Caesars Palace: New Standalone Casino App Key to Interactive Division Profitability in Q3

Caesars Interactive continued to turn a profit in Q3 2023, due in large part to the new Caesars Palace online casino app, according to the company’s top brass during the latest earnings call. Caesars revealed its plans for the new app during the Q1 earnings call and rolled it out over the summer. The digital division turned profitable for the first time in Q2 and stayed in the black through Q3 despite summer being a traditionally slow time for online gambling.

The launch of Caesars Palace is part of a larger trend towards standalone online casino apps. In the years immediately following the legalization of sports betting, the focus was on integrated sportsbook-casino apps due to the potential for cross-selling. However, pure casino users are highly sought-after customers, and many seem to be put off by sports-focused apps and marketing. The rise of the standalone online casino is geared towards attracting those players.

Caesars reported nearly $3 billion in net revenue for Q3, $215 million of that from its Caesars Interactive. Though not a big year-over-year increase, it was enough to eke out a positive EBITDA of $2 million for the quarter, compared to a $38 million loss in the same period last year.

The biggest setback in the quarter was, of course, the cyberattack that affected Caesars and MGM Resorts. Outwardly, MGM appeared to suffer the worst of that, with almost two weeks of disruption to its retail activities. However, CEO Tom Reeg firmly rebuffed any suggestion that his competitor’s woes were a boon to Caesars:

One thing that I know for certain after this quarter is that no one benefits from a cybersecurity incident.

Drop in Annual Growth Just an ‘Anomaly’

Considering only revenue and profitability, Q3 looked like a somewhat weak quarter for Caesars Interactive. Net revenue increased only 1.4% from Q3 2022, compared to 4.0% for the company’s Las Vegas casinos and 2.3% for its other retail properties.

Meanwhile, the national online casino and sports betting markets see double-digit annual growth rates most months.

However, Caesars President of Sports & Digital Eric Hession reassured investors that this was an anomaly caused by unusually high sports betting hold in September 2022.

Sports bettors, by and large, like to include heavy favorites in their parlays. When upsets occur—as they did in the early weeks of last year’s NFL season—sportsbooks make more money because those games spoil a lot of parlays. Indeed, the industry as a whole saw year-on-year sports betting revenue growth plummet 30% in September due to the same effect, as industry-wide hold fell from an unprecedented 11.8% to a more typical (though still high) 9.7%.

More relevant for Caesars and its investors in that context are its growth rates for handle. Online betting at Caesars Sportsbook increased 14% year-over-year, while online casino wagering was up 38%.

At the same time, Caesars has managed a slight reduction in its promotional spending. Hession said the company’s spending was “among the lowest in the industry.”

Aggressive spending was a hallmark of the industry’s early years. More recently, investors have demanded that operators cut back and begin taking profits.

Attempt to Appeal to Caesars Retail Demographic Successful

During the call, Reeg confirmed that the goal of Caesars Palace is to attract a different demographic. He explained to investors the difference between sportsbook and online casino users.

Broadly speaking, sports bettors are young, male, and play table games (especially blackjack) when they use the online casino. Pure casino users are older, more likely to be women and prefer slots. The latter group is desirable for several reasons, including brand loyalty and lower risk of problem gambling.

They also more closely resemble Caesars’ retail customers. Hession said that the conversion of retail customers to online players has gone as the company hoped, though other acquisition channels remain essential:

Our [retail customer] database is more reponsive to our new app, as you would hope and expect. When we built it, it was designed to be more similar to a traditional casino experience. That said, we still get the majority of customers trying the app from other sources.

These other channels include affiliates like Bonus, paid search, social media, and brand recognition.

One possible worry would be that the online casino might pull customers away from Caesars’ brick-and-mortar properties rather than attracting new ones. Insiders typically refer to that hypothetical scenario as “cannibalization.”

However, Reeg said that what Caesars has seen since the launch of its standalone online casino is quite the opposite. In fact, the crossover works both ways:

In terms of cannibalization, we’ve seen nothing to date. It’s been accretive to brick-and-mortar in that [the rate of] customers we’ve found or reactivated through digital showing up in brick-and-mortar continues to increase.

What’s Next for Caesars Interactive?

The general tone for the discussion of Caesars Interactive was that the company is happy with the division’s current performance and plans for, essentially, more of the same.

The focus over the next few quarters is likely to be on customer retention more than acquisition. On the technological front, it will be on improving the speed, stability and responsiveness of the apps, rather than their bells and whistles.

Nonetheless, Hession acknowledged that there are still some features to be added:

I feel like our product is comparable to the top products that are out there. Not quite the same level. There are still some pieces of functionality that we haven’t developed yet or focused on.

Caesars Sportsbook has added some such features over the past quarter. Hession said that viewership has been high for the new in-app streaming of nationally broadcasted NFL games. He added that the next step will be integrating in-game betting opportunities with these streams.

Other new features for the sportsbook app include same-game parlays for college football, betting with Caesars Rewards credits, and improved payment options.

About the Author

Alex Weldon

Alex Weldon

Alex Weldon is an online gambling industry analyst with nearly ten years of experience. He currently serves as Casino News Managing Editor for, part of the Catena Media Network. Other gambling news sites he has contributed to include PlayUSA and Online Poker Report, and his writing has been cited in The Atlantic.
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