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How Do Online Casinos Make Money?
Have you ever wondered how much money online casinos are earning or how they actually manage to make any money in the first place? Well, the short answer is that there are plenty of casino sites that make a lot of money by offering games of chance online. When players lose, the casino makes money. However, in reality, it’s not quite that simple, as the online casino business is highly competitive. Therefore, not every online casino out there is an actual gold mine and many of them even go broke within their first year of operation. But let’s answer the question of how online casinos make money first. Of course, you already guessed it – it is the house edge of the games. Keep on reading to find out more about how this actually works…
What is the House Edge at an Online Casino?
The house edge plays a vital role in both casino games and the way in which online casinos operate and make money. Although the casino rules vary from one game to another, there is one thing that applies to all of them. This is known within the industry as the house edge. So, whether you play online slots or table games such as roulette and blackjack, you essentially always compete against the house (i.e., the casino). Of course, this is also true for land-based gambling facilities.
The house has an advantage over the player on all casino games. Whenever you place a bet and lose, the casino wins that bet and takes your money. When you win a bet, the online casino pays out to you. However, in the long run, online casinos will always make money because the chances are shifted in their favor. It's the only reason they can keep their doors open.
How Does the Casino’s Advantage Work?
Casino games are a game of odds. This means that, whenever you play online, it is solely based on luck. There may be casino games such as poker and blackjack that require some skill, but most of the time the player does not have any meaningful impact on the outcome. The main purpose of the house edge is, therefore, to make sure that the casino wins a little bit of money from every bet – at least in the long run. While the house doesn't always win, the odds are always in their favor and a small percentage of your bets are taken by the online casino.
The Math Behind the House Edge
The house edge is different in every game. For example, at a “Single Zero” roulette table, it is only 2.70% – while it is 5.26% if you chose to play at a table with a double zero. Blackjack is one of the games with the lowest house edge of only around 0.28% – if players follow the optimal blackjack strategy. How much the odds are in favor of the casino can also depend on the type of bet. In baccarat, for example, a bet on a tie has a house edge of 14.36%, whereas if you bet on the banker, it is as low as 1.06%.
Let's assume you are placing a bet on red or black in online roulette. In European roulette, you have 36 numbers and a 0, giving us a total of 37 numbers. You can expect the ball to land 18 times on red and 18 times on black and once on zero, which is neither black nor red but green.
As an example, let’s say that you bet 37 times in a row on black with a wager of €1 each time. This means you have to invest a total of €37. From the €37, you can expect to win back €36, which results in a house edge of 2.7%. As previously explained, you will hit black 18 times out of 37 rounds on average and double your wager but lose all of your other bets.
It is easy to see how odds are shifted even more in favor of the casino if you’re playing at a table with a double zero as you would lose an additional wager in the same full number cycle.
The RTP of Online Slots
When you are playing slots, the house edge isn’t as obvious compared to most table games. Online slots are designed in a specific way to pay back a certain percentage of the money that is wagered by players. This is called the “Return to Player” value, or RTP for short. An average slot machine pays out around 96% of all wagers. In this case, this would mean that the house edge is around 4%. If you wager €100 per spin, you are expected to win back €96 each round on average. The remaining €4 is the profit of the casino.
How Do Online Casinos Make Money? – Conclusion
After looking at the house edge of casino games, it is easy to see how online casinos make their money. They constantly make small amounts by shifting the odds slightly in their own favor. Now, this doesn’t mean that you can’t win anything. It’s quite the opposite, in fact. A lot of players win a considerable amount of money. But unfortunately, even more of them will leave the casino at a loss or completely empty-handed. These players pay other’s winnings and the casino profits.