Online Casino
by Michael Orlando
Online Gaming Overview
Online gaming is one of the most profitable industries on
the Internet, and one of the fastest growing businesses in the world. Estimation
of the total revenue for year 2002 is more 3 billion US dollars! From
NetValue's statistics there are approximately 1,400 online casino and sportsbook
in operation. Online casino is the gambling over computer and Internet. Wagers
can be placed on various games, such as Casinos, Sportsbooks, Bingo, Lotteries,
Horse Racing, etc.
Online casino software has been developed at three stages.
The first, C++ and Java were used to design Download Version casino software,
which was the basic type of software during 1994 -1996. The second, new Java
software was used to develop the Non-download Version casino software while
Download Version was still widely operated during 1996 -1998. The third stage
from 1998 up till now, powerful FLASH was invented and used to design the FLASH
version casino software, which can be both Downloadable and Non-download. Now
the online casino software market is consisted of 10% C++ games, 50% JAVA games
and 40% FLASH games.
A player first gets access to the gambling website. He can
choose to play the Download version or Non-download version. He then use his
credit card to purchase the virtual chips. Using all these chips he play black
jack, poker, keno or slot machine, just like the land based casinos in Las Vegas
or Monaco.
How To Start Online Casino Operation
Here we are at the key point of the business strategies.
We will gradually lean the operating knowledge of software, tools and services
needed to start successful online casino and sportsbook:
1. The Casino Software
A. To develop and implement your own casino software. But it
will cost you millions of dollars. You have to employ experienced professional
programmers to design the software, arrange applying for casino software license
in countries where gambling software is legal and you also have to select and
establish an offshore web hosting location.
B. To purchase or
license
the casino software from a software
provider. This is the most widely used and less expensive way. Generally from
casino provides you can have the casino turnkey package, online payment
solution, web hosting or even web hosting. Licensing fees range from $20,000US
to $350,000US. In most cases, you may also have to pay a loyalty to the casino
software provider which will cover a certain percentage of your monthly gross
profits.
C. To sublicense
the software from a existing casino operator (Licensee). This is the simplest,
fastest, and least expensive way to start generating a profitable online
gambling. Costs range from $5,000US to $50,000US. Sublicensee should pay higher
loyalty than licensee.
2. Online Payment Solutions
This is the very important process which achieves your
profit circulation. While some casino software providers have the turnkey
package consisting credit card processing option, some providers don't have the
solutions. Then you have to select and choose a high secure, effective and low
charge rate merchant company to operate your online payment.
3. Marketing Strategies
You could have many ways of marketing your casino website,
for examples, main search engines and directories, banner advertising, keyword
buying, newsletter sending, banner exchange, etc. Remember, online casino is not
apart from other business, the more you do on marketing the more profits you
will enjoy.
4. Customer Services
Good customer services can make your consumers trust and
stay with you. This is also a very important part of successful operation
because there would be many questions for players to ask general concerns and
confirm their chip purchasing. While some casino software providers have the
turnkey package consisting of customer services, some providers don't have the
option.
Licensing
Most of online casino and sportsbook owners use the way
of licensing or purchasing casino and sportsbook software from a software
provider.
Software License -- Generally a software
provider should make the software licensed in a country where Online Gambling
Software is legal for registration. As long as you license or purchase the
software, you will enjoy the Software License together with the software
provider.
Business License -- You need a gaming
license to conduct business in a jurisdiction that allows online gaming. It
depends on what country you are in. For example, your country may take a neutral
position to the acceptance or may try to regulate it by taxation (i.e.
Australia). If you are a resident in a country like USA, then you will need both
an Off-shore Business Corporation to retain the revenue of your business and a
Domestic Business Corporation to receive your final profits. You have to prepare
a gaming license from the country in which you choose to have you business,
servers, customer support Etc.
Royalty Fee -- Some software providers
charge royalty fee besides licensing (purchasing) fee while others don't charge.
The royalty fee varies from 10% to 30% of your monthly profits. You should
confirm it with software providers.
Winning Possibility -- You also should
know the winning possibility of the software you are going to purchase. That
will means how much you could be profit. Alike land based casino, you will have
an average winning percentage, which varies from 50% to 75% (For example, if
players wager $100, the house cound win $50 to $75). You should confirm the
reasonable winning possibility with software providers.
Game Style -- You will have four
possibilities to choose the games, FREE PLAY on browser (Non-download), REAL
PLAY on browser (Non-download), FREE PLAY on downloads and REAL PLAY on
downloads. The best is to have it all, but sometimes you have to choose to have
some of them.
IMPORTANT: Carefully study the software
package providers offered.
Sublicensing
Sublicensing is the alternative way to start your
casino and sportsbook biz. You will contract with a company who has already been
a legal licensee of a certain software provider. You will be authorized to use
the copy of their game software to operate your online casino and sportsbook as
a sublicensee.
Legality Issue -- The software licensee
takes full responsibility for legality issue (Software license and business
license). As a sub-contractor, you are exempted from legal issues.
Investment -- You can put lower initial
investment than licensing. It ranges from$5,000 to $50,000. Generally as a
sublicensee, you can enjoy free web hosting, web designing and customer services
from sublicensors.
Royalty Fee -- You will pay a higher
royalty fee from your monthly profits than licensing. It ranges from 25% to 70%
according to your profit volume. The higher volume you have the lower royalty
fee you pay. Generally sublicensors have tracking tool to follow up and check
gaming data.
