"Poker Ecology" - what does it mean?

The term "poker ecology" refers to the balanced (or unbalanced) system of:

• weak / losing / net-depositing players
• strong / winning / net-withdrawing players

In this thread, we will discuss a stand-alone poker room. But what is true on an affiliate-basis for a stand-alone room also counts for 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 deposited by some player.

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's easy to say that III. should be our clear goal.


3. The Strategy

If we need to make sure that (Deposits > Cashouts + Rake), we have the following options:

Option 1: Lower Winnings / Cashouts - 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. To increase deposits means to bring in more recreational players (often called 'fish') to the poker room and increase their lifetime deposits. The problem: recreational players generate a lot of net deposits, but not a lot of rake. And this is exactly the 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 => 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 needs to decide how to invest the rake:
• increase rakeback / create VIP programmes / races etc.
• increase deposits

Which is better?

We think both is important, but the clear focus should be generating deposits. Why?

Simple: if a poker room creates more than $100 in deposits by investing $100 in marketing / retention of recreational players, an added value is created for the system poker. This money will either benefit a winning player (just as good 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), good players need to be able to win a lot of money there
• this is reached by attracting more and more deposits / recreational players to the eco system of the poker room, as this money will ultimately either land in a winning player's pocket or in rake, i.e. the pockets of the room itself
• the rake must be used to increase net deposits / generate recreational players




[size=12pt]5. Competition between Poker Rooms[/size]

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 for players to comfortably (good software) player poker and earn money (winnings plus rakeback).

There are networks and rooms where you can get 60% rakeback. But still, you cannot earn more money there - as there are too few tables, and these few tables are even too tough.

On the other hand PokerStars, the world's biggest poker room, consequently follow the ecological principles we 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 cashout-reload games) that what he is paid in the long run, the affiliate has a positive effect on ecology.

PokerStrategy.com belongs to this type of affiliate: every month, we bring tens of thousands of new real money players to the industry and even equip many of them with a $50 bankroll. Most of them will never be really successful - but a lot of these will pick up poker as the great game and pastime it really is and become beneficial recreational players.

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: nearly no rakeback affiliate invests a single cent to create genuine new players and genuine 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 nearly never sign up directly through 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 depositers, but nearly no high-rake player. 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 on the whole poker room to do marketing campaigns that are directed towards recreational players.


7. What can I do as a player?

• Most important: know this and discuss it! If the ecology topic is discussed by winning players, this will ultimately have a positive effect on poker rooms, networks, skins and affiliates.
• Ideally, you even actively give feedback to poker rooms 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 market flaw 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 in a competitive disadvantage against them. This is neither fair nor good for you as a PokerStars player on the legit standard conditions.


8. "What about rakeback and bonuses in general?"

First of all: we do not at all want to reduce the average rakeback / bonuses a player gets. On the contrary: a fair and healthy eco-system would allow more rakeback given out to the players, as I do not need a 'middle man' in form of a rakeback affiliate that takes his cut.

The important thing: every affiliate should offer the same monetary incentives / rakeback to players on the same 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.


9. What does that mean for PokerStrategy.com?

We here at PokerStrategy.com do our best to make sure that online poker is going to stay and grow for years. We invest heavily to open up new markets and popularise poker. And we lobby for a better regulation of the poker market to correct market flaws and allow for an environment that is ultimately beneficial for us, the poker rooms and all winning players.

So, you're offering 50$ to new players if you become their affiliate. You earn money from the rake we all pay, indirectly.

You're not generating new money to support the economy, at least some of the money stays in the circle (not like the vampire affiliates), but there's no real new money as the money you give to player A, players B-Z paid via rake.
So those 50$ already have been in the ecology but were taken out to finance affiliates. I assume you receive more than 50$ for a new signup cause everything else makes no sense.

I have no clue how much the affiliate's spread is, I assume it might be something around 2-3%. Correct me if that's a horrible guess.

Let's just take 3% for our assumptions and separate first time depositors to a site (which an affiliate might track as new customers because he can't know) and real new players, investing money into online poker the very first time.

As I doubt that affiliates generate a lot of new players (probably new customers to a site/skin, but usually people start looking for affiliates after they got into online poker, which means their very first attempt probably was without an affiliate. See all the complaints about no RB on FT on 2+2. You have no banners in casinos or tv commercials to bring first time players into online poker), we pay 3% of our winnings to feed affiliates who either do nothing for their money or give us at least a little bit back from the money we paid them.

If there wouldn't be any affiliates, we might pay those 3% less in rake, theoretically. I doubt the poker rooms would decrease the rake they take, but invest more into own marketing if there were no affiliates, unfortunately.
I assume good marketing campaigns, specially with TV commercials generate some real new players, so it would be better to not feed the affiliate, but the poker room. (This example unfortunately only applies to the big rooms)
There is still small chances if the poker rooms wouldn't pay the spread from affiliates they might increase the ratio to generate bonus points or such to be more competitive to other poker rooms.

