In this post I will try to layout the most important terms you need to know before starting an online gaming business. GGR, NGR, KPI, ARPU, CPA, CR and CLV.
Of course the most important thing is understanding your goal.
What do you want from your clients? What should they do? During my years in many online companies our goal was to buy DEPOSITS (i.e get 10% for xxx deposit, and so on). These days the goal is for players to play on their money as much as they can.
In order to understand your goal in nowadays online casinos. You will need to understand a few key terms:
Gross Gaming Revenue (GGR)
Gross Gaming Revenue (GGR) is the amount wagered minus the winnings returned to players, a true measure of the economic value of gambling. GGR is the figure used to determine what a casino or other gaming operation earns before expenses like salaries and taxes are paid. GGR is the equivalent of “sales” not “profit”.
Net Gaming Revenue (NGR)
Net Gaming Revenue (NGR) is defined as gross bets less payout derived from any real transaction with a linking visitor in which revenue is paid or credited to the client, less chargebacks and discretionary returns, sign up bonuses, promotional bonuses.
Of course the most important thing is understanding your goal.
What do you want from your clients? What should they do? During my years in many online companies our goal was to buy DEPOSITS (i.e get 10% for xxx deposit, and so on). These days the goal is for players to play on their money as much as they can.
In order to understand your goal in nowadays online casinos. You will need to understand a few key terms:
Gross Gaming Revenue (GGR)
Gross Gaming Revenue (GGR) is the amount wagered minus the winnings returned to players, a true measure of the economic value of gambling. GGR is the figure used to determine what a casino or other gaming operation earns before expenses like salaries and taxes are paid. GGR is the equivalent of “sales” not “profit”.
Net Gaming Revenue (NGR)
Net Gaming Revenue (NGR) is defined as gross bets less payout derived from any real transaction with a linking visitor in which revenue is paid or credited to the client, less chargebacks and discretionary returns, sign up bonuses, promotional bonuses.
It is the basic profit share which you are due to collect at the end of the month. Any chargebacks that are accrued from an affiliate referral will be deducted from the Net Gaming figure. In the event of the chargeback taking place on an account after commission has been made, the original commission figure based on that chargeback will be deducted from the monthly commission total. This is by far the one KPIs should be monitored at all the times.
NGR = Bets – Wins – Bonus Cost – Tax
Average Revenue per User (ARPU)
ARPU defined as the total revenue divided by the number of subscribers, it is a measure of the revenue generated by one player, per unit time, typically per year or month.
Cost per Acquisition (CPA)
CPA is calculated as cost divided by the number of acquisitions. They are other forms of paying for traffic. Rev-Share (where you pay a percentage from the wagering profit to the affiliate). And you also have hybrid with is a combination of CPA and Rev-Share.
Churn Rate (CR)
Churn rate (or attrition rate) refers to the proportion of players who leave during a given time period. It is a possible indicator of customer dissatisfaction, cheaper and/or better offers from the competition, more successful sales and/or marketing by the competition, or reasons having to do with the customer life cycle, and of course if you have tech issues customers will never come back again.
NGR = Bets – Wins – Bonus Cost – Tax
Average Revenue per User (ARPU)
ARPU defined as the total revenue divided by the number of subscribers, it is a measure of the revenue generated by one player, per unit time, typically per year or month.
Cost per Acquisition (CPA)
CPA is calculated as cost divided by the number of acquisitions. They are other forms of paying for traffic. Rev-Share (where you pay a percentage from the wagering profit to the affiliate). And you also have hybrid with is a combination of CPA and Rev-Share.
Churn Rate (CR)
Churn rate (or attrition rate) refers to the proportion of players who leave during a given time period. It is a possible indicator of customer dissatisfaction, cheaper and/or better offers from the competition, more successful sales and/or marketing by the competition, or reasons having to do with the customer life cycle, and of course if you have tech issues customers will never come back again.
One minus the churn rate is the retention rate.
