What does it take to run an online sports betting platform? Let's answer that question by providing a detailed guide on how to start a sportsbook business.
Running a sportsbook is a dream job among bettors where they can set their lines and earn money from having a sports betting platform.
Reasons to Start a Sportsbook Business
Is a sportsbook business worth it? People are concerned about starting a new business since they are unsure how profitable the market is. Fortunately, we have the data to show you the profit potential of the sports betting industry.
According to the market analysis report from WSN, the global sports betting market size reached $84.6 billion in 2022. The industry's compound annual growth rate (CAGR) is expected to reach 10.2% from 2022 to 2030. In layperson's terms, the industry's total revenue can reach as high as $182.12 billion by 2030. In the UK alone, the gross gambling yield (GGY) of the Great Britain gambling market reached £63 million between April and September 2020.
The value of the sports betting market comes from being able to make a wager on any mobile device, thanks to the improvement of phones and broadband connections. During 2020 when land-based sportsbooks were closed, online gambling platforms provided an alternative place for punters to make money lines or spread bets.
Another reason is the removal of the US's professional and amateur sports protection act (PASPA). In doing so, several US states are opening their area to the sports betting market. New Jersey led the charge along with Washington, West Virginia, Tennessee, and much more.
What does all of this information mean for an upcoming sportsbook business owner? Customers! You can tap into the growing sports betting industry with your own sportsbook business. More bettors enter the industry each year, so sportsbook operators are in an excellent position to make money.
How To Choose a Sportsbook Software
Operators need sports betting software to start a sportsbook business. The software will be responsible for hosting the lines among numerous events and where people can make wagers. Apart from providing odds, the software is responsible for accepting money from visitors and paying bettors for their winning.
Sportsbook software can come in three different types, which we will explain below:
A white-label online sportsbook has nearly everything to start accepting bets for the next NBA Finals or NFL Superbowl. Think of white-label software as a refurbished sports betting shop with monitors, kiosks, and ticket printers. In the case of an online sportsbook, this type of software has a payment processor, web hosting, customer support, fraud prevention, and a betting platform. You only need to add your company name and company logo to get started with white-label software.
The cost of launching your own sportsbook business with white-label software is meager. Nearly everything is taken care of for you, including the license you need to offer a legal sportsbook. In addition, the software provider handles the overhead, such as the hosting fees and customer support staff's salary. Marketing is your primary responsibility since you need to bring clicks to your business.
Despite the convenience and low costs of white-label software, there are several disadvantages you need to be aware of. One is limited ownership since the software provider still owns the platform of your sportsbook business. This arrangement means they get a cut of the revenue and have the final say for any changes to the software.
Turnkey software is similar to white labels in how they are ready-made. However, you can customize various parts of the software. You can change the prices of your market to attract line shoppers. This software type lets you change your online sportsbook's front end. In other words, you can fully design the front page of your sports betting website and its user interface to give your sportsbook business its own identity.
You have the edge in the market with turnkey software due to the originality factor. Unlike a white-label platform, you can make your sportsbook business stand out within your target market by incorporating innovative and attractive designs into your website. You have control over the prices of your lines and other aspects of the site, such as the addition of casino games. Turnkey software also ensures that most of the profit is yours since you own most of the sportsbook platform.
In exchange for the flexibility, you are responsible for bringing in other parts of your sportsbook business, such as acquiring a gambling license. While you can get assistance from the turnkey software provider, obtaining every part of an online sportsbook platform takes significant time, effort, and money. In addition, this type of sportsbook software takes time to launch since the customized parts take time to be integrated.
The third option is a sports betting API integration, which is feasible when you already have an online gambling platform. An API adds a sportsbook functionality to your website, providing sports betting markets, live betting pages, and much more.
The front end of your online sportsbook business is done by you or your team of IT and website design specialists. You can model your website to fit your branding, giving you better flexibility than turnkey software with limited customization options.
API integration is best for business owners with an existing gambling platform. This option allows them to tap into the sports betting market without overhauling their online casino or bingo site.
