The term "poker ecology" refers to the balanced (or unbalanced) system of:
a.) strong or weak depositing and withdrawing
b.) losing and winning players.
In this thread we will discuss a stand-alone poker room in its simplest form.
It is worth noting; that what is explained for an affiliate based stand-alone room, also applies to the skins on a poker network - so the same principles apply.
1. The Flow of Money
A poker room can be seen as an economic circuit. Deposits bring new money to the system. Money leaves the system through cashouts and rake (to be more specific: effective rake after all boni / rakeback etc.).
This is a kind of flux equilibrium, where in the long run:
Deposits = Cashouts + Rake
2. Basic Rules
I. Every Dollar that a poker room earns in rake or a player cashes out was is deposited by the players playing poker.
II. If (Deposits < Cashouts + Rake), the poker room will shrink and tables will become tougher.
III. If (Deposits > Cashouts + Rake), the poker room grows and the tables will become softer. Good players will win more (ceteris paribus).
Thus it stands to reason that rule III should be our clear goal.
3. The Strategy
To try and make sure that (Deposits > Cashouts + Rake), we have the following options:
Option 1: Lower Winnings / Cashouts - clearly no. clearly no. The attraction of a poker room absolutely relies on how much you can win there as a good player.
A poker room can only be successful if it is able to offer that to players. This means both deposits and rake must be shaped in such a way that consistently high winnings / cashouts are possible.
Option 2: Increase Deposits - clearly yes. This is the big leverage. This is the big leverage. To increase deposits means to bring in more recreational players (often called 'fish') to the poker room.
However, there is a problem; recreational players generate a lot of net deposits, but not a lot of rake. This is the exact reason why it is wrong that a lot of poker rooms measure their success and the success of their affiliates, just by measuring rake.
As a poker room, you must know that money deposited by a recreational player can leave the system in just two ways;
• Winnings / Cashouts => good - as it motivates my high-rake / high-volume winning players and thus increase their rake.
• Rake => good - as I earn money with it.
Option 3: Decrease Rake - yes this is a relevant option; however it is a little more complex in that a poker room needs rake to cover its costs and turn out a profit. A poker room therefore, needs to decide how to invest the rake:
• increase rakeback / create VIP programmes / races etc.
• increase deposits
Which is better?
We think both are important, but the clear focus should be on generating deposits. Why?
Simple, if a poker room creates more than $100 in deposits, by investing $100 in marketing / retention of recreational players; then an added value is created for the poker system. This money will either benefit a winning player (which is just as good as or better than a little extra rakeback) or be turned into rake.
This rake can in turn be invested to generate more deposits. Thus an upward spiral is created; the poker room grows and tables become softer.
4. Summary
• For a poker room to be attractive to players (especially high-rake players), they need to be able to win a lot of money there.
• To enable this situation it is necessary to attract more and more deposits / recreational players to the eco system of the poker rooms. This money will then ultimately land in either a winning player's pocket or appear as rake, i.e. the pockets of the room itself.
• The rake must be used to increase net deposits / generate recreational players.
5. Competition between Poker Rooms
Competition between poker rooms does not just mean: "Who gives the highest rakeback %?"
Competition between poker rooms, especially for high-volume winning players; means creating a better environment (good software) for players to enjoy their game of poker and also earn money (winnings plus rakeback).
There are networks and rooms where you can get 60% rakeback, however you still cannot earn more money there, as there are too few tables and these are just too tough.
On the other hand PokerStars, the world's biggest poker room; do follow the ecological principles we have described above and thus are a very good choice for many winning players.
Competition between poker rooms happens on three levels:
Level 1: Basics - Software, Customer Service
Level 2: VIP System / Loyalty Schemes
Level 3: Growth and softness of Tables
In doubt, level 3 will always be the most relevant factor in the long run.
6. How do affiliates now fit into the picture?
Affiliates are service providers to the poker operators. They generate new players and offer them services to increase their lifetime value and retention rate.
How must an affiliate be to have a positive effect on poker ecology?
