Hi Jessica,

it's not about affiliate based promotions per se, but about cannibalization.

Now, in poker, cannibalization by affiliates is done through exclusive promotions that are targeted at high rake VIP-players that lead to direct or indirect cannbalization ("de-touring") [rake races, rake chases, addiontal rakeback, etc]

Special initiatives by affiliates that are designed to generate new, recreational players are absolutely fine as they are non-cannibalistic.

Good Example:
- Affiliate raffles a trip to Vegas between all players that make a deposit at room XYZ

Bad Example:
- Affiliate gives 5 trips to Vegas to the 5 highest rakers and offers straight cash as replacement if they don't want to go.

Of course, there will be many "grey areas" and also, if an affiliate offers hundreds of those trips per month, it again becomes cannibalistic. At the end of the day, it's the task of the poker room / network to regulate in such a way as to reduce cannibalization and encourge contribution of new liquidity.

Interesting read, gives a lot of insights to someone who isn't into the affiliate business.

All of you made decent arguments, are often right in your assumptions.

But do you know how all this looks like to a player who knew nothing about all that?

People are arguing about money and how to spend/keep it that isn't even theirs.
Some might be better and take more effort/cut their profit in order to keep the poker ecology in a good shape.

What none of you states is that online poker would be better off without all of the affiliate based stress and costs.
You're investing our money in order to try to fix a problem that wouldn't exist without your existence.

It's really that simple.

@wellju:
With your view, you are putting all affiliates into one bin based on your assumptions that come from experiences with rakeback affiliates.

Take PokerNews.com: they do a fantastic job in covering big poker events & the live tournament scene. This speaks to thousands of recreational players. Exposing these to online poker rooms is perfect for any winning player.

Conclusion: a lot of affiliates are absolutely valuable even from the most very egoistic point of view of any winning players. But only if they bring in genuine new players and popularise poker to new players instead of just de-touring existing players from room A to room B.

At the end of the day, the core principle is as follows:

Every dollar that is made with poker - by winning players, affiliates or poker rooms - has been deposited and lost by a recreational poker player first.

For poker to stay attractive for those who benefit from it (winning players, affiliates, poker rooms) the business dynamics need to realize this. The focus must shift from generating rake (with all the negative side effects such as cannibalisation etc) to generating deposits from new recreational poker players.

For this to work, new recreational poker players need to be valued more. I.e. affiliates / skins in networks should not be paid on rake alone, but on a combination of rake and (deposits - cashouts).

In addition to that, cannibalisation that's aimed and attracting high rakers only while not seeking to generate deposits from recreational players needs to be reduced or stopped.

When this happens, we will see growth in poker again and softer tables overall.

Come on Xantos. You of all people should know that the bankroll model has an extremely high barrier to entry for affiliates. Not only do you need to properly screen players for fraud but you also need to get the ok from the rooms (especially if you are working on a CPA). You're implying that your run of the mill affiliate can offer bankrolls. That simply isn't true due to the logistics and risk involved with the model.

Truth be told, we do offer bankrolls. We are one of your biggest competitors. We are also one of the largest rakeback affiliates in the industry. We send thousands of "fish" or new blood to the player pool every month. So please don't lump every rakeback affiliate into the cannibalistic group you referred to in your white paper.

Hey Bevo54,

then I've got two question for you:

1. Do you as an affiliate need "exclusive" offers for high rakers?
Or would you be happy with an environment where you would be able to offer monetary incentives that also the smallest affiliate can offer?
[Example: 27% RB at FTP and maybe a central rake race for everyone, but no affiliate based races or similar stuff]

2. Don't you think that this would lead to a situation where the incentives to bring in recreational players would go up and this would be healthy?

Background:
I have no problem in someone offering all the rakeback stuff that is in the market.
I would even be happy with iPoker introducing 50% flat rakeback for everyone throughout the network.
The problem lies solely in the outcompeting that combined with accounting on a rake-only basis leads to a vicious circle of stagnation and shrinking for networks and rooms that are heavily affected such as iPoker, Ongame etc.

Best,
Lutz

xanatos.

your white paper is so horribly constructed. what is the proposal you are trying to make? it would be nice if you would make a set of absolute truths and then your hypotheses, show supporting numbers and not write as if you know all and your word is bond. its irresponsible of you to put out such uneducated, unsupported documents and pose them as factual. it would be nice if you had supporting numbers behind your sweeping statements of high rakers dont deposit, and they just cashout. where is the numerical evidence behind that? from what ive seen, my rb players deposit a TON more than my cpa, bankroll and rev share players.

