In the news this week is an article from The Analyst which discusses volume betting at online casinos. The insights can be applied to land based casinos as well but the gist of the analysis relates to mobile casinos, volume betting, and the profits the casinos can realize from volume betting. To this we can add the volume of bets that the casinos get from cash bonuses they offer to players via bonus codes.
One Bet or Many Bets
The article uses a hypothetical $100,000 bet. This sounds like a high roller bet and very well might be. The casino will either profit by $100,000 or lose the same amount. This applies in bets on slots, blackjack, and even money bets in roulette. It isn’t a perfect analogy but for the purposes of the article we can assume that the bet is a zero sum matter for the casino.
So, it sounds like the casino will profit handsomely from such a bet. The article also assumes a 5% house edge on the bet. The house edge is irrelevant to the profit line for the casino since the bet itself is a zero sum bet.
On the other hand, if ten thousand players each bet $10 it amounts to $100,000 as well. In this case, however, the house expects to realize a $5,000 profit based on the assumed 5% house edge.
It is also irrelevant that in many online casino games, the house edge is a lot less than 5%. The point is that the casino makes more money with volume betting than with one high roller bet.
High Roller or Small Time Gambler
The conventional wisdom is that all online casinos strive to reach, enlist, and retain high rollers. This is true to a large extent. However, the long term profit from high roller gambling relates to the volume of the high rollers’ bets not the size of their bets.
One of the reasons online casinos have auto play on their slots games is because it speeds up the games. Many players put on a favorite slots game in auto play. In many situations, the music and sound in the background is pleasurable enough for the player to have the game on in the background as he or she works, cleans, cooks, or watches sports on television with the sound off.
Online casinos like games like slots, video poker, and blackjack. This is true even if the return to player rate is very high, 98-99%. Once again, the volume of bets in these high speed games has the cumulative effect of earning profits for the casino in the long run. Volume betting is the key.
The Example of Walmart
We see the effect of volume sales in the case of Walmart. This chain is famous for chopping off pennies on many items when they agree to purchase the items from the manufacturer. The chain can then sell them to their customers for a few pennies less than anyone else can sell them for. Volume sales result in more profit to Walmart than they would realize with slightly higher prices.
One of the most successful ways casinos have found to attract and retain players is by offering bonuses. Players are far more likely to extend a gaming session when they feel that they are gambling with bonus money. The return to player rates for all casino games take the money gamers win with free bonus money. After a player has used his or her bonus money, the remaining bets come from their own reserves.
The final area where online casinos have discovered high volume gaming is in their mobile casinos. It’s probably fair to say that casinos did not expect mobile to be as profitable as it is now is. First of all, the graphics and animation on mobile were quite inferior for many years after online casinos introduced their mobile adjunct.
Now, the graphics and animation are far better. Mobile has proven to be so convenient that even when players are at home, they often prefer to play casino games on their mobile devices.
Online and especially mobile betting on sports events is a perfect example of how behavior can change with the medium. When sports betting was allowed in Nevada and only at land based casinos, a couple might enter the casino together. The husband usually went to the sports room and the wife usually played fast paced games like slots, bingo, keno, and the like. The land based casinos realized some profits from this pattern of betting.
However, the couple had to also factor in their ancillary costs to get to the casino. if they lived close to the casino they might drive there and drive home at the end of the day. Sports betting was legal in full only in Nevada so a couple that wanted to bet on sports and other games had to travel to Las Vegas. The cost of travel, hotels, meals, and shows made their overall gambling budget smaller.
Now that sports betting is coming to many states in the wake of the United States Supreme Court decision from May of 2018 that voided the law known as PASPA that made sports betting illegal everywhere it was not legal at the time that Congress passed the law.
In effect, that made Las Vegas the only place where gamblers could make most legal sports bets.
Now, mobile and online casinos in general can accept sports bets and can offer the full range of casino games. Players have more time to play their favorite casino games and more money for gambling purposes. This is the perfect formula for volume gambling and online casinos expect to earn nice profits from their desktop and mobile casinos and sportsbooks. A lot of the earnings will find their way into state coffers in the form of taxes.
High rollers are great for a casino’s profit line if the high rollers also bet in substantial volume. Otherwise volume betting from the far greater group of average bettors results in greater profits. This leads casinos to market bonuses and promotions to encourage the average gamblers to join.