Bonus Abuse: What We Can Learn From Stake.com

Please allow us to introduce Ozric Vondervelden AKA Ada Lovelace, a past master–with the emphasis both on “past” and “master”–of exploiting the Bonus Scheme system that now forms the DNA of so many iGaming outfits, as they reach for elusive customer loyalty and share in a what most of us would concur is highly-competitive–if not “dog-eat-dog”–market.

Ozric, like all the best insiders and knowledge brokers, is now a reformed poacher, turned iGaming-keeper.

In an exclusive deal–and something of a scoop for us here at iGamingFuture, and for you, our loyal readership, by natural extension–, Ozric is giving us The Word on the wonderful world of bonuses and what we can learn from market disruptors such as Stake.com.

– André Dubronski

Enjoy his message:

For much of the iGaming industry, bonuses are seen as the best route to acquiring new players. And with operators vying for market share in what can often be a hardcore head-to-head, pretty much all bonuses have positive value for punters.

The US certainly believes bonuses are important. In the Garden State of New Jersey, alone, it’s estimated that bonuses in any given month are collectively worth around US$18,000 per player. Impressive. Bonuses are seen as an essential route to the top of affiliate lists – the “killer” direct marketing punch.

It’s possible to argue that the gambling industry is unique, in that it’s quite possibly the only industry that attracts customers by giving them tax free cash. Smart players who take advantage of this without giving value back may be seen as “harmless”, but there is a major problem if players exploit the bonus system and use it as an infinite money and funding supply. Often, this is done by exploiting operators’ duplicate account processes, recruiting identities or using stolen, scraped or synthetic identities.

For fraud and risk teams, it’s a never-ending game of cat-and-mouse. And it’s tough to corral badsters using a limited set of data. Just as they’re caught, fraudsters figure out how to spoof those revealing data points or ensure they fall within a large pool of common data, allowing them to hide amongst false positives.

Bonus abuse, therefore,  is a significant problem for much of the industry. It has forced many operators to close their doors. And through our consultancy we have seen as much as 50 per cent of potential GGR lost to bonus abuse.

Just look at the current situation in the US. Years on, after the legalisation and regulation of online sports betting, many operators are still struggling to make a profit. By extrapolating the sheer size of the bonus abuse counter-industry, we can see this is no coincidence.

But today–in what could be a major break-through and iGame changer–we’re seeing  the emergence of an entirely different marketing approach, exemplified by Stake – the biggest crypto casino in the world, and also rumoured to be the most profitable online casino ever.

Whatever you may have heard about Stake, and they have garnered a fair deal of controversy since launch, it’s hard to deny that they have achieved something that the rest of the industry has struggled with: They have achieved world dominance, without frontloading value in the form of bonuses or affiliate costs. And this is the case for the vast majority of crypto operators.

To understand the motive for this approach, we need to look at the risks they’re exposed to:

The biggest obstacle for bonus abusers looking to scale is the requirement to have a unique payment method for each identity. Crypto payments are notoriously difficult to trace once they hit exchanges and mixers, allowing an individual to deposit from multiple, seemingly unconnected, sources.

Unlike bank accounts; you can create endless crypto wallets, making it near-impossible to correlate players that are scaling accounts by simply looking at payment data.

Many crypto operators also operate under licences that have weak verification requirements.  Unless they are proactive–well above the dictates of regulation–,  these combined factors make it very easy for a fraudster to scale bonus abuse across multiple identities and accounts.

The path of least resistance in this environment is to reward players retroactively, giving them value only once they have first given it to you.

This in turn improves user experience by removing the need for registration forms, and saves money by removing the need for device fingerprinting and verification solutions. If there is no upfront value for players to take, there is no need to prevent multi-accounting.

This doesn’t mean they are providing cashback on losses; which is, counter-intuitively, still front-loaded value. (This is a conversation for another day).

Instead, they are providing cashback on the players theoretical value. This metric ensures that the player never has a mathematical edge over the house.

They may be immune to bonus abuse, but what about affiliate fraud?

CPA and revenue share deals are exploitable and limits operators to working with only reputable affiliate companies. A lot of crypto casinos have killed two birds with one stone by rewarding affiliates with a percentage of theoretical losses. This formula completely prevents affiliate fraud and, because of this, they are able to make every single one of their players an affiliate – giving them a percentage of theoretical value for everyone they have referred. On top of this, these players are likely to continue playing with their commissions.

We live in a time where anyone can create and publish content. By making every player an affiliate, they are able to tap into streamers, forums and hard-to-reach social networks, without ever spending more than they are making; not only with player rewards, but also with marketing.

This model has been replicated throughout the crypto casino space. But why haven’t more heavily-regulated markets followed this strategy?

To be clear, I  am not suggesting that operators ditch their registration forms and verification processes. I am not even suggesting that they do away with bonuses, as they have their rightful place in most markets. I do, however, believe there is something to be learnt from the utilisation of theoretical value as a metric in rewards, bonusing, affiliation and player referral schemes. We expect to see this develop across all markets in the coming years.

To calculate theoretical value, operators first need a deep understanding of their content.

My company, Greco, has built a sophisticated automated mapping tool that maps operators’ content with our incredibly advanced content database. From here, Greco is able to formulate the theoretical value of every player, and distribute this information to your CRM or PAM. This allows for custom campaigns based on your players’ theoretical value, along with dozens of other intelligent data points. Theoretical value can also be used as a metric to calculate affiliate rewards, refer-a-friend rewards and player lifetime value-modelling.

Greco is now commencing its Beta Programme with a few select partners. Following this, our full-on commercial release is scheduled for Q2 this year.

I strongly suggest that you reach out to Greco to schedule a demo at upcoming ICE 2023.

To recap: Both bonusing and retrospective rewards have their prime place in the market.

Phase two of Greco’s project will–for the first time–see theoretical value modelling extended to operators that have bonuses with wagering requirements.

It’s what we’d like to term a win-win offer for all.