Online poker is a big business.
It’s difficult to know how much revenue is generated annually because of all the private sites. But Wikipedia says $2.4 billion was generated online in 2004. No doubt it was much higher than that in 2017.
That’s enough to get anyone’s greed glands working. To get you dreaming of what it’d be like to be the owner of a massive and hugely popular online poker site. To make so much money, you could retire young, buy an island and sip cocktails until you’re old and dusty.
Most people stop there. The dream bubble *pops* and they come back to reality.
But, for the few others, they start to seriously contemplate starting an online poker site. They want to know how to get started.
This page is our attempt to help those people out. But first, a disclaimer:
We don’t know what it truly takes to start a new online poker room. We haven’t done it before, and there aren’t any resources on the web that spell it out from A to Z.
But, we do have experience as business owners (affiliates) and poker players. Industry experience, too, as well as a little common sense.
So the following information is our best attempt at explaining the darn-near impossible task of launching your very own online poker site.
Note: We’re not lawyers, business planners, consultants or anything like that. If you truly plan to start an online poker room, we suggest using the following as ‘food for thought.’ It’s not advice, legal or otherwise. We recommend you speak to a real professional if you decide to move forward with this kind of venture.
The 3 Biggest & Most Common Mistakes to Avoid
Let’s start with the biggest mistakes we see new poker rooms make. This is by no means an exhaustive list, and there’s a lot of overlap, too. In fact, you could say each of these mistakes share a very common thought process – that starting a poker room is easy.
It’s not 2004
This phrase probably sums up this entire section. But many people think we’re still living in the ‘good ol’ days’ of 2003-2004, when Moneymaker won the WSOP Main Event. When poker become cool again overnight.
This was the easiest time to make money in the industry as a player, coach, affiliate and business owner. The market was young, new and ripe for the picking.
But it’s not anymore.
The market’s mature now. It’s going to take a lot more than a deposit bonus, large rake back deal or celebrity endorsement to get your site off the ground.
I saw a quote the other day on an old (2007) forum post where someone was asking for advice on how to start an online poker site. One of the replies said, if you don’t have at least $10 million, don’t bother.
I’m not sure if that’s true, or, because of how old the post is if you’ll actually need more. But I believe it.
I share more ideas of how much things will cost later in article. But you’ll need money for all sorts of things, such as:
- Licensing Fees and Renewals
- Web Hosting
And loads more, I’m sure.
Any one of these points can set you back a solid 6-figures. Combined, you’re looking at millions of dollars.
And you can’t forget yourself – you need money to pay your bills and take care of your family while you build the business. Because there’s a good chance your business won’t be paying you your share of the profits for several months, even years after you get started – assuming it even lasts that long.
‘Me Too’ Business
The last mistake I want to point out is creating a ‘me too’ business. In other words, creating a poker site with no clear USP (unique selling proposition).
A USP, in theory, is simple – it’s merely what makes you different from, or better than, your competition.
This is easier said than done, though. Especially in a mature market where many things have already been tried, and in a marketplace where your competitors are already profitable and have multi-million-dollar marketing budgets.
The simple fact is this – if you don’t have a USP, don’t bother starting an online poker site (much less any other business). It’s so important, in fact, we decided to dedicate an entire section of this page to it.
First Things First, You Need a USP
It’s imperative you realize how competitive the online poker industry is.
You don’t want to be afraid of the competition. But you do need to realize it’s there. You need to respect it.
More importantly, you need to use your competition to see where the gaps you can fill are in the marketplace. Because one of the worst things you can do – something that will make your climb to the top even harder to make – is becoming a ‘me too’ poker site.
What’s a ‘me too’ poker site?
A good example of a ‘me too’ poker site are poker skins. Skins were a big deal several years ago.
A ‘skin’ is a business in a box. You get the software, games, promotion, banking and marketing from a network (like the Merge Poker Network). Many networks pool the players from all the sites, too, so you even have games for your new customers to join.
Everything about a skin is the same – the games, traffic, stakes, functionality, etc. – the only difference is how it looks – how it’s skinned.
This is great for new businesses. You hardly have to do anything other than come up with a catchy name and make sure the domain URL is available.
The biggest problem, though? You have no competitive advantage. You’re like everyone else.
So why should someone choose you over your competition? Why should someone switch from an existing site – which has more history in safety, reputation and payments – to a brand-new site?
