Online casinos have revolutionized the gambling world, propelling the industry to unprecedented heights. With the market projected to reach $39.8 billion in the US alone by 2029, its growth has been substantial. As a result, one common question that often arises is — how do online casinos make money?
The answer lies in the online casino business model. To shed light on it, this article explores the gambling industry’s evolution, revenue strategies, marketing tricks, and more. Keep reading to get the inside scoop.
Online casino revenue through the years
Gambling has roots that stretch deep into history, with the earliest evidence found in ancient civilizations. Yet, its digital form only rose in the mid-1990s, fueled by rapid technological progress and new regulations. Antigua and Barbuda, a small Caribbean nation in the North Atlantic Ocean, paved the way in 1994 with the Free Trade and Processing Act.
The legislation enabled online casino operators to obtain gambling licenses, sparking two key developments. Microgaming built the first online casino software, and Cryptologic introduced secure online transactions. Others jumped on the bandwagon quickly after, causing the number of gaming platforms to jump from 15 in 1996 to around 200 in 1997.
The late 1990s and early 2000s
By 1998, the industry had exploded, with around 700 online casinos pulling in annual revenues between $835 million and $1 billion. Attempts to curb online gambling followed, with laws like the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) being enforced in the US, but the industry kept growing, nonetheless.
At this point, virtual betting was available to anyone with a computer, an internet connection, and a credit card. By 2005, more than 2,300 gambling sites were generating $12 billion worldwide, with the US accounting for at least half. By the time 2008 rolled around, the global market had hit $23.5 billion.
The 2010s and 2020s
The industry took another leap forward in the following decades. While the US continued to wrestle with online gambling laws, the smartphone boom in 2010 made online betting more accessible than ever. Then came the COVID-19 pandemic, which forced land-based casinos to shut down, pushing even more players toward online gambling.
In 2023, the global online gambling market was valued at approximately $85 billion. This figure had surged from just over $35 billion a decade earlier, reflecting a compound annual growth rate (CAGR) of nearly 9%. With newer technologies like VR, AI, and gamified mobile gaming, the industry’s future looks even brighter.
How does an online casino operate?
Seeing this remarkable casino revenue over the years might leave you wondering — how did it all come together? What’s the working principle behind real money online casino sites? The answer is multifold.
Online casinos operate by offering a comprehensive gambling platform, including personal account creation, a selection of payment methods, and an array of games. They obtain licenses from gaming authorities, implement security protocols to protect your data, optimize sites for mobile devices, and offer customer support in case disputes arise.
Once signed up, you can access the casino’s game portfolio — namely slots, table games, video poker, and specialty titles. They source these games by teaming up with software developers such as NetEnt, Pragmatic Play, or Playtech.
Virtual games use computer simulations and random number generator (RNG) technology to replicate traditional casino play. In contrast, live casino games stream from real land-based studios, featuring human dealers who manage the action in real time.
The nature of these games plays a pivotal role in how online casinos consistently make money, something referred to as the “house edge.”
What is the casino’s house edge?
All casinos maintain profitability by incorporating a house edge into their games. This method ensures that the casino profits over time, statistically speaking, as the odds are mathematically designed to ensure that payouts never exceed the total wagers placed.
The house edge is measured in percentages, signified by the Return-to-Player (RTP), which is typically set somewhere between 90% and 99%. For instance, a game with a 95% RTP implies a 5% house edge, meaning the casino expects to make $5 for every $100 wagered.
Although individual players can (and do) make a profit on their short-term wagers, the casino can rely on a large player base. Over thousands of bets, the house edge ensures that the casino maintains a steady profit, even if some players walk away with winnings.
In regard to slots and virtual table games, the house edge is embedded into the games’ design through a Random Number Generator (RNG). This generates random results that adhere to the game’s pre-set RTP, meaning that over time, the payouts align closely with the statistical house edge.
How does an online casino generate income?
Online casinos make money primarily through their players losing wagers on games. Every time you place a bet, any money left over after the winnings are paid out adds to the casino’s earnings. With a substantial number of players, including VIP “high rollers” who bet big, this can create a significant profit margin over time.
However, a small portion of these earnings is shared with the game providers. This typically involves revenue sharing, where providers earn a percentage of the total wagers. In some cases, casinos may also pay a subscription fee to feature specific games. Nonetheless, the majority of the profits remain with the casino.
Ways online casinos make money
Casinos must generate traffic for the house edge and player losses to generate revenue. To that end, they use a variety of tactics to encourage gameplay, including the following:
Curating game portfolios
A strong game lineup is key to attracting players. Casinos host large numbers of titles and diverse game categories and balance crowd favorites with niche releases to offer something for everyone.
Granting welcome bonuses
The majority of online casinos offer welcome bonuses to draw in new players. These are generous rewards that are released after newbies register and comply with any additional conditions, such as a minimum deposit.
Providing ongoing incentives
To keep players coming back, online casinos offer recurring promotions. These promotions are available on a time-limited basis at scheduled intervals (for example, daily or monthly), providing an incentive to return.
Running loyalty programs
Loyalty or VIP schemes help build long-term engagement. These are usually tiered programs that you climb by making regular deposits and gameplay to earn rewards and enhanced perks.
Tapping into international markets
Operators secure gambling licenses from revered regulatory bodies across different regions to expand their player base. The more territories they enter, the larger their potential revenue.
Offering mobile-optimized gameplay
To make games accessible to players even when they’re not at home, casinos optimize their websites for mobile play or develop dedicated apps. A smooth mobile experience keeps gamers engaged wherever they are.
