on all slots from leading game studios but that’s another topic for a different article.
The point is that if you run your own online casino, you decide if you let players spin with the best odds or with RTPs that increase your chances of creating a profitable business.
Players can still hit big wins when playing on lower RTP versions, but their balances will dry up faster than when playing on the best-paying options. In other words, they get fewer chances to hit that big win.
We don’t like it, but the option is there.
Ok, so you decided to either look into creating your own platform or go for the package option where you get most of the time-consuming elements served on a silver platter. Now, you need someone to operate the whole thing.
This might sound obvious, but please pay attention as this can make or break your online casino – Only hire A+ individuals.
Set your bar high and give this point most of your attention, as without the right team, you will fail. That is the hard truth.
Depending on your setup, you might need to hire people for the following positions:
- Casino manager
- Responsible Gambling
You might also want someone to be in charge of the operation. For example, a Head of Operations or a CEO.
However, with a white-label setup, most of these positions might already be covered and your task might be about focusing only on acquiring players, and the rest is taken care of.
In some rare cases, you don’t even need to do that but only pay a third-party company like GiG to take care of everything for you.
Assuming that you don’t give away all responsibilities but have a say in the operations, one of the key tasks to succeed is getting the marketing part right.
Marketing can be very costly, though, and not always efficient, so depending on your budget, you need to decide on two factors:
- Brand building
With acquisition, you focus on getting players to the site, while the brand building is more about creating awareness for your brand.
An acquisition-focused approach gets results quicker, while brand building is costly and takes time.
Companies with bigger budgets often focus on a mix of the two options.
The bottom line is that players won’t come to your new site by itself, but you need to be seen as if you’re not seen; you don’t exist.
Marketing will cost money, and we have seen uncountable examples of money being thrown away on failed marketing campaigns that brought little to no return on investment, so make sure that you or your employees know what they are doing.
There was a time when online casinos could do pretty much what they wanted with little to no care for responsible gambling.
Well, those days are long gone, and nowadays, online casinos need to keep track of ever-changing rules and requirements to stay compliant and protect players from harmful gambling activities.
This could affect limits on bet amounts, deposits, certain terms and conditions, player checks, etc.
To cope with these tasks, you might need a dedicated employee who oversees these requirements and ensures that all regulations are followed correctly.
Your marketing guru managed to come up with some groundbreaking methods to get players to visit your site, but now what?
After ending up on your dedicated landing page or start page, players look around briefly before deciding to proceed or leave.
Too many ignore this factor, but it’s crucial to the make-or-break moment of your online casino operations.
A few things that have to be done right to succeed:
- The message: What first impression do you want to give your visitors?
- The action: Where do I sign up, or what do I have to do now? Make it simple for the visitor to understand what the next step is.
- The registration form: Everybody hates creating accounts, so make this process as smooth and simple as possible. Do possible clients really have to type the email or password twice?
- The deposit: Ok, the account is registered, and now I want to play. Make this step hassle-free and present your players with the payment options on offer in a user-friendly way.
Get these steps right, and your overall numbers will look better from the get-go.
So, you have managed to get visitors to your site and optimized the mentioned steps to increase your conversion rates by offering players an enjoyable onboarding experience.
Visitors came, registered their accounts, deposited, and played. Now what?
Why will players return to your site next time that they want to play again?
Some players will return organically, but others won’t.
There could be numerous reasons a player decides to play elsewhere next time than on your site. Maybe they lost, had a bad experience, or just forgot the password.
Whatever the reason, you need to remind your customers that you exist. Acquiring a new customer in any business is more expensive than keeping an existing one.
You need to give players a reason to choose your online casino instead of a competitor next time they want to play.
This is not about luring, cheating, or conning players in any way to return, but a genuine reminder of your existence can be enough.
Giving a small incentive can improve the user experience and your success rate.
Office or remote?
As we all know, the Covid-19 pandemic affected many things, including speeding up the transition to everyone working from home as there was no other option then.
Some companies have started to move back to the offices while others use a hybrid solution, and some keep the employees working from home to save costs and increase productivity.
There are pros and cons to all these options, but we have seen examples of successful executions no matter the strategy used by online casinos.
While it’s more common to have a physical office, there are a few exceptions of companies that have been working fully remotely since the start and still managed to succeed.
One of those online casinos is Bitstarz. They launched in 2014 and never had any official offices but instead employed people from around the world working from their homes or any other location of their choice.
It’s easy to see things retrospectively and draw conclusions.
For example, it would have been easier to launch your online casino in the early 2010s, but that train has gone a long time ago.
Today, we have a completely different market space for online casinos where fierce competition exists. Even saturated in some locally regulated markets.
This is the hard reality, and you need to know what you are getting into before investing time and money into launching your own online casino.
What markets will you focus on? What’s your casino’s unique selling point? How will players find you? Are you sure you know what you are doing?
These are a few of the questions you should ask yourself before taking any other steps.