Well, some affiliates offer some value for the spread we pay them tho, like DC and others but as I assume they're doing it for profit and not to bring peace to the middle east, it would be cheaper for us to not pay the spread and just pay for poker education directly to them if we think its valuable to our winnings.

I don't have any numbers on this and all is based on pretty vague assumptions unfortunately, but at NL200 we generate around 45$/1000 hands, about 100$/1000 hands at NL400 on rakeback.
Well, thanks to rakeback, I turned some break-even or losing months into slightly positive, but I'm still missing those 3% for the affiliate. For no reason.
As the rake is so high, without any kind of rakeback, just the rake the room needs to turn profits I would be off way better.

It feels somehow like, I charge you 3% of my hourly income to invest the time here to post and generate traffic in your forum, but I would have done it without that 3% tho. You pay for nothing, at best something that is worth less than those 3%.

Hey wellju,

thanks for your post!

I'll try to go through it without quoting everything. If you think I miss some important argument, please don't hesitate to tell.

That would be true if none of our players would deposit their own money. In fact, a lot do.

The simplest question is: "If I give $10 to an affiliate, will he create more than $10 net deposits?" [not rake!] - I think we do. PokerNews does as well. Hundreds of small affiliates probably as well. But I'm pretty sure no major or minor rakeback affiliate does.

In fact, I'm pretty sure that the utmost majority of players we generate are first time real money online poker players.

Some reasons:
1. We do TV advertisments - e.g. currently in Romania on a sports channel. Bulgaria will soon start, others are in the making.
2. We do print ads - e.g. if you buy AS, one of the big daily Spanish sportsnewspapers
3. We seek media co-operations in new markets, such as our current one with the Akiba Guild in Japan

But the biggest reason is that our offer for a new player - free bankroll, basic poker training, a community to ask others about stuff - has an extreme appeal to people that are interested in poker but yet have doubts about playing it online:
- doubts about themselves and their skills
- doubts about online payment methods
- doubts about giving credit card data etc. to online poker operators

We eradicate these doubts. The interested recreational players will feel secure about all these things after reading some player reports in the forum, watching an introduction video to the rules of the game and after playing 300 hands with their $50 bankroll.

Month by month, tens of thosands of players get their $50 bankroll.

I agree to that for most affiliates - and even a lot of skins on networks.

You need to ask yourself: does an affiliate invest something into creating recreational players / net deposits?

You don't even have to believe us that we do - more important is that you see many skins and all rakeback affiliates don't.

I agree.

This is why we say: "Affiliates shout not at all compete with monetary incentives against each other."

These monetary incentives (affiliate based races etc.) will never be investments into recreational players - but they will be used to poach players from poker room A to poker room B (often even inside the same network) and thus create bogus value.

Paying direct or via affiliation is just a difference in payment models. But basically I agree - as affiliates are just payed for net-rake and not net-deposits, coaching sites that exclusively target ambitious players probably get overpaid.

As you probably entered the room just for looking for the best deal, I agree.

Guess: you're speaking about Full Tilt. So it would have been far better if Full Tilt gave you the 27% rakeback directly, forbid affiliate-based rake races [maybe do a big central one for everyone] and thus give no affiliate the 3% cut.

For you, I agree. As you are not 'generated' by us and do not really seem to want our offers [videos, coachings etc.], I think it is better from an ecology point of view if you do not sign-up through PokerStrategy.com, but instead go directly to the poker room.

By the way:
We (PokerStrategy.com) are getting overpaid as well - for our heavy winning players. But at the same time, we are getting underpaid for our recreational players. Even if you think we do not create enough recreational, depositing players - you should agree that affiliates and skins should be paid not just on net-rake, but that net-deposits should also play a role.

We can 'fight on the same side' even if you think we are just harming ourselves in this fight

Best,
Lutz

Not for Full Tilt. By using the rakeback affiliates as proxy, they ensure that they only have to pay players who know about rakeback. This saves them from paying rakeback money to weaker, newer players who found their site from TV or friends.

(A layered VIP program like Stars has is a partial solution for this)

I guess Full Tilt loses more money on forcing majority of high-rake players to take a de-tour through an affiliate than they save on the few players that don't know about rakeback.

And even if you think giving rakeback only through affiliates is good: then, I think, it should be the rakeback and nothing more. Affiliate-based rake races again have the negative effects as described above.

That's of course a valid point, however, there are negatives:

1) Player's feel cheated / treated unfairly
2) Nowadays, as the top 10% of poker players generate about 80% of the rake, and the top 10% of players usually know about rakeback, the savings should be very small compared to a 5 years ago.
3) As long as incentives are affiliate-based, the site itself can't use them for their (often multi-million-dollar) advertising
4) Players are "forced" to sign-up via affiliate even if they would have signed up directly at the site - this generates an extra cost to the poker room.