it seems to me that you are a socialist. you want everyone on the same level playing field in this business. in your eyes what are fair areas of competition, where do you think we are allowed to compete upon? you dont like attraction by pricing, when every industry out there have business who compete on price, its laughable that you keep using this argument. every industry has negotiation between vendors and customers, like you see with affiliates and poker rooms. you cant tell me you dont try and negotiate your payouts from the rooms(which affects their margins which you seem to be SO concerned about). so whats wrong with us doing that? sometimes we forgo larger % increases for more promotional money, which the poker rooms prefer since that money is used to attract players to their rooms and back in their poker 'ecology'. if you are playing so on the level, and keep suggesting that everyone just offer free money, how can you offer pokerstars bankrolls whihc no other affiliate is granted access to? sounds like a lot of your arguments are rather hypocritical. what about all the rake promotions and freerolls you run? what about providing rakeback? you engage in every activity you are poo pooing in your white paper.

in this comment in your white paper:

"Some poker rooms have already taken a variety of steps to prevent or regulate the problem. The undoubtedly
most well known and effective approach is employed by PokerStars:
1. Using a centralized monetary incentive scheme
2. Regulating “additional affiliate” promotions to avoid competition"

number 2, please comment on your exclusive ability to offer bankrolls at stars? are you willing to take that offer off your website in order to stand behind your words?

"Additionally it
doesn’t allow any of its affiliates to offer rake races or additional monetary incentives, and thus prevents
the issue of players needing to sign up via affiliates in order to receive ‘the best deal’."

again, you indeed have these additional incentives, please comment.

you keep saying cannibalism. the rooms and networks are fighting amongst themselves for players. hence why you see different affiliate payouts. if an affiliate successfully attracts a player from stars to ftp, he did his job and will be paid for it by ftp, there is a finite player pool and every room wants as many players as he can get. just as bmw would like all mercedes owners to become bmw owners, simple business again. why do you keep referring to us trying to publish that we have the best deals, their are caps on the offerings at each room. you mention not sourcing new players. thats just a ludicrous uninformed statement. i give out free coaching to my players to make them better, i love nothing more than attracting the brand new players i find from my bankrolling sites than transitino them to rakeback and make them become better players. i also love when our new player campaigns succeed for our rakeback sites.

u also talk incessantly about net depositors and how rb players only cashout. every poker player in their lifecycle if they become winners, has a period of deposits then they beat a certain level and build a bankroll, then they move up in stakes and lose money then they beat a level and on and on. sometimes they switch games as well in which they dump money again learning the game. also, for every fish there is a shark and in turn that shark is always going to be someone elses fish and on and on up the chain. there are also many variations of this and to make the broad sweeping statements that you do about affilates and players is just plain ignorance. i also have thousands of rb players who are losing players and just deposit every month, our players run the gamut of player type just like any other community of players.

saying that rooms are paying twice to get the players that rakeback affiliates refer is a bit of a stretch. there is always some element on advertising spends of how much of this money will bring in new people vs. people that already knew about our brand. there is a strong argument that because of the rb we provide they signed up at that room to begin with. the same can also be said though of your referral of players. arent the rooms then paying again twice for your players? do you not think the rooms are aware of this and evaluate their marketing departments ROI and see what needs changing? If feels very awkward to take advice from an affiliate in this industry and not a consortium that represents the many parties that are involved in the online poker industry. your arguments are just so biased it gets to frustrating reading them.

you make a statement about player a depositing 100 playing 100 hands, generating 5 in rake. then his 100 lost is in the poker community generating more rake.
while player b deposits 100 plays 500 hands generating 25 and cashing out 200.

first off, your example was crafted very much to your favor, you think player b cashes it all out and never plays again? come on, get real. but even as is player b is of much more value. you claim a given that winning players withdraw the money so that 100 lost by player a will be withdrawn and not around to be reraked. so i would hold that 25 rake > 5 rake, no?

"From
the viewpoint of the poker room there are even hidden costs in cannibalized traffic, since it is traffic that
they generated through their own marketing efforts yet continue paying for through revenue share."

couldnt the same be said for any affiliate traffic whether from the good affiliates like pokerlistings and pokernews or bad evil rakeback affiliates? i mean the brand of full tilt poker attracts players, but then they go through you for a free 50, then ftp is paying for that traffic again? how is that any different than them paying for the bad evil affilaites traffic?


Im sorry if my language is harsh in spots, but the way you respond to posts and the manner in which the paper was written is far from logical, honesty, fairness, and objectivity.

for disclosures sake. i started the rakeback boom with raketracker.com, i built a community portal with checkraised.com, i built a bankroll site in YPC, and my latest is pokeraffiliatesolutions which is an affiliate network/commnity that provides website development, design, affilaite deals and back office support. my company has 20 people in it, and i feel every single player i have referred to poker sites has value. we create a situation in which the player gets value from working with us, the poker rooms gets revenues/value from work with us, and we do as well. all my properties strive to provide a win/win/win situation for the stakeholders.

finally id request that you dont throw stones when you live in a glass house.

best
Chris

Guys, i realise this is not an argument solely against rakeback from your side but more about decentralising promotions, which alas I say you are as guilty of as anyone, and actually way more than most given your size.

