Why
the Online Casinos Can Be Beaten
Matchplays
are casino promotional coupons.
I have gotten them many times as part of "fun
books" I received while checking into my room in Las Vegas
at different hotel casinos.
On more than one occasion, I have received matchplays in
the mail from casinos I have visited.
If you are a rated player or regularly join casino slot
clubs, you have undoubtedly been offered matchplays.
A
matchplay is a coupon, for say $5, which you must match at a
table with a bet of equal amount.
With a $5 matchplay coupon at an even-money bet at craps
for example, you can place the coupon along with a $5 chip of
your own for a total bet of $10.
If the wager wins, you win $10 when you only really had
$5 at risk. If the
bet loses, you still lose your $5 wager.
Since the matchplay coupon didn't cost you anything, this
wager is almost a two for one proposition in your favor.
Matchplays
offered by the land-based casinos are quite similar to bonuses
offered by many online casinos.
Assume that you visit the Sky's the Limit Internet Casino
and deposit $500 for play.
If this casino is offering a ten percent bonus, then it
will deposit an additional $50 to your account once you have
wagered the $500 you deposited.
You
don't have to wager the $500 all at once.
You could make ten $50 wagers or one hundred $5 wagers.
The point is that the online casino requires that you
at least put your own money at risk before it pays you the
bonus.
When
you play a low house advantage game, the bonus will put you in a
the enviable position of having an edge over the casino.
When I say "edge" I mean a real bona-fide
mathematical advantage over the casino's normal win percentage.
Once you have this edge and know how to exploit it, you
can play the online casinos with the expectation of being a
consistent winner.
You
might wonder how the online casinos can afford to offer such
bonuses. If a
casino in Las Vegas offered such a generous bonus, there would
be lines around the block of sharp players waiting to exploit
their advantage. Yet,
the statistics I have seen indicate that barely two percent of
the persons on the Internet have ever made a wager at an
Internet casino.
The
Internet casinos can make such generous offers because they are
literally rolling in cash.
Their
profitability starts with the comparatively low cost of building
a virtual casino compared to a land-based one.
Land-based gambling not only requires the
construction of multi-million dollar structures, but it is very
labor intensive.
If
I were so inclined, I could purchase an online casino right now
for less than $250,000.
This casino would be licensed and use the latest state of
the art software and would be as legal as any online casino can
be in the United States considering the current state of
confusion. While a
quarter of a million bucks is not chicken feed, it wouldn't even
pave a parking lot for a Las Vegas casino.
Brick
and mortar casinos also have to contend with a lower win rate
and a higher cost of attracting and keeping customers than
online casinos. The
average casino hold is usually considered to be about 40
percent. The hold
is the amount the casino keeps out of the total amount of money
put into play. Let's
say you went into Caesars Palace with $500 and exchanged your
cash for chips at the craps table.
After
about an hour of play, you decide to leave the table and you
take your remaining chips to the casino cashier and exchange
them for cash of $300. The
total amount of your buy-in of $500 is the casino's handle, the
amount of your loss of $200 is the casino's hold. In this example, the casino hold rate is 40 percent.
While
statistics on Internet casinos are scarce, there is every reason
to believe that their hold rate is considerably higher.
Marc Falcone and Jason N. Ader of Bear Stearns report
that of the income statements they have seen, online casinos
have an unbelievable 65 percent return. This return is probably going to fall in the future because
of the extremely high advertising cost most Internet casinos
face.
Some
analysts place the estimated hold at between 60 and 70 percent
for the virtual casinos.
Since the online casinos do not have to employ an army of
dealers, floormen, bosses, backroom personnel, security guards,
janitors, change girls, cage personnel and so on, which are
obligatory for the land-based casinos, much more of their hold
goes right to the bottom line.
The
average Atlantic City slot player loses about $35 per session.
However, to win this, the casinos have to provide free
bus rides, free lunches, rolls of quarters and cash rebates at
the end of the day. As a rule of thumb, real casinos pay out 35 to 40 percent of
their hold in the form of various complimentaries or
"comps" to their players
The
average online player is believed to lose about $200 per
session. While the
casino must advertise to attract the player, it does not have to
provide bus rides, rolls of quarters, free drinks and meals, or
any of the other common comps awarded casino patrons.
In
short, the Internet casinos are rolling in cash.