An even better question – why should someone play at your site over PokerStars, Full Tilt, 888 and Bet365? Not only do these sites have a positive track records, lots of games, stakes, options, etc., but they’re also one of a kind. They offer something (most) other sites don’t.
But most, if not all the poker sites on the Merge Gaming Network either busted, merged with another (Merge) skin or for some other reason went out of business.
The bottom line – it’s hard to compete when you’re like everyone else. So, if you can’t answer either of those questions – if you can’t come up with a clear USP – don’t even bother starting a poker site.
Because chances are you’ll fail even if you do have one.
It’s that simple.
“What are you doing to do differently that isn’t already well covered? I think people think it’s a lot easier than it is. Also, players aren’t going to come to play for you just as a favor. Everyone needs to be offered something, or else they will just play where they are already.” – Karl Mahrenholz
How to Come Up with Your USP
Okay, you heard me loud and clear – you need a USP. But how do you come up with one?
The fastest way to come up with a unique selling proposition is to find a gap in the marketplace. What can you do or add to the marketplace that your competition doesn’t? What do they do that you can do better?
Here are some ideas to get your gears turning:
- Mobile – Few sites offer mobile poker – or even a full-blown mobile app identical to their download. You could even create a mobile-exclusive app (no desktop version).
- 3D – Only a few sites have tried 3D (like PKR). This could be telling you one of two things – no one wants 3D poker …or it’s an opportunity.
- Virtual Reality (VR) – VR is a huge trend and it’s only going to get bigger. Imagine a poker room where it feels like you’re playing live.
- Web Cam + Live Chat – 888 has done something similar to the web cam poker, but I feel like it’s still something to explore. Lots of people like live dealer casino games. My guess is people would want something similar, but for poker.
- Social Media – Skip real money gambling altogether and create a social media poker game. You could charge for chips (like PokerStars.net) or maybe an annual subscription.
- Specific Country – Find a country who doesn’t have a poker room. Make sure it’s not because it’s illegal or banking difficulties (from fraud).
- Bitcoin – The bitcoin market is not young anymore. But it’s not nearly as mature as the online poker industry is, and because of the lack of laws you can target one of the most lucrative markets out there – the United States.
Those are just a few ideas to get you thinking about what the marketplace might need. There’s no guarantee they’ll work.
Whatever you do, don’t become a ‘me too’ business. You’ll struggle to build up your player base if you do.
And your player base is one of the most important pieces to the poker startup puzzle.
Other Important Pieces to the Poker Startup Puzzle
Your USP is one of the most important pieces of the poker startup puzzle. But there are more – a LOT more. Some pieces will apply to nearly every business, while some are specific to the online gambling industry.
Either way, you cannot ignore the following puzzle pieces.
Licensing & Regulation
One thing you need to think about are the players you’re going to serve. What countries are they from? Because this will define who you will need to seek licensing approval and future regulation from.
Every jurisdiction is different in their licensing requirements and the process you need to take to apply and get approved.
They’re also different in how strict they are to operators.
A real extreme example of jurisdictions on opposite ends of the spectrum is Costa Rica and the UK. The UK is by far the strictest of the two – possibly even the strictest commission online.
Costa Rica is the opposite. Operators can get away with far more under their watch.
Either way, it shouldn’t bother you how strict they are if you plan to operate above board. But another way to look at it is this – many experienced players know they have a better chance of being treated fairly if the poker site is overseen by the UK Commission than the one in Costa Rica. So, all other things being equal, which poker site do you think that player would choose?
Absolutely – the poker site with the UK license.
Another thing to think about when it comes to licensing and regulation are the costs. This may set you back tens, if not hundreds of thousands of dollars – maybe more – PURELY IN FEES.
I read a forum post from nearly 9 years ago where they were discussing launching a poker site. And here’s what someone suggested the fees were back then based on the jurisdiction:
- Anjounan – $17,500 + $10,000 Legal Fees
- Grenada – $40,000 + $20,000 Legal Fees
- Antigua – $75,000 + $10,000 Legal
- Mohawk Territory (Canada) – $10,000 + $15,000 Legal
- Costa Rica – $100 + $5,000 Legal
- Alderney – $75,000 + $10,000 Legal
- Panama – $60,000 + $20,00 Legal
Who knows if this is what you’d pay today – you’d probably have to pay even more.
Federal / State / Country Taxes
This is going to be short and sweet because there’s no way we can cover every state, country, nation or jurisdiction out there.