However you guys keep going on about “cannibalisation” and I put it to you that you guys might actually be worse for the industry than most given your model.

The PokerStrategy model, as you have confirmed, allows a player to sign up through you for a free $50 at just one room. They cannot multi-table and they cannot sign up at the same rooms twice, or with PStrategy twice.
And once they sign up with you they get their $50 and you get your $250-$400 commission (once they have deposited and, in some cases, cleared the basic requirements)
But does it stop there?
Nope. They are now on your email list and newsletter. You naturally continue to email them regularly with your latest offers at other rooms. I mean it’s not as if once they have signed up for their free $50 at Party Poker, that you actually take them off the mailing list and don't market to them anymore. In fact you persistently thrust other rooms like Titan, William Hill, Everest, Paddy Power etc. into their inboxes with incentives like freerolls, or extra freerolls if they sign up before a certain date, bigger sign up bonuses than they can get direct, double strategy points, rake races and rakeback (none of which are the centralised promotions you so strongly advocate). In fact you actually want them (as would I or any affiliate) to sign up with as many rooms as possible because you will pick up $250-$400 CPA a go. I mean surely there is no more cannibalistic process in the poker affiliate fraternity than what I have just described?

But of course this is how all CPA affiliates operate right? And I am not remotely criticising the model, except of course your model is not actually how most CPA affiliates operate.
Most are not basing their business model solely on waiving a stick and $50 carrot to get the player to generate enough revenue to clear the CPA requirement that means they get paid the commission which pays for the $50 carrot in the first place!
And oh of course most CPA affiliates do not collect the details of their players and so cannot actually subsequently intentionally market to them persistently to sign up with other rooms.

But then again, whoaaaa! It’s not actually your fault that (nor the fault of any other data collecting CPA affiliate) in the slightest that the poker rooms all want to pay you CPA deals for every player (that we have established you are only putting about 33-45% at best back in to the system). Surely your job is just to bring the players in, whether they are new or referred by friends from other rooms. Once you have them in it’s the room’s job to do the retention of the player right? You can’t be held responsible if the room they run is crap, the software is sh*t or the customer service is atrocious. You have done your job which was to bring the layer in and if the room can't hold on to them then tough tits to them!
Of course the more rooms they sign up with the better for you and over their lives with you they probably sign up with what 3-5 rooms? Meaning you receive anything from $750-$2000 per player (average $1375)?

So back to this “holier than thou” attitude that you have adopted lately. The average lifetime value of a player (after discussion I had with 3 major rooms) is now on average $1150-$1350 depending who you ask, but they were all in that range. And you guys are picking up an average (albeit by my estimates) of $1375 a player over their life. So actually you are getting paid out more than all the rooms are making from a player between them.

If you are genuinely so concerned about all the money that is being drained from the whole ‘ecology’ why is that we haven't heard you guys stepping up to the plate and stopping players signing up through yourselves for their, second, third, fourth....seventh room through PokerStrategy?
You could block them by membership number...or email address...or IP address possibly. You could (knowing it was a new room) instead just divert them to the room directly so there was no CPA involved to you.
Not logistically possible? Or concerned that you might be depriving them of their human right to free choice? Fair enough...then why don't you waive your right to any CPA from any of the rooms where a player signs up subsequent to their $50 room. That way all those subsequent rooms could use that extra (average) $1000 between them to focus on marketing and bringing in new players via TV or other media or more importantly as you keep saying, allowing them to offer that $1000 in centralised promotions to aid their retention.
I fear this is a part of the poker ‘ecology’ that you have not thought about because you are perhaps of the Gekko school of thinking that “Greed is good!” (Has anyone seen the sequel btw? Worth seeing?). And what’s wrong with that? Nothing. Some of us are just happy to share – perhaps generosity is our weakness?

Now compare your business with any revenue share model who offers any sort of kickback, rakeback or any promotions out of their own commission regardless of how much they are putting back in. Of course like your model they actually don't care how many rooms the player signs up with, as long as the player signs up through them. But what makes them different from you is no revenue share affiliate (rakeback or otherwise) gets paid a cent of commission until rake is generated and therefore never takes more money from then rooms than the player is on average worth. In fact if the average revenue share affiliate picks up say 35-40% commission then they will only ever get 35-40% commission from that player whether he rakes $1 or $100,000 and always less than the room receives overall prior to any payments. And of course the rakeback affiliate puts even more back in to the system shared between top end and bottom end rakers.

What needs reiterating, I feel, is that you have chosen a business model and although you do so many similar things like rakeback, freerolls, bigger bonuses, double points, rake races etc you pretend they are purely defensive. No one is buying that argument as you do way too many non centralised promotions and claim to offer the best deals available. Besides there are many successful affiliates who have adapted to hedge their bets and cover all angles and offer rakeback and kickbacks alike, including, but not limited to, companies like PokerNews and PokerListings, PSO, PAS. They are all tremendously successful and respected industry affiliates and just get on with things, and the poker world turns and the ‘ecology’ survives just fine.
Yet you are dictating to rooms about what they should and shouldn’t do with other affiliates, but I wonder if the ones who are blinded from the hypocrisy by false promises and listen to you, actually realise how much money you are preventing them from spending on new players and how little you are doing to help them with retention of the players they have paid you for?