Guys, surely you aren't suggesting getting rid of affiliates altogether?
After all any player that signs up through an affiliate rather than direct is a cost to the room right?
So if you are trying to cut out the extra costs to the rooms to allow them to spend multi-millions of dollars on marketing, then surely all affiliates are defunct?
Of course you aren’t suggesting that. The industry would never have grown at the speed it did without affiliates. Sorry I even thought that.

So if you aren’t trying to cut out affiliates then citing your FT example: rakeback affiliates are actually currently saving FT 5% as FT pay rakeback affiliates 30% compared to regular affiliates whom they pay up to 35%.
And at least with rakeback affiliates 90% (27/30) is going back to the players account (the ecology) compared to 0% through a 35% affiliate.
And if that rakeback affiliate then puts some of their 3% in to promotions (let’s say 1.5% for arguments sake) then we are up to 95% back in to the room ecology which is what you guys are so passionate about.

Currently, and I obviously have to guess the numbers here, the $50 free bankroll model (that you and a few others adopt) is/has been predominantly CPA – and we’ll say that the big boys who are good at it like you earn say, a very conservative estimate of, $250 per depositing player. So $50 gets given to the player as an incentive to sign up then say you put in an extra $50 per player towards your freerolls and rake races. So actually you guys are putting 40% back in to the room ecology. It might be higher.
Obviously I haven't included all operating costs because all affiliates have operating costs and staff wages etc. But anyway that’s 95% vs. 40%+
And at least with the rakeback model the affiliate only gets paid out if the player plays and rakes, whereas with a CPA model the affiliate gets pretty much everything up front regardless of what the player goes on to do.

As for the “rakeback and nothing more”, well you are effectively saying that affiliates should not be allowed to offer any additional incentive whatsoever for players to sign up through them to be part of a rooms rakeback or VIP program (whether they offer it directly to all players like Stars or only to people who know about it like Tilt). Then that would include rake races, freerolls, live event packages, rake chases, iPods etc, a special larger sign up bonus than the site itself offers, and very importantly even a free $50 bank roll, because effectively all these things are retention tools, or to be more succinct bribes to keep playing through the affiliate or the room.

I share a lot of the same views as you guys regards the industry and seeing most of the money affiliates make go back to the players. After all it was us who were the front runner in actually offering promotions out of own affiliate fees when we first started rather than begging rooms for freerolls etc. And while I agree with a lot of what you are trying to do, I think you are barking up the wrong tree with the extra incentives because you are just as guilty as all of us of bribing players to sign up with you rather than directly with the rooms.
And you saying that “we offer rakeback at FT, PKR etc, and we offer a $100,000 rake race to our top 250 high volume players, are our ways of defending against other affiliates” is not a valid argument. You have chosen a different business model from them. And yours is a fantastic business model, one that most of us would love to replicate at some point. But in reality you offer a $100,000 race to keep your 250 biggest rakers happy and playing through you. Let’s just call a spade a spade and focus back on the real issues that we share like getting rid or illegal deals at iPoker (who let’s face it don’t really care) and other networks that have strict policies and caps. Or like trying to get networks to stop handing out skins to any Tom, Dick or Harry who waves a list of 500 of their poker playing friends in the face of the network and then relies solely on rakeback to build their predominantly worthless businesses rather than proper marketing.
Those are the battles you should be focussing on IMO.

With regards and respectfully as ever

Me

Hey JessicaRB,

thanks for your comprehensive statement. I'll try to answer it without heavy quoting. If I miss a point, please call my attention to it.

"95% vs 40%"

In your calculation, you are ignoring net-deposits. Net-deposits are the lifeblood of a poker room that is largely ignored - as skins and affiliates are just paid on rake. So yes, nowadays a RB affiliate on FTP is forced to give 95% back - which is why it was a good move by FTP to cut most RB affiliates. The problem is that they and you are just making a cut through the affiliate world by "rakeback vs non-rakeback", whereas the cut needs to be made between "contributing and cannibalistic".

Most (not all) rakeback affiliates invest zero of their income into getting genuinely new players (ideally those that never played online poker before) and will bring really new liquidity to the room. So yes, 95% is better than <95% - but I think it should be >100% => an affiliate needs to add real value.

Our players can be roughly split into two halves. The one part is ambitious and uses our extensive poker content and services to become an ever-better player. Those players will rarely become net-depositors. The larger part will use us as a stepping stone into taking up online poker as a dear recreational activity. The latter will in average be net-depositors.

Network Skins

I share your opinion here. Way too many licenses were given to skins that had no sustainable business model / marketing approach outside of poaching players from network partners - which obviously is not just "no value added", but creates a vicious circle by reducing the margins of other skins that try to bring in real liquidity.

But the same applies to a lot of affiliates. Why do you imagine that many of the very very big affiliates told you: "If you already have an account at Full Tilt Poker, we are sorry as you are allowed just one account. But maybe one of your friends and familiy wants to signup...?"

