For entrepreneurs looking to capitalize on the global online gambling boom by launching a white label online casino or sportsbook, the differences between the two might seem trivial at first glance. Is there really that much of a difference for accepting wagers on blackjack versus wagers on a sports event? After all a bet is a bet, right?
On the surface it’s true that in both instances a wager is placed and either won or lost by the bettor. Under the surface there are some important differences. When a bettor is placing wagers on casino games such as roulette or blackjack, there is a known house edge. That means that the operator has a positive expected value on each wager placed. With sports betting, it is not possible to define an exact house edge. Instead there is what is known as a vig, or “juice” which we’ll explain later in this article.
Do you need to offer both casino games and a sportsbook?
Even if your initial target audience is online casino bettors, offering a sportsbook can function as both another revenue stream and player retention tool. The inverse is also true for operators focusing on sports betting. Many bettors enjoy wagering on both casino games and sporting events. With bettors having more options than ever, it’s important to be a one-stop-shop operator for the betting offerings that players expect. That’s why Lion Gaming Group provides the option of bundling our white label sportsbook and online casino solutions together for iGaming operators.
Let’s explore the fundamental aspects of an online casino and sportsbook, and what first time iGaming operators should look for in white label online casino and sportsbook solutions.
The mechanics of an online casino are straightforward. Each casino game has its own gameplay and house edge. Because of the house edge, bettors will try and beat the house using betting strategies such as martingale, labouchere, or anti-martingale. The end goal is to win off of a variance swing since the house edge is usually in the low single digits. Other bettors prefer to try and hit jackpots on games such as slots in a manner more akin to a lottery.
In order to minimize the downside from variance swings, i.e. when players win more than expected, casinos utilize risk management strategies. For risk management, it varies depending on the operator, technology provider, and the particular game. One common tool for casino risk management is the Kelly Criterion. The Kelly Criterion is a staking method which proposes the stake should be proportional to the perceived edge. In essence, the Kelly Criterion calculates the proportion of the house bankroll to risk on an outcome whose odds are higher than expected, so that the bankroll grows exponentially. Many slot games feature progressive jackpots that are handled by the iGaming software provider, where the jackpots are fed via multiple different casinos and the jackpot is shared across all their operator clients.
Unlike casinos, sportsbooks are a little more complicated in the way they generate revenue for iGaming operators. While oddsmakers have gotten very good at their craft, it is impossible to pinpoint the outcome probability of sporting events. That’s why sportsbooks have what is called a vigorish (or “juice”) in order to provide what is equivalent to a house edge. As an example of this in practice, if a betting line is offered where the moneyline is Team 1 +150 and Team 2 -190, the sportsbook operator is expected to retain (also known as the “hold”) 5.23% of the bets placed, in other words the sportsbook expects to make $5.23 for every $100 in wagered volume (also known as “handle”).
For risk management, the vast majority of sportsbooks source their betting odds from one of the major odds feed companies, such as Sportradar, and utilize managed trading services in order to limit large swings on any given sporting event. Since sportsbooks try to even out how much is wagered on each side of the line in order to avoid risk, the betting lines can sometimes be very enticing to professional bettors, this is done by adjusting the betting lines to make one side of the bet more attractive than the other. Most sportsbooks aim to have a hold of around 5%, however this is dependent both on the geo-target of the sportsbook (with less hold for sports popular in that region), and with higher holds for sporting events that do not have as much betting volume.
What to look for in your software provider
Those looking to enter the iGaming industry usually start with looking for a casino technology provider. While looking at white label casino solutions, it may appear that there are a lot of options in the market. In order to narrow down your potential iGaming technology provider, you should first have a clear picture of the niche you are focusing on. Are you aiming to operate a platform that is more traditional and broadly focused, a cryptocurrency casino, or a geo-specific brand? Your target niche will impact the betting technology you use, as game preference varies on region and type of bettor (i.e. traditional vs crypto), as well as the localization necessary to attract customers in your geo-target.
If you are looking to operate a casino oriented towards cryptocurrency betting, you will find your options narrowed down substantially as many iGaming providers still do not support cryptocurrency payment rails. Lion Gaming has developed some of the most advanced crypto casino technology which is available in our white label crypto casino product. Too narrow down the list further, you can remove providers that do not offer a crypto sportsbook product.
At this stage, you can start comparing the pricing and features of the remaining candidates. While comparing pricing is a simple process, reviewing features can seem daunting. This is because for much of the past decade, there has been relatively little R&D in the industry into bettor-centric products – instead focusing on backend tools for marketing, resulting in many of the betting technology providers not having much obvious differentiation. To help with this part of the process, we created a free guide on the must-ask questions as you talk with iGaming technology providers. You can access the guide here. You can also view a list of terms common to the iGaming industry in our iGaming Glossary.
Starting a new business can be nerve wracking, but it doesn’t have to be that way. If you are thinking about starting a iGaming business, contact [email protected] for a free consultation today.