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Affiliate program + non-frequent players = lost $$

Discussion in 'Online Casinos' started by jshort, Mar 15, 2014.

    Mar 15, 2014
  1. jshort

    jshort Experienced Member MM PABaccred webmeister

    Occupation:
    Bus Driver
    Location:
    Canada
    I hope you like math!

    Ex. Lets say a player has signed up through an affiliate whose going to be getting 35% of this players losses each month. This player is going to play just a single round of European Roullete each month for 1000$ by betting on either RED or BLACK. From the casino's standpoint, their either going to be recieving 650$ from this player in the event that he loses, which has about a 51.4% (=19/37) chance of happening..........Or their going to lose 1000$, which has a 48.6% (= 18/37) chance of happening. This is hugely negative EV for the casino as EV = -134$ = (650$ x 51.4%) - (1000$ x 48.6%).

    FYI; The more wagers a player makes, the better it is for a casino and I suspect most online gamblers don't make JUST A SINGLE WAGER per month, unless they are colluding with an affiliate for joint profit.

    On the other hand, scenarios like the example listed below are very frequent. In most instances, the casino still makes a slight profit in the presence of lots of wagering however some games can still net them a loss via their affiliates.

    ................................................................................

    Suppose an online player signed up through an affiliate whose going to get 35% of his/her losses each month. This player is also going to be sticking with playing something like full-pay JoB video poker say (though most vp would suffice in this example)............Now on most months, this player will be donating his/her money to the casino and the affiliate he/she signed up through, however on the months that this player comes out ahead (sometimes he's going to hit the RoyalFlush and likely be in the money for that particular month!), only the casino suffers the loss........

    Calculating the EV for the casino in this example is MUCH more difficult, but here goes!

    Lets say the player wagers 10,000$ each and every month on 9/6 JoB video poker and lets consider his play over one year under reasonable assumptions;

    First off, lets assume he plays 9/6 JoB at 25cent denomination at full-pay, thus 1.25$ bets.

    He will be making 8000 wagers each month in order to complete the 10,000$ wagering quota. Over one year, this will be 12 x 8000 = 96,000 wagers and from that it's reasonable to assume that this player could get two RoyalFlush wins. He will make 1000$ on each of these wins.

    Now because we are assuming he hasn't gotten any more RoyalFlushs for the remainder of the year, then throughout this time, the player is actually going to be playing a 97.54% return game (as the RoyalFlush win accounts for 2% of the pay-out and we've just assumed he isn't going to win for the other 10 months).

    Hence for 10 months of the year, the player's losses will be EV = 10,000$ x 10 months x 2.46% = 2460$. From this 2460$, the affiliate is going to take 861$. Thus casino profit during this time will be 1599$.

    On the two months in which the player recieved a RoyalFlush, the loss to the casino is going to be 2000$ - (9,998.75$ x 2.46% x 2 months) = 1508$

    Over the course of one year, the casino makes a slight profit of 91$(=1599 - 1508) off of this player.

    .......................................................

    Overall conclusion; The first example has shown that it's very possible for an online casino to lose money via its affiliate program if the player that has signed up through them is only making very few wagers each month and plays a game with a low(ish) house edge.........In the second example the casino makes only a slight profit over a full year (< 100$), but this profit can only be had if the player wagers frequently enough per month. Mind you, even if the player decides to wager frequently (ie > 8,000 wagers per month), there are video poker games out there that return more than 9/6 JoB. Many microgaming online casinos have the game All-Aces which has a return table north of 99.9%. If I redo the math in example two for this game, then the casino ends up losing 215$ over the course of a year. I suspect this loss would exist regardless of how often a player wagers each month.
     
  2. Mar 15, 2014
  3. onkel

    onkel Experienced Member PABnonaccred

    Occupation:
    webmaster
    Location:
    Larnaca, Cyprus, Cyprus
    Affiliates are marketing, marketing doesn't always result in a profit. Without that particular affiliate, the casino might not have gotten that player at all - surely a small profit (which is obviously not always the case) is better than no profit at all?

