All online casinos offer large bonuses to attract new players and to keep existing players. The offers vary in size and quality but generally speaking online casinos have bonus offers that are unmatched by land based casinos. This raises a very interesting question: How can online casinos afford to give away large bonuses that no land based casino can and still remain profitable?

Many experts will answer by referring to the house edge, the small build in advantage the casino has over the players in every game it offers. On average online casinos pay back 90-99 cents pr. dollar played to the players in winnings meaning that online casino players can expect to lose 1-10 cents pr. dollar played depending on which games they play. But to conclude that this explains the large bonuses at online casinos is wrong. Games offered at online casinos have at least the same payback percentage as games in land based casinos. In some games with slot machines being the best example, the payback percentage is actually significantly higher at online casinos than at land based casinos. The house edge is the reason why casinos in general are profitable, but it cannot explain why online casinos are able to offer larger bonuses than their land based counterparts. The house edge is just as high at land based casinos and they do not offer this kind of bonuses.

Other experts will mention player mistakes as the main factor behind the large online casino bonuses. With some games it is all up to Lady Luck if you win or not. Slot machines is an example of this kind of game. You just push the "Spin" button and wait for the outcome. There are no decisions you can make to either increase or decrease your chance of winning. With other games like BlackJack and Video Poker you have to make decisions all the time. These decisions can be good or bad and therefore increase or decrease the chance of a positive outcome. In BlackJack, if you have 14 and the dealer has 9, then the best decision is to "Hit" and get another card. If the player chooses to "Stand" instead the chance of a positive outcome is lowered due to a player mistake. The emergence of online casinos has surely meant that a lot of people who will never set their feet in a land based casino have started playing casino games. But there is no reason to assume that these players should make significantly more player mistakes than their land based counterparts. If a player can find their way to an online casino, chances are that they will also find their way to one or more of the numerous casino information sites where they can find advice on how they should play casino games optimally. Therefore player mistakes cannot explain the large online casino bonuses either.

Instead the large online casino bonuses can be explained by two other factors: low operating costs and wagering requirements. Compared to their land based counterparts, online casinos have much lower operating costs. Land based casinos have significant expenses in form of dealers, waiters, security personnel as well as significant housing expenses that online casinos do not have. Surely online casinos have their expenses as well. They need to pay for software licenses as well as salaries for management and support personnel, but these expenses are far lower than the ones land based casinos have. On top of that, online casinos are usually located in the Caribbean, Indian territories or Gibraltar where the taxes and salaries and are far lower than in the Western World. The low operating costs frees room for expenses such as large bonuses and therefore the placing of online casinos in areas with low taxes and labour costs is an important reason why online casinos can offer large bonuses and still remain profitable.

Additionally, all online casinos attach wagering requirements to their bonus offers that have to be fulfilled before a withdrawal can be made. This required wagering significantly lowers the real value of bonus offers because it assures that online casinos rarely have to pay out an amount equal to the bonus amount to the player. Let’s say that an online casino offers a 100% deposit bonus of $100 with a wagering requirement of 10 x bonus + deposit. The player then has to wager (10 x 100 + 100 = $2000) before he can cash out. If he wagers 200 hands of BlackJack with $10 wagered on each hand, he will have fulfilled the wagering requirements, but because of the house edge he will typically not have the full bonus amount left. The house edge in BlackJack is low, typically around 1%, which means that on average 99 cents pr. dollar is paid back to the player in winnings if the player plays correctly. On average the player will win back (2000 x 0,99) = $1980 which means that part of the bonus (2000-1980) = $20 is lost because of the wagering requirements.

Online casinos can further lower the real value of their bonus offers if they exclude play on games with a high payback percentage from counting towards reaching the wagering requirement. It is not unusual that online casinos exclude games like BlackJack, Roulette and Video Poker where the payback percentage is high and the risk from the player’s point of view is low. Let’s say that the 100% deposit bonus discussed above still has a wagering requirement of 10 x bonus + deposit, but now the wagering requirement can not be reached by playing BlackJack, Roulette and Video Poker. Then the player might decide to make 400 spins of $5 on a slot machine where the house edge is 8%, meaning that only 92 cents pr. dollar is paid back in winnings. After wagering $2000 the player will on average have won back (2000 x 0,92) = $1840, meaning that the player will have lost (2000-1840) = $160, the full bonus amount and part of the initial deposit. As the examples clearly show attachment of wagering requirements to reduce the real value of bonus offers is an important reason why online casinos can offer large bonuses and still remain profitable.

It cannot be denied that house edge and player mistakes have a positive influence on the bottom line at online casinos, but the large online casino bonuses cannot be explained be simply referring to these. The location of online casinos in countries with low taxes and cheap labour and attachment of wagering requirements that lower the real value of bonus offers are much more important factors.