How I created an online casino
There is no casino advertising and gambling propaganda, there is also no step-by-step instructions on how to create a casino. This is not HYIP or boasting - just the story of a lawyer who in early 2018 decided to create an online casino, and now he shared it.
# Why casino
The idea of creating a casino came to mind for several reasons:
It became boring, since one stable business had already built (I’ll explain more details below) and delegated part of the operational tasks for slow but sure scaling (quantum jumps in such a business is extremely rare)
Due to current business often I communicate with the owners and top managers of online casinos, betting sites, daily fantasy sport or skill games projects, as well as gambling games built on blockchain technology. Good envy spurred.
# Business experience
I have already created the international law firm LAWBOOT, which focuses on serving the IT, Gambling and FinTech business, and over the past 6 years has gained hundreds of useful contacts, including in the online gambling niche.
Law for me is not just a craft, but a way to get acquainted with people I wouldn't get to in my life, for example from the TOP 500 of the world Forbes.
I tried to create IT projects, for example, cashback service, but there is nothing to boast about except valuable experience.
# Dirty business
In our society, it is considered that gambling is a dirty business.
I will not argue, in part this is true, but there are a lot of clean and legitimate projects in the world . There is no place for deception, because AML (anti money laundering) checks are carried out, sites are licensed by government bodies, and back-end elements (for example, random number generators) are certified. The ultimate goal is to create just such a project.
Components of online casinos:
- Legal part
- Financial instruments
# Legal part
Everything is captured here, because a gambling structure with a license, for example, Curaçao, can create a LAWBOOT in 1 calendar month, and certified lawyers in Denmark taught the correct use of the GDPR.
- License to organize online gambling
- Two legal entities. The first company must be registered in Curaçao (for obtaining a license), the second in Cyprus (it opens the opportunity to cooperate with European banks and Payment Solution providers)
- Documentation on the site. It is created with the aim of streamlining the relationship between the players and the service, removing the risks from the company, legally blocking Internet fraudsters and so on.
- Bringing the site into compliance with the law of the GDPR, so as not to get a fine of 20 million euros
- Automated legal support. Required to automate support and control the behavior of players
Best Start Solution - Curacao License
Here, too, everything is perfect, because the financial partners of LAWBOOT, making pay-in and pay-out payments to casino players, are in the TOP-10 in the gambling niche. These are British, German, Latin American, Cypriot and Maltese banks and payment service providers.
Within two or three weeks from the moment of receiving the license, it is possible to open the first bank account and activate the processing of customers who use Visa or MasterCard.
- Bank accounts in Europe and Latin America
- Payment Service Providers for processing bank cards and electronic money, including in Europe, Asia, Latin America, etc.
- Licensed cryptocurrency exchangers for processing or exchanging cryptocurrency for Fiat, and vice versa.
The situation with the software is complicated. To assemble a team (under the front-end and back-end) with the experience of creating an online casino is incredibly difficult / long and expensive, and the risk to make a non-working product is high (my client made such an error once).
A business model was considered with the creation of a so-called “blockchain casino” based on, for example, etherium. I dropped it due to the fact that I was already late with the ICO, but I did not see any obvious advantages.
I decided to look for White Label software.
What I found out in the process:
- setting and customization of software for the project will be made 4 months ( there is no guarantee that no longer);
- the quality of work (and feedback) of programmers will be low;
- payment in advance, and the amount of sensible products with customization of 100k EUR;
- it is necessary to pay monthly support and 10-25% of royalties from profits. Paying% of the profit is not a problem, but a monthly support service eats up the budget , especially if you don’t start on time.
A license to organize online gambling is issued only when the software is 100% ready. The regulator gets access to a demo account and checks.
Gambling requires a constant flow of traffic. There are no principles applicable to familiar SaaS projects.
If month over month growth (MoM) is a gambling project in a range lower than 1.3-1.7, then the chances of survival tend to zero.Automated advertising in Google Adwords, Facebook, VK, etc. not having local licenses for organizing gambling on the Internet is impossible (banyat sites). Cheat and bypass the lock - illegally and short-lived.
Let me explain with the example of Google Adwords:
It is possible to target Malta residents only if the casino or bookmaker has a gambling license from Malta. With the Malta license, it is forbidden to target British users, since a UK gambling license is required.
In the gambling industry, online traffic is bought from webmasters via CPA grids (they also use synonyms: adnetwork, affiliate program), or directly from content projects. Once again, thanks to the main business, the doors were open. LAWBOOT focuses not only on the IT and gambling business, it provides legal services to arbitragers and affiliate marketing projects (including the CPA grids mentioned above).
ps Therefore (by analogy with the idea of launching a casino, see the beginning of the article) a couple of years ago I had an idea to create a cashback service.