    However, I do agree that no negative carry-over is a huge risk for a casino.
     
    1 person likes this.
  4. Mar 15, 2014
  5. jshort

    jshort Experienced Member MM PABaccred webmeister

    Occupation:
    Bus Driver
    Location:
    Canada
    I agree that it must be worth the risk otherwise casinos wouldn't have these programs. On the bulk, marketing will attract a large enough percentage of slot / loose players to make up for the fewer who are more money conscious.

    I just wanted to demonstrate that these lower majority group of players can't generate profit for the casino. FYI; In the example I analysed above about a hypothetical JoB player losing 92$ to the casino over one year (wagering 120,000$ total), even that can be a loss if you also factor in things like CB and bonus offers. On most microgaming sites, this vp player would've gotten back 12$ via the loyalty program (assuming 0.01% CB for vp). This brings the casino's profit down to 80$, however if in addition to this, 25% of his wagered money was with bonus funds then well..............I let you try and figure out the casino's return in that case :rolleyes:
     
  6. Mar 16, 2014
  7. Nifty29

    Nifty29 Dormant account

    Occupation:
    PAID CASINO SHILL
    Location:
    Turn right, then right. then right again
    I really enjoyed your post. Well done! :)

    The only issue I have with the calculations is that you are assuming both:

    1. Players results exactly match TRTP, and hence,

    2. The Player always uses perfect strategy.

    I would say it is VERY rare for any player to have a personal RTP that matches the TRTP of the game, and probably about as rare for them to be above the TRTP.

    Also, in this example, where the total number of rounds is comparatively low, the player would be heavily affected by variance. So, their results could either be well above the TRTP, or well below it. Also, given the RF happens approx every 40,000 hands, and that the player may not even reach that number, it's possible they won't have hit an RF at all, which would affect the outcome for the house.

    I guess I'm just pointing out that there are many ifs and buts involved, and that it is these ifs and buts that help "spread the load" for the house and ensure that every JoB perfect strategy player doesn't blow them out of the water each month.

    The reality is that slot/keno players are the mainstay for the house, and subsidise to an extent the table and VP players.

    If one is really about trying to make some money, or at least limiting their losses, one should totally avoid slots and stick to table and VP.
     
  8. Mar 16, 2014
  9. Perc

    Perc Experienced Member webmeister

    Occupation:
    Webmeister
    Location:
    Canada
    There's also the fact that advertising adds exposure to the brand.

    If someone is searching for a new casino to play at and they visit several affiliate websites, they could see the same casino has good reviews on most/all of them, and then go directly to the casino website without ever clicking on an affiliate link.

    So there will be times when the advertising costs them money, and other times when they are benefiting from it without paying for it.
     
    1 person likes this.
  10. Mar 16, 2014
  11. jshort

    jshort Experienced Member MM PABaccred webmeister

    Occupation:
    Bus Driver
    Location:
    Canada
    Hi Nifty

    It's true that assuming perfect play all the time is unrealistic, however even if using a simple strategy one would usually only lose about 0.01%. On Michael Shackelfords website; Wizardofodds.com, the difference between simple and optimal strategy for Job is 0.02%.

    The total number of rounds in this example is moderately high; 8000 per month / 96,000 per year (fyi; that's about 30 minutes of play per day for most vp players). In this case, the odds of hitting at least one RF any given month is 18% (1 - (39,999 / 40,000)^8000). Over one year, the mean expected number of wins and variance are both 2.4 as we're dealing with outcomes that can be approximated by using a Poisson distribution model. The odds of getting no RFs in a year is 9%. The probability of getting exactly one win is 22%, 2 RF's is 26% chance and 3 or more is 43%. The casino will suffer losses of over 90$ in a year 69% of the time. If the player doesn't have at least 2 RF's, then the casino will be ahead by about 550$ or more.
     
    1 person likes this.

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