The same principles as mentioned above apply:
The money an affiliate earns should be used to increase deposits. If he generates more deposits (real net deposits - no reload nonsense), then that in turn increases his earnings in the long run. Therefore, the affiliate has a positive effect on the poker ecology.
But what about classical rakeback affiliates?
Do they invest a single cent of their income to attract new recreational players to a poker room or online poker in general?
We guess you know the answer: hardly any rakeback affiliates invest a single cent to introduce genuine new players and net deposits to the eco system of online poker!
This means: a rakeback affiliate changes the shape of the equation Deposits = Cashouts/Winnings + Rake:
• more winnings
• profit of the rakeback affiliate
• no new deposits
But it even gets worse:
rakeback affiliates make sure that a winning player will hardly ever sign up directly with a poker room, or through an affiliate that is directed towards recreational players.
This means that the player mix of beneficial affiliates will have a lot of net depositors, but nearly no high-rake players. As the success of the affiliate is measured in rake, this means that beneficial affiliates will get less and less money - and suddenly, there is no incentive for the poker rooms to undertake marketing campaigns that are directed towards recreational players.
7. What can I do as a player?
• Most importantly; know about and discuss this issue! If this topic is discussed by winning players then this will ultimately have a positive effect on the poker rooms, networks, skins and affiliates.
• Ideally, you could even actively give feedback to poker rooms stating that you would prefer a better regulation of their poker ecology.
• While the system is still skewed, you can of course continue to look for the best deal for yourself - you should not sacrifice your own profits.
The most important thing:
Stop seeing illegal rakeback affiliates as 'player advocates'!
Giving more money to the players (in the short run) makes it easy for rakeback affiliates to act as if they were the players' best friends, while basically just abusing a flaw in the market to earn profits.
Acting against illegal rakeback affiliates is not just the right thing to do; it is also in your best interest.
If an illegal under-the-table deal offers other players additional rakeback at PokerStars, you are then at a competitive disadvantage against them. This is neither fair nor good for you.
8. "What about rakeback and bonuses in general?"
First of all, no one wants to reduce the average rakeback / bonuses a player gets. On the contrary, a fair and healthy eco-system would allow for more rakeback to be given out to players. This is because you do not have a 'middle man' in the form of a rakeback affiliate that takes his cut.
The important thing is that every affiliate should offer the same monetary incentives / rakeback to players on any given poker room. This has three major advantages:
1. Sustainability - It improves the poker room ecology.
2. Growth - It gives small affiliates additional marketing tools to attract more recreational players and prevents poaching that reduces the margins of those who bring in recreational players.
3. Fairness - Last but not least: It is just fair if every player on a poker room gets the same monetary incentives.
3 comments:
Interesting read and something I feel will be looked at in more depth as games get tougher. What do you make of ipokers decision to ban some of its consistent winners?
Playtech/Ipoker are on the way to introduce network regulations and penalize the cannibalistic skins. Victor Chandler is one of the most cannibalistic skins on the network and rooms like VC are a serious threat to the longevity of the network they are on.
By giving out a ridiculous amount of under-the-table deals with very high rakeback percentages VC achieved to poach a lot of high raking, winning regulars away from other Ipoker skins. Thus their playerpool suddenly got a high volume of high raking winning players in comparison to the normal recreational players that usually are not prone to search for ridiculous under the table deals.
To put it in short: I find this banning absolutely awesome, as it means that Ipoker penalized VC for cannibalistic behavior within the network. I hope a lot more of the dodgy poker rooms will be strictly observed and penalized for market damaging behavior.
Ipoker skins like Bwin, invest an unbelievable amount of money into Marketing and belong to the biggest contributors (genuine new player deposits) to the Ipoker network, however they are struggling to retain high volume, high raking players as those are being poached by cannibalistic skins like VC.
But indeed you are right, it is an amazingly interesting topic and raising awareness and get it into the minds of poker players is very important. Secondly you are also right that within the next months you will read and hear a lot more about this topic as the market starts to understand the importance of it.
Btw, I meant Bet365 in my answer. But it's the same for Bwin on ongame. Probably even a lot worse.
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