Despite the fact that the online casino business is just over 20 years old, it will still be correct to say that it is something on the frontier of the known gambling industry. Online transformation involves nearly all business domains and the adoption of new business practices, which is key to prosperity in this digital era. The growing penetration of the Internet coupled with lowering connection rates can deliver the gambling experience to anyone far beyond the geographical limitations of land-based casinos and legal gambling areas.
Considering the above, launching an online casino is a good opportunity to be part of the hot trend. The process can be split into two equally important phases: building up the casino website itself and making it popular with players. Since the first part has already been detailed by us, in this article we will move directly to the second phase and, specifically, to the ways gambling operators can measure their success on this path.
Introducing Key Performance Indicators
Marketing is the most important word when it comes to making an online casino a lucrative enterprise. The big M is often split into 2 coherent types of activity: player acquisition (through banner advertising, affiliate marketing, etc.) and player retention (regular bonuses to loyal players, VIP programs, etc.).
A well-planned strategy involving these 2 constituents is something any casino strives for. The methods might vary, but the desired goal is eventually the same – attract as many players as possible and retain them as long as you can. In this war for players’ attention, gambling websites utilize diverse strategies and spend considerable budgets, which poses a serious question: how do we measure the success of it all. In the end, marketing is not just creative promos, mass emailing or huge bonuses – it is the numbers. If you cannot measure the outcomes of your campaigns, you are shooting in the dark.
Any marketing process requires definite metrics to keep track of the results, rethink, modify, evolve and get back with the most tipping plan for the next period. These milestones have a common name: Key Performance Indicators (KPI).
What KPIs are used in online gambling? Luckily, in the online casino world KPIs are related to two easily understandable values: money and players.
Money indicators are quite clear and speak of the online casino’s profits.
Gross Gaming Revenue
Gross Gaming Revenue, or GGR, is the most basic KPI. It has a simple formula: total bets minus total wins. This shows the amount of money that stays with the casino as a result of players’ wagering activity, but before paying for any of the casino’s expenses. If we draw parallels between an Internet casino and a physical store, GGR is similar to “gross revenue” rather than to “profit”.
It’s worth noting that GGR can fluctuate from period to period depending on how lucky (or not) your players are. For example, even if the number of players and the amount they wagered was identical in July and August, the GGR could be quite different. Why so? Because winnings in online casino games are generated randomly and actual results may deviate from the“theoretical” average return-to-player ratios.
Net Gaming Revenue
Net Gaming Revenue (NGR) shows how much the casino really earns after the total revenue is cleared of expenses.
Expenses can include: bonuses (i.e. not real money that players still use to make bets), commissions payable to payment systems, royalty fees payable to game content providers, commissions payable to affiliate partners, recurring online gaming license fees, taxes, etc.
NGR is perfect for express analysis of the project’s success rate. But unlike with the blunt and clear GGR, there is no unified way to measure the NGR metric. Therefore for analytics purposes it is crucial to agree on the exact formula behind NGR that you will always stick to.
NGR/Deposits shows how much revenue is raised from the deposits made. The higher is certainly the better.
Bets/Deposits – indicates circulation of deposited money in the games. Higher amounts might mean that the casino has been giving away too much money in bonuses.
To summarize, money-related KPIs are good indicators of the general state of things like: yes, the online casino makes profit / no, the casino didn’t generate revenue / hmm, the revenue growth isn’t fast enough. All these cases require further investigation and introduce another pack of KPIs.
We decided to call them like this since they are essentially hybrid values used to connect money metrics and people-related indicators.
Cost per Acquisition
The first one is called Cost per Acquisition, or CPA, and reflects the amount of money it costs to get one player to sign up and deposit. For example, you have spent EUR 5,000 on a marketing campaign that generated extra 100 first-time depositors (FTDs). The resulting CPA here is 50 Euro per each acquired player.
Quite naturally, different marketing channels and ways to promote an online casino will result in different CPA values. This can really be a game changer for the whole process, since thousands of players with high CPA might bring the casino the same profit as a couple of hundreds easily acquired ones.