Casino Merlin (http://www.casinomerlin.com) went live
March, 2000, and by mid April had 50,000 players.
Global Entertainment announced a record first quarter for
the three months ended March 31, 2000.
Revenues for this three month period were $1.1 million as
compared to $638 thousand a year ago.
Microgaming
Systems (http://www.microgaming.com) announced in May, 2000,
that it paid out over $730,000 in winnings in April, its fourth
consecutive month to break records.
The April payouts beat March by almost $100,000.
"These
figures are a very strong indication that Internet gambling is
on the rise," said Lisa Wycherley, senior vice president of
operations at Microgaming Systems.
Research
company Datamonitor estimates that online betting and gaming
revenues will reach a staggering $10 billion by 2002.
However,
even though many cyber casinos are rolling in cash, the
competition to attract new players is intense.
Many e-casinos have set up elaborate affiliate programs
offering commissions as high as 50% of their net revenues to
affiliates who send them customers.
For
many casinos, the fastest and easiest way to attract customers
is to offer one of the few comps available for Internet customer
- cold hard cash. This
explains the rise of bonuses available to online players —
bonuses which can and will make you and me net winners on
the Internet.
Just
how much difference can these bonuses make?
The following table compares the possible win rates at a
casino offering a 10 percent bonus.
We assume that the casino game we are playing has a
normal house edge of 1 percent.
In
each case we assume a buy-in of $500, matched by a $50 bonus.
In alternative A we put $1,000 into play.
After deducting the amount lost due to the expected house
edge or vig (gambling slang for vigorish or "vig"
indicating the house's percentage) of $10.00, we have an
expected win of $40. Comparing
our win with the amount played ($40/$1,000), we compute our
advantage over the casino to be 4 percent.
In
case B, we only make a total of $550 in wagers for a net win of
$40.50, after subtracting the estimated house vig of $5.50.
This gives us an edge over the house of ($40.50/$550)
8.09 percent.
In
case C, we wager $2,000 and retain a net win of $30.
This works out to a player advantage of ($30/$2,000)
1.5%.
Comparison
of Wins at a 10% Bonus E-casino
With a 1 percent House Advantage
|
Buy-in
|
Bonus
|
Total
|
Amount
Played
|
House
Vig-1%
|
Net
Win
|
Player's
Edge
|
A
|
$500
|
$50
|
$550
|
$1,000
|
$10.00
|
$40.00
|
4.00%
|
B
|
$500
|
$50
|
$550
|
$550
|
$
5.50
|
$44.50
|
8.09%
|
C
|
$500
|
$50
|
$550
|
$2,000
|
$20.00
|
$30.00
|
1.50%
|
Quite
clearly it is in our best interests to minimize the amount of
wagers we make as our win rate increases with a lower amount
played.
Picking
the right game is critical when exploiting the bonuses paid by
the e-casinos. The
table below assumes that the house edge for the game is 5%
instead of the 1% assumed in the previous table.
In situation A, where the player buys in for $500,
receiving a $50 bonus and wagering $1,000, the player's expected
return is to break even.
In
case B, if the player only wagers $550, he will have a 4.09%
advantage. However,
in most cases, this advantage would only be theoretical because
the e-casinos would not be satisfied with this amount of play.
As a practical matter, in most casinos you will have to
play about double the amount of your buy-in in order for the
casino to allow you to withdraw your winnings and the bonus.
In
case C, we assume that the player makes $2,000 in wagers, for an
expected net loss of $50.00, even with the casino's bonus.
While
payment of the bonuses gives the knowledgeable player a beatable
game, the selection of the casino is critical.
Equally important are the games played, the amounts
wagered, the size of the bets made and the bet selection method
used. In the next
chapter we will take a look at finding the best e-casinos for
advantage play.
Comparison of Wins at a 10% Bonus E-casino
With a 5% House Advantage
|
Buy-in
|
Bonus
|
Total
|
Amount
Played
|
House
Vig-5%
|
Net
Win
|
Player's
Edge
|
A
|
$500
|
$50
|
$550
|
$1,000
|
$50.00
|
$-0-
|
0.00%
|
B
|
$500
|
$50
|
$550
|
$550
|
$27.50
|
$22.50
|
4.09%
|
C
|
$500
|
$50
|
$550
|
$2,000
|
$100.00
|
-50.00
|
-5.00%
|
The above was taken from the Online Gambling Toolkit.
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