But you need to remember that you will owe taxes on the revenue you make. And, keep in mind that revenue is NOT the same thing as profit. Everyone else will get a piece of your revenue BEFORE you do.
That includes the government.
You’ll want to talk to a lawyer or advisor to know how much you’ll owe (if anything).
Software is one of the most important things to think about and plan. You can make this as simple or as complicated as you want.
Here’s the short version – you’ll have two choices – you can go with a white label or poker ‘skin,’ or you can have a custom platform built.
The poker skin is the simplest solution. You talk to the network, fill out an application, pay any fees, do your paperwork, etc., and then you get a brand-new poker room. The problem is your poker room – your games, software, graphics, etc. – will be like every other operator already on their network.
Building a custom platform is the complicated solution. You’ll have to plan everything out – what you want the software to look like, what games you want included, the stakes, how it should function, and on and on and on. The problem is how complicated, expensive and time consuming this process is. The bright side is you have a (minor) USP built in – your site is unique.
Important! Software isn’t a good enough USP nowadays. You need to have another clear (and much stronger) USP before you even get to the development phase.
Either way you go, you should expect to spend $100,000 to $500,000 minimum. You should also plan 6-12+ months for (custom) development, too, which doesn’t include the time it’ll take to find a dependable developer.
Marketing / Advertising
This is huge. I think too many new rooms launch with no real marketing plan outside of, “I will offer a ‘huge’ deposit bonus, ‘massive’ guaranteed tournaments and ‘generous’ rake back, and players will flock to my site in droves.
Sorry, not sorry. But this is real life, and that’s not how things work. People don’t care about deposits bonuses and rake back. At least not enough for it to push them to leave their current site for a new one.
No, what new operators need to do instead is invest in marketing. And for that, you need a marketing budget.
How much do you need? Well, according to an online gambling consultant:
To put in contrast what you are competing with, Amaya, the public company that owns PokerStars, posted up their year-end numbers a few months back. They equate marketing spends in the 100s of millions of USD. It is not easy to compete with that.
The simple answer is, the more you can spend, the better. I would definitely plan on spending somewhere in the 6-7-figure range – annually.
Though, this will depend on the market you’re trying to attract. If you’re targeting the US market, you won’t be able to advertise on any self-serve advertising platform (Google, Facebook, etc.). You’ll have to stick to direct site media buys and content marketing.
If you’re targeting international players, your options increase, but so does your competition. So you’ll need the budget and strategy to match.
Whatever you do, don’t rely (only) on affiliates. This is a HUGE mistake many new operators make. But the problem is many affiliates don’t want to promote an unknown room. So you need to be able to generate your own customers – especially in the beginning.
Tip! This is one of the most important pieces of the online poker puzzle. Because without customers, you have no games running. Without games running, it’s hard to attract new customers. It’s the whole ‘chicken and the egg’ problem. So make sure you learn how to acquire cold traffic and turn them into customers.
This is another biggie – and another complicated puzzle piece to cover because banking is different depending on the location of the customer you’re serving.
But the general idea is this – you’ll need payment processing. The more payments you can handle, the better. But you’ll need to find a merchant/payment processor who’s willing to deal with online gambling.
This is much easier for international operators. And this will be a royal pain in the backside for US/offshore poker sites (because offshore gambling operators are illegal in the states). You’ll have to deal with unreliable payment processors, which will delay how quickly you’re able to ship payments to your players.
Tip! Payment processing and shipping is single handedly one of the most complained about problems from (offshore) US customers. Getting this right can set you apart from 99% of your competition.
If you work with a poker network, there’s a good chance they can handle this for you. This is a bad idea, though, because you have no control over any of it. Plus, there have been horror stories of 3rd party white labelers (networks) stealing from their customers’ customers. Other networks will suggest payment processors – this is (probably) worth looking into.
You won’t be able to run the site yourself. You’re going to need help with all the different tasks included in running an online poker site.
Some of those tasks include:
- Customer support
- Payment processing
- Staff management
- Website maintenance
- Marketing / advertising
- Social media
And so on. Most, if not all of these tasks are ongoing, too, which increases your overhead (and reduces your profit).
One of the most important is customer support. Customer support isn’t one of those things you get to when you feel like it, either. The best sites respond in minutes, hours or maybe within 1 day.
Then, once you have all these roles taken care of, you need to maintain and improve. In other words, you need to ask yourself questions like:
- How can I improve customer support?
- How can I improve customer support response times?
