The Impact of Fraudulent Traffic on ROI in the iGaming Industry
Can ROI in the iGaming sector be affected by fraudulent traffic and multi-account users?
The iGaming gaming sector, which is estimated to be worth 92 billion dollars in 2022, is enjoying popularity among players at the international level, so for the next few years it is expected to increase the revenue up to 173 billion dollars. Romania is among the European Union states that have legalized gambling, so that many international brands, such as GGBet, is currently operating on the iGaming market in our country.
ONJN (National Gambling Office) requires casino and fixed-odds betting operators to limit access to iGaming games among persons under the age of 18, as well as to monitor the access of persons interested in using iGaming platforms for carrying out criminal activities. Fraudulent traffic and users holding multiple accounts on these sites can negatively impact the return on investment of iGaming operators.
What are the factors that directly influence the ROI of a business?
The return on an investment is calculated by dividing the profit generated by the investment by its costs. Businesses in the field of iGaming games can be seen as investments with a medium level of risk and involve a number of expenses that cannot be covered in a short period of time.
The fees and taxes that an online gambling operator pays have increased from August 1, 2022, for example, for those who carry out casino activities, the annual fee will be 115.000 Euros, the operating tax will be 23% of the revenues generated (minimum 120.000 Euros), to which other expenses are added, such as the fees necessary for processing the licensing documentation (3000 Euros), issuing the license (9500 Euros) or the 5% fee for advertising.
In addition to taxes and fees, another factor that influences ROI is brand recognition. A start-up iGaming business requires a solid investment in order to gain the widest possible exposure of the brand to the target audience. ROI will also be influenced by the level of revenue obtained by the business.
The level of player engagement can have a major impact on ROI. The higher the level of traffic on the site and the higher the number of active members, the higher the amount of deposits made by them will increase, which means making a profit. The iGaming platforms have the possibility of setting a certain house edge value for each game in the portfolio.
In general, slots allow a wider helping of the house edge to the value of the RTP (percentage returned to the player of the amounts wagered) compared to table and live games. The value of the house edge in the case of online slot machine games is between 2% and 15%, but the highest level can be reached in the games of Sic Bo (between 2.78% and 33.33%) and Keno (between 25% and 29%) .
Promotions and bonuses offered by iGaming operators contribute to profit, especially when turnover conditions are imposed that limit the possibility of converting bonus money into real money by platform members. However, a high number of players does not automatically mean that the iGaming platform is making a profit, and this is due to fraudulent traffic.
How does fraudulent traffic affect the return on investment in an iGaming platform?
Online gambling operators promote their businesses through advertising and digital advertising. In exchange for sums of money paid to advertising agencies operating in the online sector, iGaming platforms expect to attract a certain type of target audience to register and then make real money deposits on these platforms.
But in addition to human users signing up and claiming those promotions and bonuses, these ads attract the attention of people with nefarious intentions. For example, bots are one of the real threats to iGaming platforms, these programs run intelligent scripts that allow them to simulate human behavior and claim the bonuses and promotional offers of online casinos and sportsbooks.
The fact that the iGaming platform enjoys a high level of ad clicks does not automatically mean an increase in ROI, especially if it is fraudulent traffic. The ROI in this case is based on some data that isn't real because it's about bots and not real human users.
Another danger for ROI is represented by users who create multiple accounts on an iGaming platform, "hunting" its bonuses and promotions. The legal term for verifying the user's (account holder's) identity is a maximum of 30 days, in which case, in the absence of real information being procured by him, the platform will close the respective account.
It's just that, based on the estimates made by the operator for a month, these accounts will also be taken into account, which will be equivalent to calculating the ROI based on erroneous and false data. Another way in which iGaming platforms are affected in terms of ROI is related to the use by spammers of offers promoted by sites affiliated with an iGaming platform.
Instead of real users registering, those using this way of getting commissions from the iGaming platform will be using bots. And this is equivalent to the loss of money by the iGaming platform, which will pay the amounts in exchange for fake users, which do not exist in reality.
Companies active in this field must invest in protecting their own interests, starting with securing the platform (SSL encryption) and continuing with the use of advertising agencies to guarantee them for the results generated and ending with the establishment of validation of accounts registered on the respective site.
They must be avoided mobile fraud (40% of mobile traffic is at risk of fraud) and placing bets from invalid sources (34% of traffic comes from such sources), as well as monitoring competitors (some of them may use such methods to exhaust the budget and eliminate ads on results pages An iGaming business can only be profitable when it is based on real and verifiable results!