Businesses that offer gambling services online and offline can be extremely profitable. A successful gambling operator can generate hundreds of crore each year with very high-profit margins.
The fact that the gambling industry is so lucrative makes it challenging to penetrate for startups because there are already many well-established companies in the space. The land-based casino industry is very mature with operators operating casinos for decades, after all, gambling is an age-old form of entertainment that establishments in different societies have catered to throughout history.
The online casino industry, on the other hand, is much younger, tracing back to the early 90s but as we all know, startups in the tech and digital space move much faster than traditional companies and business models.
Due to the nature and scalability of online casino products, there are already many well-established casino operators with a worldwide presence. The online casino industry is becoming more and more consolidated after years of mergers and acquisitions (M&As) in and between sizable online casino operators.
While a few giants largely dominate the online space, there’s still plenty of room for startups to carve out a piece of the enormous pie. Many parts of the world are still considered emerging markets with massive potential.
India is a market that is estimated to be one of the most valuable due to its population size, internet usage, and rise of the working class.
When starting up a company in the online casino space, you have to be prepared to carry big up-front costs, navigate a jungle of laws and regulations, and withstand fierce competition.
Roughly 90% of startups fail within the first two to four years. While there are no statistics specifically for online gambling, we can assume that the success rate of 10% is fair for any startup trying to crack into the online casino industry.
Below we will outline a couple of important aspects of starting and running an online casino business.
Well-tuned Customer Acquisition Model
To acquire customers, you need to spend money so capital is essential when starting an online casino business. Before starting, you need to factor in high customer acquisition costs. This is your most critical and highest cost-aspect, and it deserves both time and attention. Already established casino operators are fighting for traffic and customers and already spend a lot of money on custom acquisition.
You need to understand that the cost of gaining and retaining new players need to be well-planned concerning your revenue projections. To do that you need to spend time modeling your customer acquisition metrics. One way to make any projects more accurate is to pivot your business towards specific products that you offer.
In any online casino, you can find a whole range of different types of games from slots to the more innovative live products. Instead of marketing yourself as an online casino, you could differentiate your casino further by highlighting something that you are particularly good at, such as providing the best live casino games and experience in India.
An Alternative Route to Customer Acquisition
A way to lower customer acquisition costs is by starting with affiliate marketing before launching an online casino. Affiliate marketing is typically done through one or multiple websites where you target online casino players via paid marketing or search engine optimization (SEO) and acquire traffic organically through search engines.
So instead of starting your online casino, you would partner up with other online casinos and drive customers to their sites and earn money on a commission basis. In time, you would be able to drive traffic to your online casino site through your affiliate sites.
Starting an affiliate marketing company is less risky and less capital intensive, with a large financial upside if done right. If time is an aspect, you should not opt for building your customer acquisition channel, building a successful affiliate site can take anywhere between 12 and 24 months and more.
There are plenty of technology partners in the casino space offering turnkey solutions and white-label technologies. Opting for a white-label provider who will provide you with the website, products, and technology platforms is the fastest way to get started.
White-label solutions are relatively cheap in comparison to building your technical setup and integrating different product providers. A white-label casino usually has a lot of limitations in terms of product design, features, and it makes it difficult to be unique and stand out in a highly competitive space. And you need to stand out in this market to survive.
If you have the expertise, human resources, and capital, the best way would be to find a stable technology provider that offers their API and then build your UI on top of all the relevant data you need. This way, you will be flexible and better align with your company vision.
Laws and Regulations
The online casino space is heavily regulated, and failure to comply with regulations results in hefty fines or even business closure. To operate an online casino legally, you need to apply and acquire a license to operate. Without such a license you won’t be able to work with any serious and reputable technology partners, and if you do find a partner who is willing to cooperate with you, you would be operating your online casino illegally.
With a white-label solution as described above, the technology partner themselves will make sure that the products and services you offer are compliant. If you build your UI on top of an open API you can trust that the data from the partner is compliant, while it’s your responsibility to make sure that the UI is compliant and display the right tools and information required. Besides product aspects, laws and regulations also relate to marketing and communication practices.
Both when it comes to customer support and marketing, there are strict guidelines around what you are allowed to do and say. Players displaying signs of gambling problems must be taken care of healthily and responsibly through responsible gambling acts which are also part of laws and regulations. To be safe, it is advised to hire a consultant who deals with these aspects of running an online casino.
Summary of the Above
Having capital and a well-thought-out customer acquisition plan is vital to validate the venture before starting and will allow you to make cost projects and revenue projections. Choosing the correct technology partner is important because you want to increase your chances of getting things right the first time; finding a reputable and stable partner is critical. To navigate and comply with all the laws and regulations, it’s recommended that you hire a consultant who is knowledgeable in the field of online casinos.