Hosting sportsbooks
The best online casino sites integrate sportsbooks to appeal to sports enthusiasts and offer an alternative to traditional casino gaming, creating more opportunities for wagers and boosting overall revenue.
Leveraging network promotions
Casinos take advantage of supplier-hosted prize pools to entice players with massive reward potential. This approach encourages real-money play and promotes player retention without the full financial burden.
Online casino marketing
Marketing accounts for a considerable portion of the expenditure in the modern online casino business model. Casinos craft strategies around their financial goals, target audience, and player behavior and try to reach the right crowd by employing diverse tactics in various marketing channels.
Affiliate marketing
Affiliate marketing for online casinos involves partnering with influencers or industry-relevant websites to promote the casino in exchange for a commission. Affiliates share links or promo codes to improve the casino’s reach. In return, they earn money each time a player signs up and deposits through these links or codes.
Individual content creators tend to promote the casino explicitly, while affiliate sites embed the links or codes in their content to spark interest without direct promotion. These marketing efforts constitute written reviews, guides, videos, and so on.
Social media marketing
iGaming brands leverage the virality social media platforms offer to create a strong online presence. They open profiles on the likes of Facebook, Twitter (X), Instagram, and TikTok to build a community, interact with players, and drive traffic to their casino platform. Most do so by offering exclusive promotions, contests, tournaments, and so on.
Streaming
Some online casinos hire famous YouTube streamers and celebrities to promote their platforms via sponsored streams, affiliate links, and exclusive deals. Streamers incorporate casino branding into their content, offering special promotions or playing specific games.
This symbiotic approach benefits both the casino and the streamer, with the latter fostering a personal connection with the audience. As a result, the promotions feel like authentic recommendations, giving viewers a sense of familiarity and trust with the casino platform.
Brand-association marketing
Many online gaming operators partner with major sports events or teams to further their marketing objectives. Often, their ads appear during live match broadcasts, logos are displayed on team uniforms, and unique betting options become available on their websites.
You may even spot exclusive promotions on the casino site, offering team experiences and branded merchandise to lucky players. Partnering with well-known and respected sports brands boosts the casino’s credibility, enhances visibility, and expands its overall reach.
How online casinos safeguard bonuses
Promotions play a significant role in online casino marketing, but they can also impact the casino’s bottom line. To safeguard against potential losses, online casinos set terms and conditions for their promotions. The most important include wagering requirements, game restrictions, withdrawal limits, and KYC.
Wagering requirements
Wagering requirements mandate playing through bonus funds a set number of times before a real money withdrawal is possible. This prevents players from immediately cashing out the bonus and encourages longer playtime, ultimately increasing the casino’s chances of making a profit.
Although some players will convert their bonus into real money, if all players were able to do so, this would seriously affect the company’s bottom line. Therefore, wagering requirements act as a form of protection, allowing casinos to offer attractive sign-up deals without risking heavy financial losses.
You can learn more in our detailed wagering requirements guide.
Restricted games and game weighting
When completing the wagering requirements, the casino will exclude certain games or even entire game categories from the promotional offer. Playing any of these can invalidate your bonus.
Furthermore, some eligible games will contribute less than others towards the wagering requirement. For example, whereas slots typically contribute 100%, live casino games may be “weighted” down at 20%. Now, only 20 cents out of every $1 wagered count towards the remaining turnover.
These conditions direct players toward games with a higher house edge, helping casinos manage risk and profitability. They prevent players from exploiting high-RTP games, such as live blackjack, to complete the wagering requirements more efficiently.
Bonus withdrawal limits
Casinos sometimes cap the amount you can withdraw from bonus winnings, meaning you can’t get your hands on significant amounts of cash after converting the bonus into real money. This is especially the case with no deposit bonuses.
This safeguard helps online casinos maintain a fair balance between rewarding players and protecting their interests. It also helps them plan for expected payouts and manage their financial liabilities effectively.
Know your customer (KYC)
Know Your Customer procedures aren’t part of the classic bonus terms and conditions but are related to general casino operations. These procedures involve verifying players’ identities before letting them withdraw real money. The process helps fend off cybercrime like fraud, money laundering, and underage gambling.
KYC also ensures the casino meets legal requirements and offers a safe gambling environment to all its users.
| For tips on converting a bonus into real cash, check out how to make money with casino bonuses. |
Conclusion
The iGaming industry has evolved by leaps and bounds in the last few decades, with online casinos relying on the long-term house edge to collect players’ lost bets and generate profit. Combined with promotions, loyalty programs, marketing campaigns, and shrewd T&Cs, this helps attract new players and protect their bottom line.
Yet, none of them are set in stone. As technology and regulations continue to evolve, we can expect both the industry’s revenue model and market growth to change. The answer to the question “How do online casinos make money?” may look entirely different in the future — only time will tell.
FAQ
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References
- The market size of the online gambling industry US 2023 (Statista)
- Free Trade and Processing Act (Antigua and Barbuda Laws)
- Internet Gambling Developments in International Jurisdictions: Insights for Indian Nations (Spectrum Gaming Group)
- Unlawful Internet Gaming Enforcement Act (Federal Trade Commission)
- The Antigua-United States Gambling Dispute (Journal of International Commerce and Economics)
- Product Share of Global Interactive Gambling Gross Gambling Yield in 2013 (Statista)
- Market size of the online gambling industry worldwide from 2017 to 2023 (Statista)