Remember the quote from Abraham Lincoln: “If I had five minutes to chop down a tree, I’d spend the first three sharpening my axe.”
Do your homework before you take any further action. It’s tempting to look at all the success stories and popular online casinos and think, “I could probably do that too,” but it’s not that easy.
Try to contact people who have experienced failed online casino operations. Find out what they did wrong and what they would have done differently today. Learn from others’ mistakes instead of repeating them.
Will you shoot from the hip and hope for the best, or shall you dedicate your efforts to specific markets only?
For example, the English language can be used to target many different markets, while other markets need a localized approach and the specific language spoken in that country.
One sure way to fail is to use poorly translated content, so pay attention to those details.
Latin America is on the rise, but again, you need some understanding of those markets and correctly translated content.
Do your research and have a proper strategy plan ready of what markets you want to target and why.
The United States seems interesting. Well, think again, and the reason follows on the next subject.
Isn´t it enough to provide players with the most known payment methods like VISA, Mastercard, and Bank transfers? Well, yes and no.
While the most commonly used payment methods give you a good start, you might also need some localized payment methods to succeed in some markets.
- Canada: Interac
- Netherlands: iDeal
- Sweden: Trustly & Swish
- Germany: PayPal
And the list goes on. Find out which payment methods are the most popular ones in the market you want to target, as otherwise, your online casino will struggle.
Payment method fees: Hold on; we are not done here yet.
So you did your research and managed to arrange to have the proper payment methods in place for the markets you target, but what does this all cost?
While some payment providers are more expensive than others, you can estimate a 1-2% fee on all transactions. Yes, that is on all deposits AND withdrawals.
As you can imagine, these fees can quickly accumulate to huge amounts as when your player database grows, you have more players making constant deposits and withdrawals.
This is one of the reasons why online casinos are less keen on players making minimum deposits and withdrawals all the time.
Important: Make sure to negotiate a cap amount on the percentages you pay on the transaction costs. That can save you some extra money, and no payment provider will ever mention this option to you, so you need to bring it up yourself during the negotiations.
Until recently, you could apply and (if approved) target most markets with an MGA (Malta Gaming Authority) or Curacao license, but times are changing.
Nowadays, you need a localized gambling license in markets like the UK, Germany, Sweden, Denmark, Netherlands, USA, and many more countries are following and regulating their gambling markets.
These changes are costly and drain on casinos margins as not only do you need to apply and pay for a new specific license, but you also need to pay more taxes and follow increased regulations.
USA? Well, while it’s said to become the biggest market for online casinos shortly, you need a separate license per state that approves online casino gambling. A very costly procedure.
The licensing process goes hand in hand with your approach and strategy to the markets you want to focus on.
Once you have decided which markets to target with your online casino, determine how the licensing process works for that country or region.
If you haven’t lived under a rock for the last 10 years, you have noticed the volatile boom of cryptocurrencies like Bitcoin and others.
Now, what can you do with Bitcoins? The options are increasing, but one way to use them is to gamble online.
The registration process is smooth, and players usually don’t need to send a heap of documents to prove their identities or incomes, as is the case in most regulated markets.
As a matter of fact, it’s said that crypto casino Stake.com is the world’s largest gambling operator online today.
Another popular Crypto Casino is Bitstarz.com.
Is this the future of online casinos? It’s hard to say, but it seems like many crypto casinos are doing well for themselves right now.
With Crypto as a payment method, these casinos target a broader number of markets, including Asia, that Fiat casinos can’t approach.
We are not saying that this is an option for you or that it is a good or bad option in general, we are just mentioning crypto casinos as it’s a hot topic right now.
Examples of successful casinos
Apart from the mentioned crypto casinos, there are several other successful online casinos that we can look closer at.
Study these successful online casinos and try to find what they have done well. Learn from their success.
What about new casinos?
Why do online casinos fail?
So you have a great plan, did your research, got an exciting and innovative product that should stand out, or are trying a completely different niche. You even have an experienced and skillful team in place – Still, you fail. Why?
What went wrong?
Some reasons why online casinos fail include the following:
- Poor management or/and staff.
- Not flexible but sticks to something although it isn’t working.
- Spend the finances on the wrong things.
- The product is too niched.
- The market is saturated.
If you still want to start your own online casino and aim to avoid failure, do your research properly and remember what you have read here today.
The pre-planning is essential. Discuss it with experienced people from both failed and successful online casino projects.
Spend your budget wisely!
You can’t imagine how quickly you can burn through your budget when the costs pile up and the expected income isn’t happening.
Summary of how to create an online casino
Starting your own online casino is hard. Really hard.
Well, that’s not really true. Starting is quite easy if you have the finances, but succeeding is the real challenge.
Operating your online casino can also be fulfilling, exciting, and fun.
It can be profitable when done right and a disaster when executed poorly.
Do your research, learn from others’ mistakes and successes, and plan everything as well as you can. These steps will at least increase your chances of launching a successful online casino.
Good luck if you proceed!