The reason is simple: many rakeback affiliates also rely on poaching players from other skins, other affiliates, other rooms without adding value to the online poker industry in general and often not even to the skin they are working with.

Rake Races

I also agree here. The $100k race we offer is not a good thing from this perspective. We would love to give this money to the poker rooms themselves to help them offer big central promotions.

Gradually, we try to devise a plan with rooms to switch away from allowing affiliates doing those things. We think that direct monetary value like a race should be centrally controlled by the liquidity pool (stand-alone room / network) for three reasons:

1. It's fair to the players
2. It gives small affiliates a powerful marketing tool they don't have now
3. It prevents poaching

But at least we do not go around and poach players with our not-so-nice race. We don't even talk about it here on 2+2, even though we quite some pages of self-description content for this forum. The reason is that the $100k race is not meant to poach. It was meant as a defensive move against other affiliates doing local rake races or handing out under-the-table deals. But we now see that this does not work in the long run - which is why we switched to public "lobbyism" for this (from our view good) cause.


Conclusion:
I think it is important to take net-deposits into account. And I think it is important to ask yourself - when analysing an affiliate or skin - whether they have some plan to bring in genuinely new players instead of just tapping into the existing well-informed player base by offering them some nice deals and acting up like they were player advocates.

And as you rightly pointed out for many skins, you will also find out for many affiliaes that they do not have such a plan. They do not invest money into marketing / some other way to speak to new players.

Best,
Lutz

I'm a partner at a small company that runs both a rakeback site and a reasonably large news site / forum...I tried to focus on points that haven't been exhausted in this thread or at PAL, but forgive me if I'm repetitive as the threads are long and have a lot of good existing ideas already...

1. De-centralized incentives (be it rakeback, free bankoll, free training, rake races etc) offer advantages:

-It allows the poker rooms to offer more efficient promotions. Some communities are motivated by freerolls, others by free training, others by rake races. It doesn't make sense for a room to pay for free training for a customer that isn't going to use it, or to offer rake races to those that aren't going to be motivated by them. Affiliates provide the means to target the unique groups.

-It allows for rooms to discriminate based on price - they can offer a better price to those that require it, and charge a higher rate to those that are indifferent to price. This is most clearly apparent with the straight rakeback example. Those that care about rakeback can sign up for rakeback, those that don't, won't bother.

2. Rakeback affiliates do add value to the poker rooms and the community

-They serve as a means for poker rooms to provide their customers and potential customers with news and details on their promotions. As an affiliate we receive news from the rooms frequently about new promotions they're running or changes to their VIP program. A significant part of our job is to make sense of those changes and communicate them to our members, be it via Live Chat, email, news posts, or mailings....On this note, Email and chat support at rakeback sites is typically very good and extensively used by players. Things like deductions, different VIP point earn rates for rakeback players, deposit bonus terms etc make for a lot of questions for players that rely on their affiliate to answer. Unlike the poker rooms, we rarely offer canned responses.

-All larger rakeback affiliates have a system in place to relay player rakeback stat and payment scheduling to their players.

-Many rakeback affiliates also run news / content / training / other sites. They use the rakeback operation to convert this traffic into revenue. Those rakeback providers that aren't involved in other aspects of the business often buy ads on forums / news sites etc. Twoplustwo for example derives a significant portion of their revenue from ads sold to rakeback affiliates. Those rakeback affiliates are supporting 2p2, which most / all would consider to be good for the industry.

-It isn't fair to assume that rakeback affiliate revenue is solely from players that are switching rooms. First - many rakeback affiliates do target new players (ie: news sites that promote rakeback, off-line recruiting). But even knowledgeable players are often on the sidelines because they busted, or because they have been playing xbox instead of poker. An email from a rakeback affiliate promoting the latest offers from a specific room along with an exclusive promotion may well convince this player to return to the tables. Some might say that this player is 'switching rooms', but since time has lapsed since he last played I would consider him reactivated.

3. Value of a player: I agree that a player that deposits $10000 and generates $5000 in rake is more valuable than a player that deposits $500 and generates $5000 in rake, ceteris paribus. But I don't think the formula is quite so simple. For instance, all else equal, a player willing to sit short-handed is more valuable than a player taking the last seat at a table. This player starts games and makes the lobby more attractive thus encouraging recreational players to deposit. Also a player who plays during off-peak times is more valuable. As is a player who deposits / cashes out infrequently because they limit room fees...etc etc.

4. Good rakeback affiliates aren't focused on poaching. In fact we discourage it. For example, our system doesn't allow a customer to sign up for a Cake network room if they already have a rakeback account (with us) on the Cake Network. We set up this control to protect the original Cake Network room they joined in accordance with network rules. Granted it's not perfect since it just involves players who signed up through us at their first Cake room, but it's a way that we add value for the rooms that doesn't in any way lead to revenue for us. We do it because honoring the network rules to the best of our ability is the right thing to do, and I believe other major rakeback affiliates act similarly. My point - I don't think it's fair to equate rakeback affiliates with affilaites / skins that offer illegal deals and focus on poaching. our deals are legal and we don't want to steal players from other affilaites.


