We all have a friend that has won big gaming at an online casino (or even some friends who do it professionally!) but between all of the great bonuses and giveaways offered, have you ever wondered how online casinos make their money?
In recent years, online casinos have been absolutely killing it. The 2019 online casino market share was valued at around $57 billion with a projected growth rate of 11.5% annually. From those numbers, it will have more than doubled in the next 7 years.
Those are some huge gains in a short period of time so let’s dive in and see how online casinos are raking in the big bucks while giving some hefty payouts.
Free money and free spins
One of the most successful marketing tactics used by online casinos is enticing new players into the game with free cash. This “free cash” can come in many shapes and forms, such as no deposit bonuses, free spins, and free play for a limited time.
Petra Mueller from NoDepositFriend.com gives us the inside scoop, “Online casinos understand that sometimes all it takes to make a new long-term player is to give them a chance to try the games. This ‘free money’ method is a sure-fire way to give players an opportunity to try the games, risk-free.”
In order to get a new player bonus, however, gamers will generally need to enter their credit card information to open a new account. This ensures that once a player gets hooked on the games and wins a few prizes, they’ll use the card on file to continue playing.
Comps and addictive behavior
In a strategy that’s the polar opposite of devices like paywalls, this method of gaining players relies heavily on addictive behavior. It’s proven that people get an endorphin rush from gambling, whether they’re winning or losing.
This behavior actually produces similar effects in the brain as stimulants and drugs, forming new neural circuitry along the way. When a player sees the possibility of a huge jackpot and places a large bet, the thrill of the game increases as the wagers do.
Online casino game structure
Most people might expect the topic in this section to mention scams and how online casinos “rig” games in their favor. This, however, is simply not the case. Online casino games employ complex algorithms that make it impossible for the house or the players to tamper with the game.
This trust in gaming technology is actually one of the reasons that players are able to enjoy games in online casinos with confidence. Professional online gamblers trust the algorithms and can play without fear of being swindled.
House edge and commissions
This isn’t to say that the house doesn’t program their algorithms using perfect RNG (random number generation), however. The ‘house edge’ is a well-known phenomenon that helps to answer the question of how online casinos are able to make the big bucks.
House edge
While it’s true that the games cannot be manipulated by the management during or after a game, the way they are programmed does have a significant influence on who wins and loses. This hedge by the house is called the ‘house edge’ (but could also be called the ‘house hedge’).
House edge is a complex formula that predetermines a certain percentage of players will lose. The percentage is usually low (around 5%) and doesn’t seem like much, but when you account for how many people are playing online, it can add up to quite a large sum of money.
Online casinos earn the most revenue from games like roulette and slots with their pre-programmed statistical advantage. Neither party knows the outcome of any particular game, but even when they do have to pay out on jackpots, the house edge means that the house will have collected a portion of the player’s money on each previous game.
Commissions
Commissions generally only come into play in the game of poker. When players sit down at a poker table, everyone pays a fee to be a part of the game. This fee can either be a percentage of the bets made or a flat fee.
Online casinos collect the commissions, which is called the “rake”, at the start of each round and is basically their fee for dealing the game. It’s an important distinction to make because it means that the house is not a participant in the game, as is the case in blackjack.
Winning the jackpot
The house edge alone may seem like a sure thing when it comes to earning a profit running an online casino but as you can see, online casinos bring in a lot of money in a variety of ways. Some of these methods work seamlessly together to guarantee an income, regardless of odds. For this reason, players never have to worry about being scammed or cheated by an online casino. If you win, you’ll get paid.