So while you may want rooms to be able to spend more on bringing in new players to the industry, I suggest that you guys are actually depriving them of some significant funding to do so, and thus hurting the industry ‘ecology’ in your own way!

Kind regards as ever

PS apologies to those TLDR, and anyone who read this on PAL already.

You are assuming the exclusive offers are meant solely for acquisition. When in fact, from our standpoint and the standpoint of the rooms, these offers are more often than not used for retention. But obv you know that. You offer exclusive races as well.

If i had to guess, i would say that part of your issue with rake races could stem from the fact that you operate on a CPA and therefore gain little in the form of revenue from the retention provided by races/chases.



No. This isn't 2005. Rakeback is not some secret that new players have no idea about. Much like cashback sites are no longer a niche in the traditional (non-gaming) marketing space. I know tons of people who won't buy a product online unless it's through a cashback or coupon site.

TONS of new players know about rakeback from their friends, 2+2, Google, etc. Some new players choose rakeback, while others choose free money. That is their right in a free market. Just like it's our right to provide them the best deal possible (of course within the caps and T/C's of the poker rooms).



"Outcompeting" where I'm from is good. It spawns creativity and generally provides extra value to the end user. The end user you are trying to appeal to is the poker room. Why? Not because you care about this industry but because you want to further your market share. What is best for the players? They are the lifeblood of this industry after all. Not us.

@morgant:

Chris, I absolutely appreciate your post - harsh language happens if you are into something with your whole heart.

I agree that the paper does not fulfill requirements for scientific papers / publication. At the moment, it is in a stage where it presents some facts and packs them into a context - and of course even for that purpose, it is far from perfect. But it is a start and we heavily encourage poker operators, other affiliates and especially players to think about it and discuss it.

Regarding your arguments regarding competition vs cannibalisation:
From you it sounds as if there would be no cannibalisation and that all competition would be good.

Maybe let's take an example - a Ford dealer on the outskirts of Los Angeles. This Ford dealer now has some cost advantages over LA downtown dealers:
- a cheaper municipal tax regime
- lower wages
- way lower rents

Would you now allow this outskirts dealer to use all his cost advantages to offer the Ford Focus for $2k cheaper than everone else and hire someone to hand people his flyers on the doorstep of the downtown dealers?

I guess Ford would not allow them to.

Competition is really good - including outpricing. But it should happen on a manufacturer level, not a trader level. Means: I would be perfectly fine with the whole of iPoker deciding to outcompete PokerStars and others in price (rake). This might be a good strategy for them.

The bad thing about iPoker internal competition is that it reduces the incentive to bring in recreational players - which is the single biggest thing a poker room has to offer to winning players. It is not in the players interest that iPoker has no recreational players.

Short Wikipedia article on cannibalisation: http://en.wikipedia.org/wiki/Cannibalization


@JessicaRB:

If we really would recieve $1,375 per player as you suggest, we would indeed be happy men - for we generate tens of thousands of new real money players every month. Rest assured: it's far, far less.

Why is it less?
Because we aim for long-term co-operations with the poker operators. In a long-term relationship

Which brings me to another point: rake vs net deposits.
In your post, again you are just talking about rake. If I were a stand-alone poker operator, I would happily pay $1,000 CPA for a player who deposits and loses $10,000 - but just rakes $100. As these $10,000 will go into either winning players' pockets or my own pockets - both good for me in the long run.

Currently, net deposits are not being reflected in player value, which besides the unhealty cannibalistic competiton is the second single biggest reason for online poker in general and especially the networks not growing at the moment.


@Bevo54:

I wonder why central poker room promotions are not good enough for retention. If indeed an additional rake race would generally help to retain high rakers so much - then you can also offer a central rake race.

To some degree you are right: rake races also help in retention and sometimes even net rake maximisation. But this does not offset the negative effects of most of the high rakers taking a de-tour to those affiliates who offer their 'exclusive best deals'.

My problem is not even these affiliates earning some money. My problem is that most of these affiliates do not invest a single cent into the long-term growth of online poker - i.e. do not invest to generate genuine new players that bring in new net deposits.

Well said - and that's what we are aiming for. Poker operators should heavily restrict affiliates in offering their own monetary incentives geared towards high rake players. There, the negative effects do by far not offset the positive effects.


Different types of monetary incentives

It's true: you cannot put all rakeback affiliates in one basket. But at the same time, you cannot put all monetary incentives into one basket.