Customer Lifetime Value (CLV)
The lifetime value of a customer refers to the total revenues generated by an individual player over time from all spending, discounted by the time value of money. CLV is critical both from the standpoint of marketing investment (when dealing with a high acquisition cost) and when looking to improve retention rates. CLV helps you make important business decisions about sales, marketing, product development, and customer support.
CLV can be calculated historically, over specific timeframe, or it can be predictive. Each of these calculations serve different purposes. But, predictive CLV is the most powerful way to not only understand what a player is worth to you now, but also how their value will change overtime. Improving CLV has a dramatic impact on the business and is done by improving the repeat purchase rate or improving the average order value (bet value).
One of the simplest and straightforward way to calculate CLV is (NGR per player) * (# Life Time Months) as described here.
NGR / Deposits ratio
Low values might indicate a high number of winners or abusers. High values are showing players spending more money than usual.
Bets / Deposits ratio
This will show how many times players circulate each money they have deposited: higher figures mean that it takes more time to lose whilst lower results indicate that players are losing at a faster pace. Deviation from the standard might also mean that the games don’t function as they should (RNG problems)
Withdrawal / Bets ratio
Provides with a reliable method to project the expected true loss out of gaming activity.
What are KPIs?
KPIs exist in every industry, field of work and for every vertical, so online gambling is not an exception. Using KPIs, an online operator is able to measure the performance of its business, the way it is perceived in the market and how it reaches its target audience.
For this reason, analyzing the performance is a crucial step to be taken by any managing department in order to comprehend and direct the next actions.
Furthermore, the manner and means by which performance is measured can be as crucial as performance itself and getting the system wrong can have an adverse effect and ultimately damage the business.
Selecting the right indicator depends on a good understanding of what is significant to the organization. For the business owner, measuring the right KPIs and creating actionable items from the data can elevate the company above the competition. Lacking the appropriate set of KPIs, any commercial and financial planning is difficult to implement.
Customer Lifetime Value (CLV)
The lifetime value of a customer refers to the total revenues generated by an individual player over time from all spending, discounted by the time value of money. CLV is critical both from the standpoint of marketing investment (when dealing with a high acquisition cost) and when looking to improve retention rates. CLV helps you make important business decisions about sales, marketing, product development, and customer support.
CLV can be calculated historically, over specific timeframe, or it can be predictive. Each of these calculations serve different purposes. But, predictive CLV is the most powerful way to not only understand what a player is worth to you now, but also how their value will change overtime. Improving CLV has a dramatic impact on the business and is done by improving the repeat purchase rate or improving the average order value (bet value).
One of the simplest and straightforward way to calculate CLV is (NGR per player) * (# Life Time Months) as described here.
NGR / Deposits ratio
Low values might indicate a high number of winners or abusers. High values are showing players spending more money than usual.
Bets / Deposits ratio
This will show how many times players circulate each money they have deposited: higher figures mean that it takes more time to lose whilst lower results indicate that players are losing at a faster pace. Deviation from the standard might also mean that the games don’t function as they should (RNG problems)
Withdrawal / Bets ratio
Provides with a reliable method to project the expected true loss out of gaming activity.
What are KPIs?
KPIs exist in every industry, field of work and for every vertical, so online gambling is not an exception. Using KPIs, an online operator is able to measure the performance of its business, the way it is perceived in the market and how it reaches its target audience.
For this reason, analyzing the performance is a crucial step to be taken by any managing department in order to comprehend and direct the next actions.
Furthermore, the manner and means by which performance is measured can be as crucial as performance itself and getting the system wrong can have an adverse effect and ultimately damage the business.
Selecting the right indicator depends on a good understanding of what is significant to the organization. For the business owner, measuring the right KPIs and creating actionable items from the data can elevate the company above the competition. Lacking the appropriate set of KPIs, any commercial and financial planning is difficult to implement.
An example of KPIs are:
- 1213 FTDs in June
- 7819 Depositing customers in June
- $7,918,091 in total deposits in June
And so on...
In your KPIs you need to set goals for every market, VIP level, account manager, campaign, call you make during the month.
In your KPIs you need to set goals for every market, VIP level, account manager, campaign, call you make during the month.
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