Net Gaming Revenue (NGR) is a crucial metric in the iGaming industry that provides the basis for how iGaming Affiliate Programs offer Revenue Share Commission calculations to their affiliate partners.
There are several ways that iGaming programs commission affiliates from CPA to Revenue Share and Hybrids of these common models. The Net Gaming Revenue number reflected in affiliate reports represents the amount of money retained by the operator (Profit) after paying out taxes, bonuses, and player winnings as well as their operational costs. NGR is a key indicator of profitability on player campaigns and is important that affiliates understand how this is calculated, what deductions can take place and how to monitor the delivery against campaigns they may be running to send quality customers to operator’s offers.
In this article we’ll break down what NGR is and how it’s typically calculated and what the common deductions are which represent how programs monetise and remunerate partners of casino and sportsbook affiliate programs.
Calculation Methods for NGR
Calculating NGR involves a relatively straightforward formula that takes into account player deposits into the casino – minus – their bets , winnings paid out, and other related costs. There are two primary methods commonly used to calculate NGR: the Gross Revenue Method and the Player Loss Method.
Gross Revenue Method:
- The Gross Revenue Method calculates NGR by subtracting player winnings directly from the total amount wagered. The formula is typically worked out as follows:
NGR = Total Bets – Player Winnings
This method provides a simple and quick calculation of NGR, making it suitable for operators with a straightforward business model. However, it does not account for operational costs, such as marketing expenses (player bonuses) or payment processing fees, taxes and other operational costs that the operator has to incur to offer the affiliate program and player experience.
Player Loss Method:
- The Player Loss Method is a more comprehensive approach that considers the net losses incurred by players. It takes into account factors like player incentives, bonuses, and promotional costs. The formula for calculating NGR using this method is:
NGR = Total Bets – (Player Winnings + Player Incentives)
By factoring in player incentives, this method provides a more accurate representation of the revenue generated by the operator (otherwise known as player profits). It allows for a better understanding of the impact of promotional activities and player retention strategies on the overall profitability over the longer term and can more accurately represent life time value ROAS on campaigns that partners perform over the longer term.
Other important deductions that can be added to these metrics can include regulatory taxes in certain jurisdictions, payment processing and foreign exchange fees, administrative costs from platform providers as an example. Affiliate commission is based on the net profit after program and running costs therefore the brand needs to ensure NGR is calculated correctly.
Importance of Accurate NGR Calculations When Your Program is Launched
Accurate NGR calculations are vital for several reasons:
Financial Performance Assessment:
- NGR serves as a fundamental measure of an operator’s financial performance in their affiliate program. By accurately calculating NGR, operators can assess their business strategies’ effectiveness, identify improvement areas, and make informed decisions to optimize affiliate campaigns profitability.
Regulatory Compliance:
- In the iGaming industry, operators are often required to report and pay taxes based on their NGR. Accurate calculations ensure compliance with regulatory requirements and prevent any potential legal and financial consequences.
Player Tracking and Analysis:
- NGR plays a significant role in tracking and analyzing player behavior. It provides insights into player preferences, betting patterns, and overall profitability per player. These insights enable operators to tailor their marketing efforts, develop targeted promotions, and enhance player experience.
Performance Benchmarking:
- Accurate NGR calculations allow operators to benchmark their performance against industry standards and competitors. It provides a basis for evaluating market share, growth potential, and profitability compared to other operators in the iGaming landscape.
Reporting and Tracking NGR in your Affiliate Program
To ensure accurate reporting and tracking of NGR, iGaming operators must establish robust systems and processes to enable affiliates to drive the right kind of clients and players to their site. Here are some essential considerations prior to launching your affiliate program and calculating NGR deductions you should take into account:
Reliable Data Collection:
- Operators need to implement reliable data collection mechanisms to capture accurate information on bets placed, player winnings, and incentives provided. Accurate reporting and tracking that offers real time data to your affiliates helps deliver that. This involves integrating secure and efficient systems that record and store relevant data in a structured manner.
Transparency and Auditability:
- NGR calculations should be transparent and auditable. Operators should maintain clear records and documentation of the calculation methods used, including any deductions and adjustments made. This ensures transparency in financial reporting and allows for independent audits if required. These deductions should be listed in the affiliate terms and conditions so that your affiliates know what the running costs are being deducted from their commissionable earnings.
Integration with Financial Systems:
- Integrating NGR calculations with financial systems allows for seamless reporting and tracking. By automating the process, operators can reduce the risk of errors and ensure timely and accurate financial information. Your affiliate tracking platform should be able to meet the daily and hourly latency your platform offers to provide the data in real time to your affiliates.
Periodic Analysis and Review:
- Regular analysis and review of NGR data enable operators to identify trends, patterns, and anomalies. This analysis can provide valuable insights into the effectiveness of marketing campaigns, player retention strategies, and overall business performance. It also helps in identifying areas that require optimization and improvement. Regulation on markets and changes in tax laws can also impact NGR calculations along with additional administrative costs that might be required to keep programs compliant.
Conclusion
Calculating Net Gaming Revenue (NGR) is a critical aspect of measuring the financial success of iGaming operators and forms the basis of what affiliates receive as their commission proposition within your program.
By understanding the different calculation methods, emphasizing accuracy, and implementing robust reporting and tracking systems, operators can gain valuable insights into their financial performance, comply with regulatory requirements, and make informed decisions to drive profitability. Building full transparency with affiliates in this regard also helps them to target their campaigns more effectively.
Accurate NGR calculations provide the foundation for evaluating player behavior, benchmarking against industry standards, and optimizing overall business strategies in the dynamic world of iGaming.
If you’d like to understand more about NGR and how this can be displayed and shared with your affiliates to drive better results for your business, get in touch with our sales team and take a look at our next generation reporting and real time data reports.
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