- How can we process payments faster? Cheaper?
- What marketing campaign can we run to attract new players?
- How can we make our VIP program better?
And so on and so forth.
In other words, getting started is only half the battle. From there you need to focus on maintenance and improvement.
What if you want to accept poker players from the United States?
You’ll have two ways you can go – offshore (illegal) or onshore (legal).
Let’s start with legal online poker rooms.
Assuming you can even launch an online poker room in the United States (because each state is different, and may require a physical poker room/casino), it doesn’t mean it will be easy. There are lots of things to worry about.
- There are lots of people who want to change the laws back so that online gambling is illegal. That’s unlikely to happen, and it becomes even rarer as more states pass (legal) legislation. But, if it does happen, you’ll be out a LOT of money and resources.
- Banking is still a struggle, though it’s less of an issue now than when online poker was first legalized. But between confusion of laws and how taboo gambling is, finding payment processors can be a challenge.
- Poker rooms live and die by their player base. If you live in a small state (like Delaware or even Nevada) and haven’t/won’t make an interstate pact with another state, a small percentage – probably less than 1-2% – is the biggest your poker room will ever get.
- You will still need to pay application and licensing fees and go through your state’s application process. There are lots of hoops to jump through, as the United States takes (online) gambling, problem gambling and safety VERY seriously. You can see an example of New Jersey’s laws here and here.
Those are your biggest hurdles.
That all said, marketing will be a bit easier. You’ll (probably) be able to advertise on TV, the radio, paper and on billboards. Chances are you’ll be able to advertise on the larger advertising platforms (Google and Facebook), too.
One other thing – legal online gambling is going to happen in the United States. It’s just a matter of when – and, in this context, if you can manage to stay afloat long enough until more states pass legislation and launch sites.
Starting an Offshore Poker Site
An offshore poker site is an option, but realize you’re operating in the United States illegally. Because most of the anti-gambling laws written on both the state and federal level are aimed at operators.
It’s a game of cat and mouse. And YOU are the mouse.
You don’t have to look any further than Black Friday for proof. Only PokerStars came out in one piece – and only because they had the money to pay their fines, pay Full Tilt’s fines and pay Full Tilt’s customers back.
This cost PokerStars $500 MILLION DOLLARS. And even then they didn’t walk away unscathed.
Part of PokerStars’ motivation for paying all the fines is so they could one day enter the legal US market. And they’ve managed to make some progress there.
However, there are some sites PokerStars will never be allowed to operate in – or, at least, won’t be able to for a long time – because many states have, or will have a bad actor’s clause. Which is basically a rule saying that, if you got in some kind of (online) gambling trouble before, you’ll be unable to offer online gambling services in that state.
But assuming you can skirt the law, and the future doesn’t concern you, you can go the offshore route.
Banking will be one of your biggest obstacles. It will be difficult to find a payment processor who is willing to work with you and who can get payments through.
This is tough. There’s a reason why some of those poker sites from Black Friday created faux online stores – so they could fool payment processors into processing their payments.
…which is also why their indictment included felony money laundering and fraud charges.
Anyway, banking may be your biggest obstacle, but you’ll still have all the challenges we talked about above – which, honestly, is more than enough without adding ‘dodging the United States DOJ’ to your to-do list.
So while you may see an opportunity in the USA – and chances are there IS an opportunity here, because of how few legit sites there are servicing US players – it’s probably for a few reasons:
- It’s illegal.
- It’s hard.
- It’s expensive.
- It’s risky.
Does that sound like a business you want to build?
Conclusion: Be Prepared to Fail
This article probably sounded pretty negative. And, we’d have to agree.
But we wanted to share the truth, as best as we can tell it, having never started an online poker site ourselves.
But we do have a fair amount of knowledge of the industry, between playing online poker and being affiliates (marketing partners) with so many poker sites over the years.
We’re also business owners.
And the truth is, the majority of (poker) startups fail. Only a few rise to the top to become the next PokerStar, Full Tilt, 888 or Bodog.
The rest – the majority – crash and burn. Some die slow and quiet deaths. Others die epically, in a greasy, fiery heap along the mountainside …often taking their customers and affiliates down with them.
They become the Lock Pokers, Ultimate Bets and Absolute Pokers of the world.
Chances are you will, too. You should be prepared to fail.
Though you can increase your chances of success by having an adequate (multi-million dollar) budget, business plan, a bit of luck and proper advice from a highly paid and qualified consultant.