How do online casinos profit?
With many casino games, including Texas Hold’em Poker, player against player we are often asked how online gambling sites can profit from these games.
Well believe us they do.
Obviously online casinos have to take care of things such as licensing fees, employee salaries, advertising, security, physical buildings and much more to even get started, but there is a fine math used to ensure casinos come away the long-term winner.
How exactly do online casinos make a profit? While online casino sites and programs vary, most share the common methods of using the “house edge”, commissions and even their game’s structures to build profits.
This article will examine some of the different ways an online casino, or “the house”, has of generating its income with little effort.
The online casino’s ‘House Edge’
Some online casino games appear to be completely free of influence from the house, but closer examination reveals one of the online casino’s most powerful forms of income: the house edge.
While players bet among themselves at table games such as roulette, the online casino collects the house edge from every hand. The house edge is a simple formula used by the online casino to generate profit, but what is it exactly?
The house edge simply refers to the difference between the true odds of an online casino game’s win conditions, and the actual odds used by the online casino to determine payouts.
What this means is that instead of breaking even as a game would naturally allow players to do, the casino will pay out a slightly smaller percentage, such as 5% less. This means that over time, players will lose 5% of their money and the online casino will pay out 95% back among the winners. This 5% may not sounds like much, but when considering the amount of money that changes hands at some high-stakes online casino games, it becomes quite substantial.
Because of this, online casinos are able to make a significant profit, regardless of how many players win or lose in a given time period.
For example, if you bet on a coin toss, you would have a 2:1 chance of winning the bet. If you bet $1 on each side, you would always win your $2 back, therefore breaking even.
If we introduce a house edge of 5%, you would win back only $1.90 each round. This means that the house would collect $0.10 each turn.
Online casino commissions
In some online casino games such as poker, a commission is collected at the start of each round. This usually takes the form of a percentage on bets made, or in some cases, a flat fee for each round of play. This commission is referred to as the online casino’s “rake”.
The rake is important for the online casino, as because of the way poker is played, the online casino simply acts as dealer and does not become an active participant capable of winning, as in blackjack.
Online casino game structure
Online casino games such as blackjack, as previously mentioned, allow the online casino to become players. Not only this, but the very way that the game and rules are set up allow for a significant advantage for the dealer. In the case of blackjack, the advantage lies in players playing their cards before the dealer. Should the player lose (or ‘bust’), the dealer wins, without even having to have played his or her cards.