The main disadvantage of API integration is the cost and effort of building your gambling platform. In addition, you need to coordinate with other software providers that own other third-party APIs within your platform when adding a sports betting API. Overall, this is not a reasonable solution if you are new to the online gambling market.
New Sportsbook Business Essentials
There are four essential parts of a platform when looking for sportsbook software or planning on building a website from scratch.
Sports Data Provider
A sports data provider is the backbone of your business since this is where the odds and betting markets on different sports come from (e.g., FeedConstruct). Their bookmakers formulate odds from data providers according to updated data on the team, players, and various factors of an upcoming game. They will also have scouts providing updated data on live matches to help your customers catch up on the event through the live sports betting page.
Choosing a provider without experience in bookmaking can lead to wrongly priced odds or delayed live odds feed, which can turn away potential customers. It pays to find a proven sports data provider that has been used by recognizable brands and has been in the industry for years.
Sports betting is regulated in every jurisdiction, including the US, UK, and Malta. Sportsbook business owners are required by law to have a gambling license, allowing them to offer legal sports betting to the jurisdiction's residents. Operators without a license are at risk of getting shut down by the authorities, prosecuted by the law, and fined.
A license can also build trust among potential customers. Given the dangers of running into rogue sites, most sports bettors will only choose licensed gambling sites. In addition, you can form a partnership with reliable sports betting software and payment processors when you have a license.
A payment system is the lifeblood of any sportsbook business since this is the source of your funds. Online sportsbooks have many payment options, such as debit cards, e-wallets, prepaid cards, cryptocurrencies, and cage payments. If you choose turnkey software or are building your sportsbook platform, you will need to negotiate with banks or service providers to add their payment options.
Having verified and trusted payment services for your sportsbook business helps you attract customers. Payment options such as Visa and PayPal provide users with fraud protection or security, which makes your potential bettors feel safe when topping up their account on your online sportsbook.
Sportsbook Monthly Expenses
Below are the standard overheads to keep in mind when running a sportsbook business.
Sports betting API that comes with monthly, quarterly, or annual costs. Some software providers also offer a commission-based fee based on your sportsbook business revenue. Keep in mind that this is separate from the setup fees of the API.
Servers are essential for having your site available to bettors. While major brands have the equipment to create a dedicated server for their online platform, sportsbook business owners just starting out will likely need a server host for their site.
GoDaddy and HostGator, two popular server hosts, have shut down gambling sites. Take note of the server's policy on accepting betting sites. You will want to check with a company if they are open to an online sportsbook first. At this level and in this industry, you would need to go ahead with a leading cloud provider (e.g., GCP, AWS, Cloudflare).
Another essential feature to look for in a web hosting service provider is DDoS protection. A distributed denial-of-service (DDoS) attack reduces your site's traffic to a snail's pace. A protective measure within the server will prevent attacks affecting your sports betting site, especially during peak periods when major sporting events are happening.
Marketing is essential to getting the attention of your potential bettors. Commercial banners, social media marketing posts, and advertisements allow you to build your brand's awareness. Note that you do not have to spend millions of dollars to get noticed, but you will still need to invest a substantial amount to get clicks. Building your brand will make bettors think about your sportsbook instead of your competitors.
One of the marketing strategies sportsbook businesses use is affiliate marketing. This method involves recruits companies or professionals to drive traffic to your site. Profits made from referrals are shared with your affiliate partners.
Customer support is integral to your sportsbook business' bettor retention measure. The department tackles various issues with a customer's account or transaction. They also answer inquiries about your sports betting platform or the legal aspects of their account.
Sportsbook operators are expected to pay taxes set by their jurisdiction's government. In the UK, 21% of online sports betting profits are subject to remote gaming duty (RGD). Those operating in New York are subjected to 51% sports betting taxes.
You can start providing lines to the next big game with enough capital and solid online betting software. Note that this guide only shows you how to become a bookie. To be successful, you need to set your platform apart from the competition, such as great pricing and promotions in critical markets.
This article was published on December 7, 2022, and last updated on December 7, 2022.