If you were to compare the revenue of online gambling and retail gambling, in a jurisdiction where both are legal, you’d likely see big discrepancies in the available data. There is no universal trend that can be observed. In some countries retail sector rakes in more profits, whereas in others, online casinos are performing better. However, there is a strong possibility that this will change over time, and online casinos will slowly outperform their commercial counterparts.
First off, gambling companies still invest a lot in order to compete in a digital landscape. After all, the younger audience prefers to interface with this form of entertainment via phones or PCs. Additionally, it’s often cheaper to play this way, as iGaming businesses aim to capitalize on micro-transactions. There are plenty of 5$ deposit casino sites where one can get hundreds of spins on their first deposit by claiming a bonus. Since the market is packed with these operators, it’s possible to manage your budget efficiently by using these bonuses. But, we should take a closer look at all the factors that are currently in play and that determine the profitability of each model.
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Factors That Affect the Performance of Gambling Businesses
Gambling businesses in general perform differently depending on the region, and there are a few factors that impact their profitability:
- Regulations – This affects what forms of gambling are legal, and how they can be advertised
- Economic situation – Determines how much people can afford and are willing to spend on this hobby
- Gambling culture – Even in underdeveloped countries, these businesses can thrive if the gambling has been normalized and is easily accessible
- Tourism – Commercial gambling businesses perform better in countries that attract a lot of tourists
- Market itself – Certain countries where gambling is legal have state-held monopolies, so only a few brands perform well, while others struggle
In essence, each market is different when it comes to these factors. So, it’s not surprising that numbers are very inconsistent across the board.
Are Casual Gamblers Important to Casinos?
All businesses want both casual spenders and loyal or frequent customers. In iGaming, casual or recreational gamblers account for 50% of profits or even more. However, we can also notice a concerning trend in this industry. A big portion of the profits comes from frequent spenders, or problem gamblers, who make up around 5% of the player base. In fact, some studies suggest that up to 60% of revenue comes from this group. However, each and every one of these big spenders started out as a casual gambler at some point.
Challenges of Measuring Player Preference: Retail vs. Online
Player preference is another factor that is difficult to measure. Many who gamble do so in both online and retail environments, and the numbers vary between the countries. It’s even more difficult if we want to focus exclusively on casinos, as many who play online also place bets online.
Some UKGC reports from 2019 suggest that nearly 50% of people gamble casually, and more than 20% of those who were surveyed do so online. However, it’s important to note that almost 80% of online gamblers are young men aged between 18 and 30 years. Also, online players tend to have multiple accounts, or 3 on average, so it would be wrong to assume that each active account is equal to 1 active gambler.
Why Micro Deposit or Online Casinos are Superior
While retail casinos are still dominant in many corners of the world, the advantages of the online business model cannot be ignored. The operational costs are significantly lower for starters. Second, the average customer LTV for online play is between $500 – $1500, whereas the cost per acquisition is between $150 and $500. Of course, all of this varies depending on the market.
On top of that, there is a lot of cross-selling, as players often spend on other products like betting, bingo, or racing. These aren’t considered casino play, and each activity is licensed and taxed differently. Still, retail casinos also have additional avenues of profit, like accommodation, dining, drinks, etc.
Operational Costs
It should also be noted that the online model has some big differences compared to commercial casinos. In retail gambling, the profits simply go to that establishment, whereas the online model usually involves a revenue-sharing scheme. A portion of revenue goes to game suppliers and to affiliate marketers that are very common in this space. That said, it’s not uncommon for game studios to have their own online casinos where they mainly push their product. What’s more, these software companies often promote the casinos that host their games, so some of the customer acquisition costs are shared as well.
Expanding User Base
The main reasons why the older audience doesn’t embrace online play are habits and a lack of trust. They aren’t digital natives and are still aware of how prevalent cyber fraud can be in today’s world. That said, as the younger generations are getting into this hobby, this demographic distribution will shift. So, the number of online casino players will continue to grow.
Will Commercial Casinos Disappear?
When you take into account the profitability of the online model (lower operational costs and customer LTV), it’s easy to think that commercial casinos will be slowly phased out. Except that’s highly unlikely. As stated, bigger establishments don’t earn solely through gambling, so they are likely to stay. Also, there are regulatory requirements in some regions that only license online casinos that have a physical presence in the country. So, the hybrid model will be around for a long time.
Finally, a lot of people love the social aspect of gambling, and don’t want to exclusively play on their phones. In other words, there is still a demand for this form of entertainment even among the younger player base.