Rake races certainly speak to an audience of high rakers who have -in average- a pretty good overview about what the market offers. So if an affiliate offers and heavily advertises it, his main goal is that players who think about switching to that poker room should go through him. This goal does not add any value to the poker room. Of course, as a side effect, also some losing players will take the offer and also some players who would otherwise play on a different room. But for most hardcore rakeback affiliates, this is the minority.

If you now centralise the rake races, high rakers will still have a good reason to switch to this poker room. But they could do so directly and won't need to take a de-tour through an affiliate just for the money. And the affiliates could still advertise with the race - as could hundreds of small affiliates who currently have no such tool.

But there are other monetary incentives on an affiliate basis that can add value to a poker operator. Important is that they do not attract high rakers - but target genuine new players, support the conversion to real money and popularise poker.

Examples:
- Depositor freerolls => can increase net deposits & convert playmoney players to real money players
- Free bankrolls => heavily speak to genuine new players & convert them to real money players [I don't know a single high raker who prefers an ID verification process for free $50 over his first-deposit bonus]


Of course you can now say I just write this because I am me and you are you. Fair point. That's why I want to invite players and not just affiliates to think about these mechanics. That's why we think these discussions should be lead public for everyone to see.

We believe that with some simple corrections in the artificial market rules poker operators themselves create for their affiliates and players, they can go back to the growth track again. We also believe that this is critical for every affiliate and winning player in the long run - as both profit heavily from a growing and diverse(!) landscape of poker operators.

Currently, for these market inefficiencies, there is no growth anymore for the smaller operators / networks. This is a bad thing. Especially as there are loads of big companies like bwin, William Hill, Ladbrokes, bet365, Betfred, Unibet, betfair that could invest dozens of millions into the growth of online poker - if they would get a fair value in return for it. This is what we are fighting for.

Best regards,
Lutz

Thanks Lutz but you’ve kind of glossed over the cannibalisation point

Do you not concede that, to some degree, what you are doing is the incredibly cannibalistic and bad from an operator point of view at least? Are you going to take the bold step of waiving your right to secondary and tertiary CPAs? Will you stop marketing other poker rooms to existing players who the poker system has already paid for once? Of course not.

As for the car analogy, why would Ford possibly penalise a dealer who has chosen (something you seem to want to deprive people of) cheaper rent, wages and tax from promoting its cars? That dealer will sell way more Fords than the downtown dealer. The Downtown dealer will be fine as there will be lots of people who don't want to travel outside of Downtown LA and the Ford car market in LA will find it’s natural balance. More importantly the local dealer because of his lower costs will also sell more cars than the Toyota or Honda dealers etc which is ultimately what Ford wants.

What you are suggesting in your rhetoric is that once a guy has bought a Ford, nobody is allowed to offer him another car. No other local or downtown dealer or company like Cadillac or Nissan is allowed to offer him a similar model but with 2 years free insurance or a sun roof or leather interior plus free fluffy dice.

We’re all in long term relationships with the poker rooms. It’s a fact that affiliates were and are an integral part of helping the industry to where it is today. You are no more special than the rest of us as far as relationships go and most of us have been in those relationships for much longer than your good selves.

I also don't subscribe to your theory that Poker growth has slowed dramatically over the past 3 years as everyone knows. It has been mainly hit by UIGEA and processing issues rather than anything affiliate driven. And the other reason for the slowdown was that we were approaching saturation. There are only a finite number of new people who can begin to play internet poker each day due to them coming of age. Everyone else has been bombarded with adverts and TV programs on Poker, so most people know it's out there. I appreciate that there are emerging markets to be “tapped” but the reason they are emerging is mainly because the average salary per year in those countries doesn’t allow for the luxury of spare cash for online gambling. Nothing the affiliates are doing is causing the problem. Just because one affiliate offers a $100,000 rake race with almost the highest 1st place on the net of $10,000 (you guys btw ) it doesn’t alter the “ecology” significantly at all. You keep harping on about losing and recreational players being key to the ecology. But if (as you suggest) I am an operator who is only bringing in recreational players at $1000 CPA for thousands and who then rake $100 and then lose it to winners (who are net withdrawers) then how can I possibly survive. I will be broke in a week. And where are those winners coming from? You, me or any affiliate or other player who is educating players on how to survive in the game for longer. Are you suggesting that we should stop educating players and just let them all fend for themselves on some Escape From New York style virtual Poker Island? Of course you are not. But you are suggesting that affiliate promotions and action are responsible for the decline in player numbers.

No affiliate is responsible for a player stopping playing poker and overall growth therefore taking a hit. The player themselves is responsible for stopping playing poker. If they find a tough environment at one room due to an excess of sharks, they will go somewhere else and they will fight their way up the food chain. They themselves will choose when to stop playing, not the affiliate or anything any affiliate does.