Rakeback sites are essentially brokers of poker rooms. Our gross revenue averages well under 10% of MGR. In exchange we fund promotions, assist with support, allow rooms to community-target their promotions, allow them to price discriminate, provide them with a means to spread the word on promotions, spend advertising dollars on and / or run other industry sites, and compete with eachother to ensure that knowledgeable players receive good value for their play. Are there industry issues arrising as more players know about rakeback? Will payment structures evolve and will rakeback affiliates need to adjust? Does it make sense that smaller networks pay us better than larger ones with large marketing campaigns? Absolutely. Is it a flawed and over-simplified formula that causes a player generating $2k MGR to be worth more than a player who deposits (and loses) $100k over $500 MGR? Yes. But painting rakeback affilaites as poaching leaches on the industry is not a reasonable conclusion.

One final note - the concept of giving different affilaites / customer groups different prices isn't new. Look at TV offers for sites like audible or weightwatchers. Or check out cashback sites like Bing Cashback or Fatwallet. What's going on in online poker isn't that different than the 'real world' - which doesn't by itself make it the right model, but it's certainly not a unique one.

Hi Lutz, thanks for getting back to me.

I am not sure i understand the net-depositor argument as many (more than 50%) of rakeback players are net depositors so i think that argument can be applied to the majority of players (assuming that overall a much smaller portion of players are winning players (and therefore net withdrawers)).

Also I am not sure that your argument about rakeback affiliates not introducing new players stands up either. I think that argument holds for 99% of affiliates. My point being that you are almost suggesting that the 1st person who ever introduces a person to online poker should be credited with that player's referral for life.
Let's say Player A (20 years old) has a brother who is 16 and sees him playing poker daily and 2 years later he signs up with the same card room and starts playing. So it's his brother who has introduced him to online poker. Then after a year he is surfing porn and comes across a poker ad for a different room offering a big sign up bonus and a $50 bankroll (the ad belongs to an affiliate). Now is it fair to say that if he clicks that ad and signs up with the new room he has effectively been poached? After all you are saying that if he sees an ad offering to give him cash back on his play (which is just another incentive like the $50) by an affiliate that would be classed as poaching?
You see the problem? Either both are poaching or neither. Both affiliates will get paid when really it was his brother who introduced him to the game.
The poker rooms are all competing with one another and they want to poach players from other sites. It’s true between independent rooms and it’s also true between skins on a network. iPoker is a classic example where almost every skin has a differing VIP program. It’s ludicrous!

I think we share many views on skins etc. but just because an affiliate tells a player that their friends and family are still eligible for accounts, I don’t think we paint everyone with the same brush. After all a lot of those players may genuinely want to refer friends and family to poker and if you start to curtail that then how is one supposed to attract new players? What is the point of you or us having “Invite A Friend” programs where we are offering incentives to the referral and the referrer. More often than not these will never be new players anyhow.
You yourselves suggest that players invite “People you know from internet forums”. I mean that is effectively poaching existing online poker players away from other affiliates or rooms where they already play. We also ask players to recommend friends, family and post in forum where they are allowed. Why should either of us be penalised for trying to enhance the overall experience of the end user?
As muckthenuts suggests it’s exactly how the real world operates. You buy a car from Ford, and 3 years later you see an ad in a local newspaper by a local car dealer who promotes Volvo and he is offering $2000 cash back. It’s a competitive world and with the world economies in the states they are in, everyone is looking for any edge/kickback in ALL markets to help them get by.

Muckthenuts covered most of the races/promotions argument so I won’t go too in-depth, but again reiterate that the defence argument is not a valid one. Different standard of player get different rewards. Big players get the races – Chases benefit all players – Freerolls benefit small to middling players who stand to win sums that could be worth 2/3 years worth of rakeback in one sitting. If you stopped your $100,000 race then I think you would see an instant drop in revenue from those 250 players because you would be forced to split the money between the 10+ rooms that participate (to help them with their central promotions) and those rooms wouldn't be able to offer the race amounts that would be needed to be practically guaranteed for your players to hang around. They will go off and search Google for “Rake Races” and get “poached” by the first site/ad that popped up (it’s not us incidentally ).

The fact is that unless we somehow manage to tag a player (for life) to the very first thing/person that made them play online poker then they are always potential targets/fair game for all rooms and affiliates.

Kind regards

Me

Many of the obvious rebuttals have already been articulated above, but the one massive flaw in the original post is worth re-hammering:

This line of thinking is rooted in a POV where rakeback operators do nothing but offer rakeback. That POV hasn't been relevant for several years. While there are still several 'pure' rakeback operators, I would argue that a majority of sites that offer rakeback do so as an aside to their larger function / service (training, software, news, staking, coaching, etc) and that a majority of those services represent significant investment in attracting, developing and aiding in the retention of new players.

muck makes a point that's worth re-stating: re-activating a dormant player is, in many ways, identical in terms of ecosystem impact to attracting a new one.

