How much does it cost to create a sports betting product?
Over the last few months, I’ve been working with a team in Europe to bring a new product to the Australian market. It is currently in Beta testing mode with 20 users from Dailyprofit. This week I will open it up for a 2 week trial to all Dailyprofit members, before offering it for sale.
In 2017, I plan to launch a number of betting related products and I also want to show you how everything works behind the scenes as well. I’ll go into detail on what they will do, how they work, how much they cost to create and run and how many users I get and how much money I make from each product.
I’ve done this previously with Dailyprofit. It had never been done before in the gambling space, so I thought it was an interesting case study. My goal is to be as transparent as possible, something that never happens in the gambling space.
For now, I’ll keep that under wraps. If Dailyprofit members fill all the spots available (100), I won’t need to open it up to anybody else. But as it will be an expensive product, it is likely there will be spots available. It’s a new take on a few existing products, nothing groundbreaking, but fits in with my punting philosophy and a great product for my audience.
Not only will I be selling it, I’ll also be a user. Just like with my monthly profit and loss statements, I’ll be posting my own results from using this new product.
Costs associated with creating this new product
There are lots of different types of online businesses and depending on what it is, each have very different cost structures. But compared to real world businesses, Internet products are still fairly cheap.
This will be my second product. The first one was Dailyprofit. Dailyprofit is a tipping service, otherwise known as an information product. It costs less than $1,000 each year to run. The only additional costs are our time to create the information and also do customer support.
This new product is software as a service and requires not only upfront costs to build it, but also ongoing costs. To build the product, we required a programmer. These days a standard programmer costs about $50 per hour, and can charge 3 figures if they are really good. You can also outsource to Asia or Eastern euro and get good programmers for $25-$50. But more hand holding is needed when doing this.
This software took a lot of upfront time to create the algorithm and the backend/frontend. Not to mention the ongoing maintenance and feature updates. In total there were over 2,500 hours spent on creating and perfecting the product. At $50 per hour and 2,500 hours of developer time, the initial cost to create the first version was ~$125,000. Software can get very expensive.
We also have many ongoing costs to take care off. Each month we need to pay our data supplier, server and database suppliers, customer support and financial software and many other costs. Each month that comes close to $3,000.
Lucky for me, the product was already mostly made and we are just porting it across to work in the Australian market. So our real cost will be $36,000 plus our time/marketing/misc expenses.
The product will be priced at $49/week or $175/month. To break even each month we will need at least 17 customers on the monthly tier.
17 x $175 = $2,975
As this product fills a need for my current members, I think we should be able to get to that number, and the initial 20 members who are beta testing the product are very keen on continuing to use it. It’s a product that can easily cover its cost and make members a heap of profit, so I have no fears that I can get to break even very quickly.
By July 2017 I hope to have 50 monthly users and by the end of the year I hope to hit the cap of 100 users and start a waiting list. This is a product with a limited life cycle for customers, so the churn will be high. If I can reach 50 users in 6 months we will be bringing in $8,750 (revenue) – $3,000 (ongoing costs) = $5,750 profit per month. 100 users would mean $14,500 profit per month. That means this product has an upper limit of $174,000 profit per year.
As with all my joint ventures, I like to go 50/50 and that is also the case here. I will be splitting the profits 50/50 with the creators of the software. They have created the product, I have the sales funnel and customer service skills.
What that means is even if we hit our cap, this product will never make me rich. If things went perfect (they never do). The product will be bringing in $174,000 per year profit. I would take $87,000 of that. This is not a scalable business for me, but it is for the other guys as they can repackage it for other markets.
But if I can help punters to increase their betting banks, and also make some nice profits along the way, all at the expense of the bookies, then I’ll be a happy chap.
Expect to see regular updates about this new product. I can’t wait to launch it and tell you all about it.