Even though the face of gambling has changed greatly in the last three decades due to the growth of online options, the ability to attract new customers remains the lifeline of growth for both land-based and digital gambling businesses. The online gambling industry, in particular, though, is fiercely competitive, and trying to grow a business in the sector at any cost is typically a recipe for disaster, meaning that growth has to be carefully measured.
Player Acquisition Cost (PAC) is the most important metric for assessing how well a gambling operator’s marketing is working. The PAC is essentially the investment required to convert a prospective visitor into an active player, i.e., one who deposits, plays, and continues to make future deposits. That makes PAC a good indicator of financial efficiency, as a business simply divides the total spent on marketing by the number of new players that it has acquired through the campaign.
But the overall picture of Player Acquisition Cost is far more nuanced and complex. New online casinos appear regularly, with a strong sample highlighted in a list of the latest casino sites in the UK on Legalbet, an expert portal which reviews and publishes ratings of licenced platforms.
Having made it to market, each of those new casino platforms has to find a way to attract customers.
PAC Essential Mechanics
All direct and indirect costs associated with getting a player to register to play are assessed in the Player Acquisition Cost, such as:
- Media Spend: The cost related to things like pay-per-click (PPC) advertising, social media campaigns, and potentially television spots.
- Affiliate Commissions: Outgoings that are made to third-party partners who help to drive traffic to the casino site.
- Onboarding Incentives: Incentive costs like welcome bonuses, free spins, or matched deposits have to be absorbed.
- Creative Production: Costs of developing advertisements, promotional assets, landing pages, etc.
The PAC Overview
The simple overview of Player Acquisition Costs is that it is equal to the total of all marketing and sales expenses, divided by the total number of new players acquired. As an example, if an online casino spent £50,000 on a new advertising campaign which returned 1,000 new depositing customers, then the cost for the casino to get each new customer is £50.
A casino will attempt to keep PAC costs low to improve margins and reduce the risk of overspending on a campaign that fails to bring in the expected number of new players. But whatever the PAC number is, it ultimately becomes just a baseline that the casino has to absorb in the hope that each new customer brings long-term value to them. The cost of player acquisition is intended to be offset by retention, transforming a high-cost acquisition into profit.
Tactics used to lower PAC
- Organic SEO can be leveraged to drive free traffic.
- Optimising landing page conversion rates.
- Analysing data to target potentially high-value demographics.
- Creating a revenue-share affiliate network.
- Using social media to build and nurture brand communities.
Customer Retention Economics
The initial cost of bringing in a new depositing player is a great expense that online casinos have to bear. But as soon as they have someone, the model then shifts to retention strategies, with things like targeted CRM marketing, loyalty programmes, and VIP schemes. Those are designed to build long-term relationships with customers, as that’s where the offsetting of Player Acquisition Costs will happen.
If an online casino can extend a user from one month to twelve months of activity, for example, the initial PAC investment will be recovered many times over. The effectiveness of retention strategies, therefore, helps to reduce the actual effective cost of the PAC over a period of time.
In the example above of a casino’s PAC being £50 to get a new customer, if that player deposited £50 each month for a year, the operator would be well ahead of the financial game in regard to how much it cost them to get signed up. The longer the term, and the more frequent and high-value a customer’s deposits are, the better for the casino operator.
The Cost Balance
Online casino operators are constantly playing an efficiency game, as there are two sides to the coin. A casino doesn’t want a high Player Acquisition Cost (say £300), which would take longer and be more difficult to recover through the revenue generated by an individual player, but they also don’t want to cheap out and hinder their ability to attract quality players who will be likely to stick around for the long term and build a solid customer base.
Player Acquisition Costs, then, aren’t just about what an operator has to initially outlay per depositing customer. It can be looked at as more of a capital investment that gets amortised over the length of time that the player remains active - a concept known as Customer Lifetime Value (CLV). CLV is used to balance PAC because if the initial cost was £50 and a player only generated £35 in revenue, the model is flawed.
Sophisticated modelling helps casinos hit the sweet spot. A ‘spray and pray’ method would help them reach the biggest audience, but more and more, operators target a more niche customer base. Analysing profiles and demographics helps them target only those people who are likely to be the most profitable players in the long term, taking a ‘quality over quantity’ approach, thereby helping to reduce the PAC.
What Drives the Price of Acquisition Efficiency?
Let's have a look at the factors that impact PAC in the following table:
The Biggest Online PAC Challenge
Economics and forecasts drive a casino’s decision-making, and in the online gambling sector, PAC management is crucial because of the competitive nature of the industry. The biggest challenge that any new online casino platform, in particular, faces is that the industry is already heavily saturated. The UK is a highly regulated market, with the industry overseen by the UK Gambling Commission (UKGC). Getting a foot in the door can be extremely challenging, as new operators have to fight potentially dozens of other casinos for customers.
Players themselves have it great when it comes to starting an online gambling journey, as there’s plenty of choice and registration can be completed in a couple of minutes on any device connected to the internet. That’s a very different world from the challenges land-based casinos face with their PAC, as they have to heavily appeal to a radius around the property to get regular local folk coming back through the door.
But this convenience of online gambling has created something of an intense arms race to win new customers. The high competition between casinos creates a situation where a casino often needs an eye-catching, high-value welcome bonus to stand out. But those are offers that typically attract players who grab only the incentive and then don’t stick around to become long-term depositors. Low conversion is a nightmare for Player Acquisition Costs, and it’s why targeted advertising is so important for casinos.
In the early days of online casinos, high-value promotions were just thrown out there for everyone. Technological advances mean that now, certain bonuses only get triggered by player behaviour, such as pushing a special promo to a player who signed up but hasn’t deposited within the first three days. A targeted approach means that casinos only need to send specific offers when they are likely to cause the user to step up and act.
PAC Goals
Player Acquisition Costs are not simple from an accounting perspective, but they are a good indicator of sustainable, strategic health. The success of an online casino comes from its ability to balance the PAC by really pushing data-driven retention efforts to keep players around. Therefore, the lowest PAC isn’t necessarily the best; it’s finding the one that provides the best ratio between PAC and CLV.