I'm not going to bother picking apart the original post simply because I don't accept it as the premise from which this discussion should begin.

The assumption that PS's model is better than rakeback on face is absurd, and the attempt to employ 2+2 members as a proxy for pressuring rooms to bend to PokerStrategy's preferred model under the guise of 'protecting the poker ecosystem' is at once disingenuous and instantly pollutes any attempt at a reasonable conversation on how the affiliate system should evolve along with the industry.

Hi Chris,

thanks for your feedback.

With regards to the first point, you are in right in so far that it is not about rakeback vs non-rakeback but cannibalisation vs contribution. Of course, this is a sliding scale, and there is a difference between pure "best deal / rakeback" affiliates and more balanced one's.

However, it does not change the fact that cannibalisation per se is counter-productive.

With regards to your second point, it's not about playing mind games. The phenomena we described are real and are routed in actual player data (rake vs deposit/cashout) , but also clearly visible in an affiliate's marketing strategy (aimed at cannibalisation vs aimed at generating new players).

Based on empiric data it's very easy to find out how cannibalistic an affiliate is.

The core problem in the rake based player valuation model is that the top 5% of players generated 60+% of the rake. The top 5% of players are - as we all know - extremely well connected to each others.
This is why "secret exclusive deals" aimed at those players never stay secret. Also, those players do know the poker market pretty well, so it's not like they hear about Full Tilt first because they saw a big race on a rakeback site.
At the end of the day, exclusive promos targeted at VIP are pure cannibalisation. This is how cannibalisatic affiliates achieve million dollar revenues without neither risk nor significant investement or contribution of new players.

There is really no reason whatsoever why VIP incentives should not be centralized at the liquidity pool level, or at least, at the operator level.

With regards to incentives targeted at completely new or recreational players, the above problem is less strong, i.e. there the potential benefits can off-set the hidden damage.

Incentivising VIP players is great. As said above, this should be done by the poker room centrally to deal with the cannibalisation issue. Also, it's really very easy for a poker room to do this - there is no "work" required - the same goes for the tracking and stats.
The great advantage of central VIP incentives is that poker rooms can finally *advertise them* through their direct channels and on their website.
It's also much fairer from the player's point of view. Decentralized VIP incentives always generate 1st and 2nd class players - see the massive Full Tilt debate here on twoplustwo.

Affiliates that generate true value through content etc quite frankly don't need to cannibalisation at all. (although of course it's still a free lunch) They should just do away with it.
Central promotions and incentives work just as well - if not better - for converting players than "exclusive" ones. New players won't even know the difference.

As said above, it's not "black and white" We have nothing against particular sites "as a whole" but only against the cannibalistic elements. However, I think you will agree with me that most rakeback affiliates are not so much into generating content or advertising as it's much easier & smarter to generate traffic through cannibalisation - and for this to work, promotions and incentives need to be "exclusive".

Player value is a complex topic. There probably is no perfect solution. However, the current "rake only" model is clearly flawed. So moving from a rake only model to a model involving rake, deposits and cashouts will already be a huge advantage. (in detail, doing this btw is not that trivial, however it can be and has been done).

There is two ways of poaching:

1) Direct poaching, i.e. encouraging players to create an illegitimate 2nd account. A nice version of this is the infamous "uninstall your software" clause in the download guide and the "friends and family" clause if you already have an account. Please don't insult my intelligence by trying to give a bogus explanation for this.

2) Indirect cannibalisation. ("de-touring" players)
Example: Top Player likes Full Tilt -> He wants to play at Full Tilt -> He knows that there are different "deals" on Full Tilt as VIP incentives are not centralized -> He goes to twoplustwo -> He looks for the best deal -> Affiliate makes sure that he has exposure / awareness at those places where people look for deals -> Player signs-up through that affiliate.

All in all, 2 is the bigger problem than 1 as poker sites are aware of 1, but often are now well educated about 2, though this has been changing quite a bit in the past.

Rakeback affiliates are not brokers of the affiliate industry, but they are very often unnecessary middle-men that don't add value. All the things done by them can be provided by the sites directly usually in a much more efficient and fair way. The money saved can either go to players or be invested into marketing.

Yes, that's true. However, the so called "price-targeting" is also not a no-brainer. It makes sense in some environments and can be very bad in others.

In the context of poker, it simply does not work. This is made much worse by the fact that the current player value metric is 100% rake focused which makes cannibalisation extremely easy and very profitable.

The result is an easy to set up and profitable business model for cannibalistic affiliates at the expense of long term market development which is also very damaging for players that aim to make a decent living with poker for some time to come.

Hi Jessica,

I think the key thing to realize is the difference between competition and cannibalisation.