IMPORTANT: Carefully study the software
package providers offered.
E-payment
What is a merchant account?
Just as in the physical world, a merchant on the Internet
needs to establish a merchant account with a financial institution in order to
accept credit card payments.
Even if a merchant already has a physical world merchant account, that account
is not likely to be Internet-ready as Internet transactions fall under a
different category and qualify for different rates than physical world
transactions.
How to evaluate merchant account providers (MAPs)?
Some MAPs make quite a killing out of unexpected costs,
contingency fees, and penalties. Here's a list of the common fees and costs you
can expect to pay from any MAP:
Internet discount rate.
An Internet discount rate is a fixed percentage taken from every online
transaction, usually two to three percent. The Internet rate will generally be
higher than card-swipe rates, the rate charged when the merchant can swipe the
customer's card through a traditional point-of-sale (POS) terminal.
Transaction fee. MAPs
typically have fixed charges, usually between $0.25 and $0.70 per transaction.
If you are going to sell many low-priced items through your site, high
transaction costs can be devastating.
Monthly fees and minimums.
This is a variety of charges levied on a monthly basis, including statement
fees, monthly minimums for total charges, excess usage fees, and others.
Holdbacks and chargebacks.
Your MAP may holdback, or reserve, a percentage of your transaction receipts to
cover any contested charges. The MAP may also apply chargeback fees against your
account when transactions are successfully contested.
Setup and equipment.
Setup fees are often only a small portion of total setup costs. Ask about
required hardware or software purchases, installation fees, programming costs,
and other setup expenses.
Research
Merchant Account Providers
Don't rush into any MAP service contract without gathering at
least five price quotes from prospective MAPs. You can find a free, impartial
listing of MAPs and their primary rates and fees at MerchantWorkz.com.
Also, keep in mind that rates and fees are often negotiable:
don't hesitate to push MAPs into a bidding war. Merchant accounts should not be
an obstacle to setting up shop on the Internet. With a little research and
planning, acquiring a merchant account can be painless and inexpensive. It can
also shield you from less-reputable providers seeking to profit from novice web
merchants.
Marketing
The more traffic you get, the more gaming
profits you can gain. There are no career online gamblers unless
your casino site has extreme high winning possibility, but every visitor to your
site could be players. Now that you have installed your state-of-the-art gaming
software, your business will mainly depend on how successful you can be
marketing.
Search Engine -- This is the origin of
Internet. But it has been playing the very important role on the WWW. While some
main directories and search engines charge a small fee on submitting URL, most
of search engines are free of fee. When submitting to search engines you should
prepare outstanding TITLE, DESCRIPTION AND KEYWORDS. You are recommended to
submit your URL to main search engines manually, such as Yahoo, Google,
Altavista, Excite, submit ordinary search engines with auto submit tools such as
SubmitWolf , and keep submitting for every two weeks.
Affiliate Program -- This is another zero
investment marketing method. Your casino is set up with affiliate program when
you purchase the package. You can name the affiliate with fixed rate or
flexible rate from 20% to 60% varying from revenue volume respectively. In fact,
this is the main traffic source to some successful online casino sites, such as
WindowsCasino,
VideoPokerClassic,
CyberBet ,
QueensClub,
CasinoLux.
Advertising -- This is the widely used
marketing method for online gaming promotion. you have many websites to
choose to post your advertisement, such as ONLINE MAGAZINE, CASINO PORTAL,
ENTERTAINMENT SITE, ONLINE SHOPPING SITE, ADULT SITE, etc. For detailed
operation you have many ways to promote, such as BANNER ADS, KEYWORD BUYING,
TEXT LINK, POP UP, EXIT TRAFFIC, E-MAIL CAMPAIGNS, BANNER EXCHANGE. There are
many online marketing companies focusing on online gaming industry. For details
please visit the listing below.
IMPORTANT: Keep marketing on search engine
and directory submission. Design attractive banners for advertisement. Carefully
study the traffic quality from the site where you pay for advertising.
Legality
There are some countries and territories in the world
where online gambling and land based gambling are legally licensed, such as
Costa Rica, Belize, Antigua, Isle of Man, Netherlands Antilles, British West
Indies, etc. But most counties treat online gambling as controversy where local
law is stipulated just in the middle of the road, especially for online casino
and sportsbook. Generally, online casino and sportsbook operation needs safe
legality environment, so you should keep in mind that you have done all the
preparations:
Legal Licensed Software -- If you program
the gaming software, you are responsible to have it licensed in the place where
online gaming is legal; If you purchase or license the software from Casino
Software Providers, you should confirm the legality with the providers.
Generally you can share the software license as long as you purchase/license the
gaming software; If you sublicense the casino software from an existing
operator, you don't need to be responsible for legal issues.
Legal Business License -- This is also
referred as Off-shore operation. You are recommended to register a such company
in the countries or territories where online gambling is legal. The off-shore
company will namely take all the operation of online gambling business.
Servers Off-shore Hosted -- Get your
website and database hosted out of the place where you live or use the
servers in the place where online gambling is legal. Because most countries
still don't have any detailed law act to judge online gaming, sometimes gaming
server location could become key point. Most software providers have hosting
services, where you can choose to use together with online payment system and
customer service.
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