Yes there are certainly things that can be done like cutting out under the table fixed return deals and stopping networks from giving out skins to people with no marketing business plan. And we like you would like to see this stuff cleaned up (and to that end we spend time and money on trying to find the culprits and moaning at networks). But don’t forget we both work with those networks who still do not vet strongly enough, so really we could both take a stronger stance and refuse to push any of their brands. But we don’t. Why is it that no poker room asks to see an affiliate's licensed company number when they register? Wouldn't that be a good start to finding rogue affiliates who aren’t paying taxes etc. It would certainly deter a lot of them from trying to make a quick buck. Would you back that proposal?

I still concede there is some merit in what you are saying regarding a better evaluation of a player’s value, but I still say that you are focussing your energies in the wrong areas.

This is not an ecology. It is a market place like any other virtual or bricks n mortar business. Market rules and forces apply and operate and it finds its own natural levels. It needs all types of players and it needs all types of affiliates (legitimate ones at least).

Kind regards as ever

Hi Jessica,

first of all, I think you can say openly that you are (Karim?) from RakeTheRake (as evidenced by the post on PAL). This makes the debate ultimately fairer and more transparent.

Secondly, I think it's quite sad that you have now decided to move to the personal level by claiming things that are factually wrong and apparently designed to damage our reputation as a business.

To clear up a few things:
1) More than 50% of our revenues are revenue shared based

2) The CPAs that we charge depends on a market-place system. This market-place system makes sure that players are acquired at fair market value. This of course means: the CPA must be justified with player quality. If player quality goes down, so will the CPA.

3) The "CPA-rollercoaster" that you descirbed is something we have never done and will never do. It's just plain silly from a business point of view, especially at our scale. You can only get the free $50 once. Sometimes we use another free $50 to re-activate players that showed a high player quality before going inactive and that have been inactive continously for a prolonged period of time.

4) Literally everything that we (you call it retention) do as a company has to do with maintaning a high player quality throughout. We employ more than 200 people full time and 1000 freelancers, that offer vast amounts of content, poker education and a live and vivid poker community.

On top of that, we do pay maximum rakeback where it is allowed and to our own promotions in order to prevent the players that we introduced to poker to get cannibalized by affiliates that really do nothing else than passing money from A to B. We do match exclusive bonuses, promos & races given by others.

Karim: we do spend a considerable larger absolute & relative amount on building value, retaining & acquiring players than you do.

5) We have said nothing about how much should be spent on VIP promotions and who should be paying for them (room / affiliate / both). Neither would we have issues with a room giving 70% flat to everybody nor with affiliates contributing more towards central VIP schemes / promotions.

6) I think to an extent, you should be quite happy that we take the stance against cannibalization that we do. We could easily notch up our exclusive promotions considerably and get the word out, here at twoplustwo and everywhere else, and thus cannibalizing all the players that would currently go with classical rakeback af*****ates such as your site. If you check our banners here, you'll notice that we don't mention "best deal on XYZ" or "more than $300k in exclusive promos every month" and even on our own website, you'll notice that we take a low key approach towards exclusive deals. They are meant to retain players that we introduced to poker from getting poached by others and not as an acquistion tool.
Now, we don't do this because we are "saints" but because we take the long term approach towards the poker market.

7) The key issues is cannibalization. To be precise, the type of cannibalisation that makes use of the flaw that poker networks / rooms calculate player value incorrectly by just looking at rake and not at net deposits.

A player that rakes $1000 and loses $10.000 to other players (making them happy and giving rise to more rake eventually) is not worth the same as somebody who rakes $1000 and cashes out $10.000 every month.

The flaw in the player value model makes the market self-destructive and inefficient. And abusing that flaw is why cannibalistic business models are possible in the first place.

[Note for other readers: JessicaRB == Karim from RakeTheRake]

Hey Karim,

It is absolutely not cannibalistic that if we generate a player from the market (by educating him, offering him content & services, convincing him that poker is a great pas-time and even some money can be earned with it), that we profit from this player as long as he thinks our services are valuable to him.

This is not just not cannibalistic, but absolutely fair. And while we earn money with a player, we still educate him and offer services to increase his lifetime (deposits if he is a recreational player; rake if he is a winning player).

Ford would and should object as this dealer cannibalises the sales of the downtown dealers.

The downtown dealers have higher cost - but this comes with a positive effect for Ford: e.g. their logo is displayed downtown and not just on the outskirts.

If now the suburb dealer heavily outprices the other Ford dealers, they will ultimately go out of business. This will result in lower overall sales for Ford.

Which is quite what's happening on iPoker:
The suburb dealer here is a rakeback skin and his affiliates that have no costs outside of the rakeback and a very small overhead. Thus, they can easily outprice other iPoker skins - who have way more costs as they spend 25-40% of their rake on marketing activities to bring in recreational players [or have these 25-40% as opportunity cost from cross-selling the players from their sportsbook, which has the same effect].

On iPoker, things get worse as the payment of 'dealers' or 'skins' is modeled on rake only - and the fact that recreational players (not easily cannibalised) create a lot of deposits, but not a lot of rake. High rakers on the other hand are easily cannibalised.

