Introduction
I am often approached by clients who are considering launching an online casino. The most common question is: how to calculate costs and understand when the business will reach break-even.
For these purposes, I use a simple financial model based on unit economics. It helps evaluate investment decisions and compare different launch strategies. The accuracy of conclusions depends on the quality of input data, but even with approximate assumptions the model highlights what truly matters.
What the Model Includes
The financial model is built around three main blocks:
- Revenue Stream
- Expense Stream
- fixed costs
- variable costs
- administrative costs (including platform fees)
- Performance Metrics
- product operations ratios
- business operations ratios
This structure allows you to model:
- margins
- ROAS (return on advertising spend)
- EBITDA
- growth rate
- time to break-even
The main purpose of the model is to answer a single question: do we have enough capital to reach profitability within a defined timeframe, in a selected geography, using a chosen traffic acquisition strategy.
Why Break-Even Matters
Break-even is a key signal for investors, especially in “grey” or unregulated markets where the business is more volatile.
Main risks in online casino operations include:
- regulatory changes and blocking
- competition and brand attacks
- instability of payment solutions
- dependency on marketing channels
As a result, it is often better to invest more upfront and reach profitability faster than to invest less and stretch the payback period.
Data Required for Modeling
The model relies on a small set of core inputs:
- number of FTDs / NDCs (first-time depositors)
- player LTV per period (quarter or month)
- fixed costs
- marketing costs (CAC)
- other variable costs
This is sufficient to build a baseline revenue model and evaluate overall business economics.
Two Main Challenges in Financial Modeling
1) The Real Cost of Launching a Casino
Today there are many white-label and turnkey solutions available, but they often include hidden costs:
- platform fees
- additional integrations
- payment services
- support, KYC/AML modules, and other add-ons
Estimating these costs accurately is important, but it is rarely the biggest risk.
2) Player Volume and Player Value
The real challenge is to correctly model:
- how many FTDs can be acquired in a given geography
- the cost of acquisition (CAC)
- expected LTV and player lifetime
Errors here are the most expensive.
What Is Truly Critical: Variable Costs
For investment decisions, variable costs are the most important factor—specifically the cost of acquiring players and its dynamics over time.
Fixed costs should be viewed as a startup investment:
- platform
- integrations
- launch team
- base infrastructure
Miscalculations in fixed costs are usually less dangerous than mistakes in CAC and LTV assumptions.
If a client says, for example, “fixed costs are €800,000 per year and break-even is in 18 months,” this is often a signal that the model lacks an understanding of core economic logic. In online casino operations, efficiency of variable spend is what truly determines outcomes.
Traffic Acquisition Strategy as the Foundation of Viability
An online casino cannot be launched without a clear player acquisition strategy. At the initial stage, three main traffic sources are typically used:
- Social traffic and paid advertising (where allowed by the geography)
- External affiliates (SEO, media, arbitrage)
- Internal SEO team
- initially covers branded demand
- later expands into a standalone function
Choosing the right geography and realistically forecasting FTD volume are critical. Both LTV and CAC are highly geo-dependent.
How Geography Affects the Model
Geographies differ in:
- regulation
- competition
- payment infrastructure
- popular products and games
- player value (LTV) and lifetime
Markets are commonly grouped into Tier 1, Tier 2, and Tier 3.
- In Tier 1, players live longer, LTV is higher, and CAC is higher. Quarterly modeling is usually appropriate.
- In Tier 2–3, players churn faster, average deposits are lower, and CAC is lower. Monthly modeling is often more suitable.
In the financial model, geography ultimately collapses into two parameters: LTV and retention / player lifetime.
Payment Methods as a Geography Filter
In practice, geography selection often starts not with LTV, but with payments.
If payment methods in a geography are:
- popular
- stable
- scalable
then the geography is technically accessible.
It is important to remember that payment options offered by platforms are often not the most popular or convenient ones locally. Manual research is required.
The Dilemma: Growth vs. Retention
To reach break-even faster, a casino has two primary levers:
1) Improving Retention
Players stay longer and generate higher LTV. This requires a strong CRM/retention team and a solid product.
2) Increasing Acquisition Speed
The player base grows faster, but each additional player usually costs more. CAC increases.
Therefore, it is essential to calculate player margins and ensure that scaling does not move the business further away from profitability.
Case Logic: “Casino Day” vs. “Casino Night”
To illustrate strategic differences, consider two hypothetical products.
Product 1 — “Casino Day”
- acquires twice as many players
- has a larger affiliate team and higher fixed costs
- uses a more expensive acquisition mix: prepay + CPA + revenue share
- LTV is 11% lower
Product 2 — “Casino Night”
- acquires fewer players
- operates with a smaller team but may pay success fees
- uses a lighter acquisition mix: prepay + revenue share
- achieves higher LTV through traffic quality and partnerships
Typical modeled outcome:
- break-even for “Casino Day” at around 12 months
- break-even for “Casino Night” at around 10 months
- higher upfront investment for the larger product, lower for the smaller one
Importantly, the larger product has more strategic options after break-even. The smaller product is more likely to remain niche.
Conclusions
- For investment modeling in online casinos, accurately estimating variable costs—CAC, FTD volume, and LTV—is critical.
- Errors in fixed cost assumptions are less dangerous than errors in player acquisition economics.
- Casino strategy is defined by the matrix: geo × traffic source × channel.
- Geographies should be selected based on payments, competition, LTV and retention, and realistic FTD forecasts.
What’s Next
Future materials will logically cover:
- the structure of casino marketing teams
- affiliate team functions
- development of internal SEO departments
- typical CAC and revenue share models
This document is intended for industry professionals and describes a modeling methodology rather than the financial statements of a specific company.