The reason why cannibalisation in poker is such a big problem is the fact that the player value metric is flawed. It's just based on rake. Thus, the assumption is that if I take 1000 players who generated $10k rake per month and put them into a poker room (there will be enough action in principle as they all play a lot) I'll generate $10m per month.

We all know that this is nonsense as VIP players are not "self-sustainable". The money they rake is basically converted net losses of other players.

Now, cannibalisation in poker is so dangerous because by just targeting the top end players - and getting cannibalisting them directly or indirectly (see my post above), the business is taking advantage of the fact that somebody else is stupid enough to generate all the fresh players and deposits without asking fair compensation for that.

This gives rise to a vicious circle / downward spiral which leads to reduced liquidity and tougher and tougher tables as there is not enough "room" for winning players any more.

At the end of the day, cannibalistic affiliates are taking advantage of a market flaw.

Now, the tool to make cannibalisation work is mostly "de-touring" players that already want to play at a site but are looking for "deals". If those deals very centralized - and I don't mind them being 60%+ btw! - this "de-touring" of players won't work.

This is why cannibalistic affiliate are always so keen on finding reasons why VIP promotions/races/chases need to be "exclusive" to them.

Korn,

Our most prominent disconnect falls in the generalization that rakeback affiliates are by definition cannibalistic. Some certainly are, and we share that common enemy. But even if you ignore or heavily discount the value added by rakeback sites directly, most rakeback providers are involved in other sites that you would certainly consider to be adding value. Likewise, most news / content / software / training sites offer rakeback. It isn't reasonable to simply equate cannibalsim with rakeback.

True.

From my point of view, there are several things that indicate cannibalistic behaviour:

1. No other offers
If an affiliate seriously tries to offer some content or services, e.g. news (PokerNews.com) or content (CardRunners.com), chances are they are not cannibalistic in that sense.

2. Exclusive offers
If an affiliate tries to offer "the best deal" as a unique selling proposition, the idea behind this is most of the time attract players that do just look for this best deal.

3. Presentation
If an affiliate presents his deals clearly geared towards people interested in the best deal & even indirectly implying the player should open a new account (on his grandmother or the likes), chances are he has the clear goal to poach players.

4. Marketing Strategy
Of course not always easy to see - but most of the time you can guess it pretty well: does an affiliate (or skin) has any other marketing strategy / way to acquire customers outside targeting high-volume players with his "deals"?

It sounds like you agree with my statement that "most rakeback providers are involved in other sites that you would certainly consider to be adding value". You and I might draw the line in a different place, but generally I think we're on the same page...But in the OP you say:

Why not say "Theres a breed of rakeback affiliates that offers illegal deals and / or suggests that players break poker room and network multi-accounting rules. These guys are leaches on the community and should be torched." The generalization your making isn't fair to a large portion of the poker world that both contributes value to the community and offers rakeback.

Hey muckthenuts,

to be honest, I do not care too much for the shareholder structure of rakeback affiliates. It might be that some of them also are building different business models - inside and outside of online poker - that I would not call 'cannibalistic' or 'parasitic'.

Especially the big rakeback sites we do not need to specifically mention here are based upon 90%+ cannibalisation. They have no other business model than trying to squeeze 'exclusive promotions' out of a poker room's affiliate manager [i.e. a rake race] so that people that ask for a 'good deal' on poker room X in huge communities like 2+2 will be advised to go to them for purely monetary reasons.

Even a lot of small stakes players are lured to those 'best deal / exclusive deal' sites, as they think: "Well, better than nothing - and maybe some day I will get my share of these races".

[Worse of course are under-the-table deals by illegal rakeback affiliates that do shady stuff - we're surely of the same opinion here.]

These rakeback affiliate sites do not add value to the poker industry - but harm it in the long run. This is also true if you take the view of winning players as a whole - and ignore the fate of operators / other affiliates.


It might very well be that some of these affiliates take some of the millions they earned with their cannibalistic business models to go into other areas of the online poker affiliation market and build up sites there that are not to be considered parasitic. But that does not make the former business model any better.

Best,
Lutz

Lutz/Dominik,

From my perspective it seems you are essentially posting this rhetoric, as well as emailing your thesis to the major rooms/networks, to curb your competition. You are the biggest poker affiliate in the world and are trying to throw your weight around to get even more market share.

I find many of your points to be hypocritical. The biggest one being that rakeback affiliates cannibalize traffic by offering something the room doesn't have in house. Well, you do the same thing.

Most rooms don't offer players free bankrolls to play poker with. Therefore, new players must go to your site to receive free poker money. Sure, you bring in fish and liquidity. But you do so in the same fashion that you are scolding rakeback affiliates for. You are offering something that is exclusive and can't be obtained from signing up with the rooms direct.

Your company indeed has a lot of power in this industry (i believe you claimed your revenues are higher than Party Poker). However, your recent actions are NOT in the best interest of this industry or in the best interest of poker players. Your arguments and actions are in the best interest of YOU and your bottom line.

