The Economics of Online Casinos: What Drives Profitability?
The online gambling industry has maintained a steady growth rate across the world in the past decade. The UK industry gross gambling yield (GGY) is estimated to be £15.12 billion. One of the subsections helping to grow this yield is online casinos, which accounted for almost 50% of the industry GGY. For casino operators, it’s not just about bringing in revenue. It is also about maintaining profitability. Several factors help these industry players maintain profitability despite increasing competition and regulatory challenges. Some of them include acquiring and keeping players, the technology they use to gain a competitive edge, and, of course, regulatory compliance. However, it all begins with generating revenue.
Revenue Streams
The main source of income for most online casinos is from gaming activities like slots, blackjack, poker, and roulette. In slots, for example, a player has to deposit funds to spin the reels. Each round of spin deducts a certain amount from the deposit. The same logic applies to table games. The player has to bring something to the table (deposit) to join the game. Regarding profitability, a casino can improve its profit margin through in-game purchases, loyalty programs, and even transaction fees when players make deposits and withdrawals. The amounts may be small, but with a high turnover, it quickly adds up to millions annually.
Interestingly, a growing number of gamblers are turning to offshore casino alternatives like the ones listed here. These casinos offer bigger rewards and also accept players who have signed up for the Gamstop scheme. This impacts the UK’s online casino revenue stream somewhat, as these sites are based overseas.
Factors Driving Profitability
Player Acquisition and Retention
First of all, operators understand that there is no casino without players. As a result, they must do whatever they can to get players and also keep them. As simple as it sounds, this is one of the most challenging factors some operators face because, at any given moment, there are hundreds of gaming options out there for players to choose from. Online casinos have to use SEO-optimised content to increase their brand awareness, affiliate partnerships to reach new audiences, and various digital marketing strategies to attract players. They also offer enticing welcome bonuses and cashback offers. In some cases, they sometimes personalise offers to make players feel special. This is all part of the game because the result is that these players will spend money on the platform and drive profitability up.
Gameplay and Variety
Once they’ve gotten players, the main thing that keeps players engaged is the quality of gameplay. The rules and principles of most casino games have remained largely unchanged since their inception, even for legacy games like slots, poker, and blackjack. However, players want a seamless experience when they play. And they also want a variety of games. The more games you have to offer, the more likely they are to spend their money trying out the games.
Technology and Software Provider
As of December 2024, a UK survey found that 49% of respondents aged between 25 and 34 play games on their mobile phones. The year before it was 45%. Online casinos that want to capitalise on this trend ensure that their platforms are optimised for mobile gaming. They also invest in any technology that will improve the gaming experience of players. In some cases, they partner with legacy software providers like Microgaming and NetEnt since they are renowned for providing top-quality games.
Regulatory Compliance
This is one factor that could negatively affect profit margins. In the UK, the industry is regulated by the UK Gambling Commission (UKGC), which has very strict rules and regulations that all UK-licensed casinos (land-based and online) must abide by. Failure to do so could lead to hefty fines or outright license revocation. Early in March 2025, the Commission fined a gambling operator, AG Communications Limited, over £1.4 million for violating social responsibility and anti-money laundering (AML) laws. Being compliant saves you money.
Market Expansion and Diversification
Scaling a business is the best way to significantly increase revenue and profits, especially in growing markets like Africa, Asia, and Latin America. Even though these regions have access to online casinos, they have yet to be fully adopted en masse. UK online casinos and non-GamStop casinos can capitalise on these opportunities to improve their profits.
Case Studies for Profitability and Loss
Flutter Entertainment
Fanduel owner, Flutter, is the world’s leading gambling company, and it seems there is no stopping it from growing even further. It was recently reported that the company projects a 34% increase in profit for 2025. This would triple its earnings from $507 million in 2024 to $1.4 billion. The company’s online casino sector offers great customer experience, and smooth gameplay, and uses AI for fraud detection and marketing. UK casinos can learn from this.
Star Entertainment Group
On the other hand, across the ocean in Australia, Star is facing hefty fines amid regulatory violations. In 2022, the gambling giant was fined AU$100 million for major failures in several areas including AML. Two years later in 2024, authorities found that the company did not address those failures, leading to further fines. As of March 2025, Star has AU$315 million in debt and its 9000 employees are at risk of losing their job.