Average Revenue per User
Another measuring tool is called Average Revenue per User (ARPU). This actually shows how much an average player brings to the casino, typically per month. To calculate ARPU, you can simply take all the casino revenue for a given month and divide it by the number of active players during that same month.
Improvement of the above parameters requires understanding the following KPIs related to potential or actual players.
In its broadest sense, conversion rate is a proportion of people that behaved the way you wanted (e.g. clicked on your advertisement) to the total number of people who had a chance to do so (e.g. all people who saw the ad). For an online casino we can define two types of conversion rates.
Conversion rate 1: Visit to registration = % of people who signed up as players to everyone who visited the website.
Low conversion rate may mean that something is not quite right with the quality/nature of the traffic you bring to the site. Or it may hint that your website design needs more polishing, and you should experiment with the layout, content and interactivity in a bid to prompt a higher share of people to sign up.
Conversion rate 2: Registration to deposit = % of all registered players who made a first real money deposit.
Do not neglect this valuable ratio, especially if you give away free spins or bonuses just for registration, before any real deposits are made.
Customer Lifetime Value
Player Lifetime Value (LTV) indicates how much revenue a player brings to the casino overall during the period of staying with the gambling site. Ever-higher Player LTV is the cornerstone of all the online casino marketing efforts. In order to improve the LTV, the business must attain both a higher customer lifetime (i.e. likeability that the player will return to the casino next time) and a higher average order value (in our case, mean revenue per gaming session).
To calculate Player LTV you can multiply the Monthly ARPU by the average Player Lifetime in months. This is easier said than done, since “Player Lifetime” could be quite tricky to calculate, especially if the casino is relatively new. One reliable way to find customer lifetime includes a widely used technique called cohort analysis. Loads of posts have been written on this in various marketing blogs, so just keep googling!
Customer Lifetime is closely connected with the next parameter – Churn Rate (CR), sometimes called Attrition Rate. Sadly, players tend to migrate across the web always looking for new gambling emotions as well as more goodies, like free spins and bonuses. Churn rate indicates the proportion of players who discontinued playing at the casino to active players from a specified period. Lowering CR is a positive indicator of a well-performing player retention strategy: the casino gets “stickier” with players as they are willing to return for more.
Tracking and analyzing your KPIs
Once the KPIs are more or less identified, the big question is how to track and analyze them. While interpreting and analyzing KPIs are the realm of online casino marketers, the actual tracking of KPIs is something provided by online casino software. It is a serious flow of data that needs to be captured, stored and transformed into ready-to-devour bits of information in the online casino backoffice.
A gaming website is not just a frontend players use to access games, deposit and withdraw money. The iceberg under the water is an online casino platform which actually makes the gears work. A good gambling platform embraces games, players, finance, affiliates, marketing analytics and flexible reporting tools into a comprehensive command and control infrastructure that automates data handling as much as possible to make life easier for operators. SoftSwiss online casino platform, for instance, offers a wealth of interactive real-time reports that let operators get an in-depth understanding of everything that is happening inside the online casino.
However, data generated solely through the casino’s backoffice is at times insufficient. To get a 360-degree view of the business, operators must account for plenty of things that lie outside the casino platform per se: think coffee and candy for live chat support agents. To cater for this, SoftSwiss gaming platform allows for easy export of data that can later be used to build even richer, all-inclusive reports in third-party tools, be it Excel or Tableau Software.
Once the data is captured and the reports built, it is time for the operator to interpret the findings and act accordingly. But that’s a whole new story.
To round everything up, the main KPIs in the online casino business are closely connected with each other and can be graded like this:
Accurate and constant measurement of Key Performance Indicators is a must to turn a great casino into a profitable business that will stay ahead of the curve for many years. Dreaming big only works big if you can measure, adapt and control the performance at every stage and make data-driven decisions, based on detailed intelligence retrieved from the right casino platform.