So in fact, iPoker has way more problems than the hypothetical Ford in our scenario.

Obviously I'm not saying that.
It's absolutely fine for Nissan or Chrysler to outprice / outmarket Ford.
As it is absolutely fine for Everest Poker or 888.com to outprice iPoker or PokerStars.

As described above, there is a big difference between "healthy competition" and "unhealthy cannibalisation". Of course you can make them look similar with some rethoric tricks - and I understand quite well why you do that



No doubt about that.

But what poker rooms have to ask themselves: which partner does add real value?

Honest question:
How much of your traffic you send to Full Tilt Poker do you estimate would play there anyways (directly or though other affiliates like TITN etc.) if RakeTheRake would never had have existed?

For us, most of our players would never have started to player poker if it weren't for PokerStrategy.com in the first place.

We became the single biggest source of traffic for genuine online poker without ever targetting the big existing player communities like 2+2 or the big existing poker markets like the US and the UK.

Just knowing that something is out there does not make it popular.

I know that Volleyball is out there - still I don't watch it.

Online poker needs continuous marketing investmens the way PokerStars and Full Tilt do. That's the main reason why I see them as still being so successful. Of course being in the US helps - but the big sportsbooks and some poker companies could also do what they do, maybe more in some newer markets, and thus increase the buzz about poker in general.

This is the situation we want to reach - and cleaning up problematic market flaws on networks with their skins and on poker rooms with their affiliates is crucial to that.

Online poker has become more and more competitive - which means that nowadays, poker rooms cannot afford a 10% tax to cannibalistic affiliates anymore and still thrive. So this tax has to be cut so that they can again invest into market growth.

That's why the player value calculation has to change. Player value must take net loss / deposits into account.

But preventing cannibalistic stuff will also help a lot - as these exclusive promotions target high rakers and thus worsen the problem.

Rakeback affiliates abuse the possibility to specifically target high rakers with their "exclusive deals" - which removes even the few high rakers other affiliates or the skins themselves generate.

Let's say a great marketing campaign costs $100k and generates $300k in deposits and $105k in direct rake. Already unfair that I just get a $5k profit by generating $195k in winnings for players and rake for other skins/affiliates.

Now a rakeback affiliate comes and poaches my top 5% of rakers who do probably >50% of the rake - and my profit of $5k is changed to a loss of more than $40k.

The result: unsustainability.

1. We think that winning players are valuable - but they are overpriced by the rake-only player quality measure.

2. We think that the problem is worsened by some affiliates specifically targeting high rakers (that normally are not high depositors) - also supported by the rake-only measure.

We take care that PokerStrategy.com only works with companies that have a sustainable business plan and add value to their respective networks.

That is why on iPoker, we are not working with some random skin just because he gives us and the player some more %. We work with reliable, value-adding skins such as bet365, Betfred and William Hill.

Yes, for revenue share deals where the affiliate gets player-individual data, I'd certainly back that proposal! (Should also count for sub-affiliates of course)

Probably it would still make sense to offer "easy ways" of affiliating - but making the cannibalistic stuff harder there, such as "no player individual data".

In a market place, the rules should be made in such a way that "fair value" applies. I.e. you should pay only for value added. Our belief is, that currently, that fair value principle is skewed - resulting in too high payments for too little value at the one end and vice versa at the other end.

We do not even believe we are underpaid, as we have a good balance between winning players and recreational players.

But we believe a lot of smaller affiliates and -in internal accounting- big marketing campaigns are underpaid for. This results into less growth and ultimately less money for everyone, especially the winning players.

Best,
Lutz

While this is little off-topic, as someone who plays a lot through strategy I'd be curious to know

1. if you are on some kind hybrid-payment for each room
2. What % of players who receive the 50$ become profitable for you (or are they all)?

Hey Anssi,

Ad 1:
CPA, hybrid or revenue share - all possible and it largely depends on the partner and their preferences. We cannot disclose details, of course.

But rest assured that we will also service a CPA player in the best way possible - as we know his player value is what our partners pay for in the long run.

Ad 2:
Depends on the metrics. On a pure rake basis, a lot of the free $50 players do not pay for themselves - as rake tends to be distributed amongst the population in a very top-heavy way. But the deposits are more equally distributed.

Lutz

LOL! Of course it's me - did anyone say it wasn't or try to hide it? - It's kind of sweet though that you both need to point it out and have gone back to edit your posts here and your PAL posts to mention it too when they all know already.
I just can't post as RakeTheRake in your forum so i have to use JessicaRB.