Continuing the theme of marketing:
Popular adware integration with YouTube and Instagram bloggers.
By the way, the situation with bloggers is favorable, because many bloggers are clients of my law firm (again a coincidence) and they advertise bookmakers and online casinos.
This does not mean that Instagram or YouTube allow advertising of gambling, rather, on the contrary, bloggers receive strikes and bans of channels and accounts. Our team helps such bloggers (even with the TOP-50 Russian-speaking YouTube) get out of the ban. In this way we get to know and then maintain friendly and business relationships.
I’m scrupulous about this issue, because attracting investments and “pushing them into the toilet” is the lot of startups who are dreamers who sit in coworking, drink smoothies and discuss how their project will change the world for the better.
I know the price of money, and I understand the level of responsibility for the failure to fulfill promisesIt so happened that investors, to whom I can turn, are ready to invest in me and my projects (thanks to my personal reputation). The only question was the readiness to make an offer to the investor and take responsibility for the fulfillment of obligations.
Weaknesses - software and marketing.
Failed to get insights of other market participants on the main metrics of online casinos:
- Churn (or Retention Rate),
- LTV (Lifetime Value),
- CAC (Customer Acquisition Cost),
Therefore, to name (display in a business plan) investor figures close to reality I could not.
# Why investment and not equity
To conduct the test you need a ready-made White Label, legal and financial instruments.
Creating a MVP without a command is pointless.
Considering the option to buy White Label and create a legal and financial structure for personal money. The goal is to conduct a test and make sure that the main metrics are within the normal range, and then sit down at the negotiating table with the investor and take money with less risk exclusively for marketing (for buying traffic).
If the test fails, I lose more than 150k EUR (for me this is a significant amount).
If the test result is satisfactory, the risks of the investor are reduced, therefore you can bargain for the size of the investor’s share.
In my thoughts I found myself thinking that regardless of the source of funding, I have to be sure that everything will work, otherwise I’m no different from the above-mentioned startups who sit in co-working, drink smoothies and discuss how their project will change the world for the better.
# Meeting with the traffic provider
I called a client of my law firm, which has a number of Internet sites promoting online gambling.
Gambling traffic is getting more expensive, competition is extremely high, it seems that casinos and bookmakers buy their traffic in minusCreating a cashback service a couple of years ago, I came up with an example when big companies buy traffic on certain marketing channels in their own minus in order to prevent competitors from growing on these channels.
Let me give you a simple example (the names below are fictitious):
The SuperBrand brand is on the market - the leader in the cashback services segment.
TakSebe (and dozens of others) set up ads in Google Adwords for SuberBrand branded query.
SuperBrand is also forced to advertise on Google Adwords for the SuperBrand branded query, otherwise it will lose users, and the cost per click (which Google automatically exposes, depending on demand) will be lower.
Examples are more sophisticated and more complicated than dozens.
# Rose-glasses, TSS and competition
I don’t wear glasses for a long time, because two years ago I tried to enter an IT product (cashback service) into a competitive niche without UTP, and lost.
UTP - a unique selling proposition (in English USP, or Unique Selling Proposition).
It was stupid to repeat the same mistake twice, because White Label software did not give any UTP. The same software has already been used by future competitors (the only difference is in design).
By the way, about competitors:
The market is oversaturated with offers, and top online casinos spend millions of dollars a month to buy traffic within one GEO, how to compete (or just survive) with them at an early stage, I still did not understand.
# Special markets
They discussed the strategy of using the financial capabilities of our partners to enter interesting markets, where competition is also high, but LTV is higher. For example the markets of Turkey, China, Korea. By the way, in Turkey it is forbidden for residents to place bets in online casinos, while residents of the country are gambling. There is a legal conflict that opens the door for companies under a Curaçao license to the Turkish market, albeit with restrictions.
The idea did not continue to develop further, since starting from unfamiliar markets with insufficient legal regulation is a huge risk.
# Decided to create a business
The idea of creating an online casino did not let go, and the risks of software and traffic need to be covered. I chose the following strategy: to create your own CPA grid, gambling crammed under the niche, aggregate traffic (publishers) through it and merge advertisers (offerors) connected to the grid. Connecting large advertisers is not a problem, as some of them are LAWBOOT clients (we will connect several big ones, the rest will come). Finding webmasters with traffic is also not a problem (I don’t waste my time on networking and participation in specialized communities).
Having a CPA net is useful (at least) for two reasons:
- The presence of conditionally "their" traffic, which can be merged on your own offer (on the online casino).
- Possession of insights (how traffic converts, what is the conversion price, who, how much and where buys).
And this is exactly what is missing on the way to creating an online casino.
Soon I will talk about the difficulties that arise with the creation of the CPA grid (also a lot, but it’s easier for me and the team to overcome them, since we have experience in the affiliate marketing niche).