We obviously disagree on several basic theories when it comes to marketing and poke ecology. You have every right to state your opinion publicly on this forum and others. Having a fair and professional discussion is what this community is all about.

Bevo54

POTD

We could not agree more.

Hey Bevo54,

The reason why we do all this 'lobbyism' is that we believe a healthy poker market is important for everyone who thinks in the long run:
• winning players
• poker operators / networks
• affiliates / other businesses

I think you noticed that the year over year growth of the poker market has gone done to below 10% by some indicators [namely PokerScout.com].

We strongly believe that one of the big reasons for this are market flaws. Big marketing campaigns often bring in a lot of new net deposits - but not a lot of rake, as the rake is generated by another type of player.

Thus, big marketing campaigns don't bring a good ROI if you calculate by rake. A stand-alone room can ignore that or calculate differently - which is why PokerStars and Full Tilt, who do big-time marketing, still took market shares.

But if you are a skin in a network - say a sportsbook on iPoker or Ongame - you cannot calculate differently, as you are contractually paid on rake. If now parasitic skins/affiliates use monetary incentives to concentrate high rakers on their sites, they will never regain their investments into big marketing / cross-selling campaigns.

So yes - we do all this in our best interest. But also in the best interest of thousands of winning poker players, hundreds of small affiliates who cannot compete with these monetary incentives and dozens of operators.

So why don't you give out free bankrolls? I guess no poker room in the world would hinder you from doing so. You can even start to give your players $1,000 - and we won't care. So one question by me: why don't you give out free bankrolls?

There is just a big difference between "monetary incentives designed and used to poach high-rakers" and any stuff that helps converting loads of recreational players such as free bankrolls or - more widespread - some smaller freerolls.

We also get this argument a lot when talking to affiliate managers at poker rooms. They hear this all day from rakeback affiliates [again, I'm just referring to affiliates that do nothing else than rakeback and try to offer "the best deal" to players] - as rakeback affiliates have little arguments left to defend their cannibalistic business models.

It might very well be true that our bottom line will be hurt in the short run. But still, this is absolutely necessary in the long run. Only an online poker industry with healthy market rules will prevail and grow in the long run. That means: ceasing to incentivise cannibalistic business models that do not add any value.

I'm not too sure if you really disagree, but you certainly argue against us. And this is absolutely understandable - as I guess your business model depends on it.

I also understand that you need to lead this "counter attack" of implying that PokerStrategy.com is also evil and just argues from an egoistical perspective. But this does not curb the logic behind our arguments. It's not rocket science - it's a comparably simple economical model.

Best,
Lutz

To add one thing:
Whoever built up a successful rakeback affiliate is probably a smart person business-, Internet- and industry-wise.

Heed my call: use your expertise and skills to find ways to deliver real value to the poker industry.

Popuarise poker. Bring in genuine new players. Optimise cheap ways to acquire traffic. Realise content and services the operators cannot offer to the players themselves.

I'm absolutely sure of two things:

1. The industry will move towards better market rules - or shrink further. Both would mean the cannibalistic rakeback affiliate model would work worse and worse.

2. There are a lot of opportunities to deliver value to both operators and players and be paid fairly for it.

Hi Lutz:

I just want to challenge what I bolded in your statement a little bit. Winning players do start games and keep games going, and it's my experience, mostly from live poker, that winning players help a poker room to be successful. I assume this is also true on the Internet.

Best wishes,
Mason

Hey Mason,

I completely agree. Winning players are crucial for a poker room. What I meant is: "it is in the best interest of a winning player to have a poker market without big market flaws."

The reason is that the current market flaws lead to business models that de-tour a lot of rake through themselves that would be generated anyways.

Especially on networks like iPoker this lead to a situation that iPoker skin A poaches players from iPoker skin B by offering them a few % rakeback more.

The consequence is:

Option 1: skin A joins the fray and increases it's bonus costs
=> a vicious circle at the end of which no skin has money left to do marketing to bring in genuine new players.
=> without new recreational players, winning players lose - no matter if they now can have 70 or 80% rakeback.

Option 2: skin A does not join the fray and continue to do marketing.
=> the marketing will bring in new recreational players
=> the high rakers amongst these will wander off to skin B
=> skin A will not have a positive return of investment on their marketing campaigns and need to stop them. [reason: they are just paid for the low rake of these players - not the high net-deposits]
=> without new recreational players, winning players lose.


The problem is the short-termism of a winning player - that is completely understandable. If skin B offers 10% more rakeback and all else is equal - it's logical for the winning player to wander off. So the system needs to be changed to regulate the behaviour of skins on the network.

The same applies - as was the main topic of the thread - to a stand-alone poker room and it's affiliates - especially if the affiliates encourage opening a new account through your grandmother

Best,
Lutz

Hiya Lutz,

Will you concede that if poker rooms were to start centralising promotions (such that affiliates couldn't offer any added incentives) then that would mean the end of the free $50 bankroll that you offer also?

Kind regards

Me