I am not getting personal or trying to damage your business at all Dominik. I have said in many of the threads that I thought your business model was a sound one. I think you add significant value to the market, BUT and is a big BUT, you think you have a divine right over every player and you harbour some odd belief that is your site alone that is keeping the poker market afloat. Of course players would find Tilt if we never existed just as they would all find Tilt if Strategy never existed. There are countless affiliates who would fill both our shoes in a heartbeat. That’s the beauty of a market place, players do not need PokerStrategy or RakeTheRake to find poker or to stop playing poker. Your model happens to bring in more new players than ours does, and ours helps extend the playing lives of our players by giving them so much back. But with or without you and I, they will find poker regardless

But my point has now been made and shown by the fact that you are clearly upset, that it is ridiculously unfair and irresponsible to make such sweeping generalisations about other businesses without really knowing all the facts (as you did with your paper). And when you are doing exactly the same promotions as the businesses you are criticising and in most cases bigger promotions the hypocrisy simply adds insult to injury.

I have definitely enjoyed our chats here and on PAL, and personally have devoted more time than I should have. I should be focussing more on my new $51 Free bankroll model www.strategy51.com
Dominik we have very similar ideas and aims regards the industry it’s operation and longevity, and I respect you as friend and businessman. I am sure that if approached differently we can work together (and with others) to help preserve this market and eradicate some of the roguish elements and hone some of the marketing models. Feel free to contact me directly if you would like to continue/pursue.

Lutz I have enjoyed our chats also, but alas I haven’t the strength to read/address your last post other than to say thank you for replying, and great photo! There you have it...Germans outdoing Germans...they probably even planned it!
I hope we play you in the World Cup and beat you on penalties for a change....better still in the final! Chance would be a fine thing.

Kind regards

Karim (of RakeTheRake infamy)

Hi Karim,

good that we cleared up the identity questions

In a very concise way, I'll try to get the key logic across:

1) The poker player value model (based 100% on rake) is flawed as it assumes that the money that's needed to generate the rake comes out of nowhere. To capture the fair value of the player, net rake and net deposit must be considered. This is currently not the case.

2) Because it's currently not the case, a certain type of cannibalisation is possible. It revolves around the fact that sharks are worth too much and fish are worth to little, therefore relying on others to generate the fish while picking up the cream of high end players to make a lot of easy money. This is why those business models are also parasitic because they could not build up a self-sustaining poker room. (this is why rake free poker has never worked -> VIPs don't really like to play each other, and without rake, there is no budget to bring in the fish)

3) The result is that even less recreational players will be generated by the non-cannibalistic skins and affiliates which triggers the downward spiral that we are seeing in so many networks.

4) There are two ways to fix this:
i) pay affiliates and skins on a fair value metric based on rake and some form of (deposit-cashout)
ii) introduce rules that prevent the cannibalization of VIP players within the same liquidity pool.

5) The result will be that people will focus on generating new players as they will earn more money doing so. The total amount of (deposit - cashout) will increase, which will increase the liquidity, rake levels and profits of winning poker players. The downward spiral will turn into an upward spiral.

-------------------

So far for the basic logic.

Now, in that context, please (I mean this) go ahead and issue $51 or even $100 to beginning poker players [but please don't twist my words and use it to poach existing VIPs, I think you get the point]. Even better if you manage to do this for players that weren't really that keen on poker before or in markets where poker is not that well known.

If you did this, neither would you cannibalize in the broader term (i.e. you probably would not be de-touring prospective PokerStrategy.com players that already made up their minds (and if so, so be it) but you also would not be abusing the flawed player value metric but in fact be generating new, recreational players)

----------------

Finally, it is not a contraction of somebody argues for better policies but still sticks to the business as usual as long as those policies are not in place yet.

For example, somebody living in a country where bribing is necessary to get anything done might actively fight for better regulation & enforecment against corruption, but might still have to continue to pay bribes himself if the alternative means that his electricity is being cut off or he'd be arrested by the police.

The reason why we do run exclusive VIP promotions it not because we want to, but because we have to in order to not get cannibalized ourselves. It's a defensive policy (this is why we check what others, including RakeTheRake, are doing and adjust our races accordingly - which of course can lead to a price war that makes the cannibalization even worse).

At the end of the day, I am a big fan of VIP promotions and loyalty schemes. But there is just no good reason why they should not be centralized accross the room if that means that the cannibalization based on the flawed player value metric can be reduced. This will act as a catalyst for skins & affiliate to acquire more new players - who deposit a lot of fresh money - and this is going to benefit operators, affiliates and players alike.

korn,


do you have data to back any of this up? Or, as we say in Texas, are you just "shooting from the hip"?



bevo54

Korn,

Do you plan on responding to this? Will these offerings be removed as part of your poker ecology movement?

1. your exclusive bankroll at poker stars
2. your additional incentives and exclusive rake race at poker stars

Hey Bevo54,

It seems of pointless to discuss this infinitely with rakeback affiliates. You, Karim and others will always find something - and if it's just repeating questions that were already answered, hoping to score a point with bystanders who are not reading through the whole discussion.

Like the effect of offering $50 once for all beginners - it...
1. is obvious that this does not cannibalise high rakers.
2. was discussed already in the thread.

Regarding the rake race:
Yes, we are planning to stick to the strict rules we are lobbying for.

Best,
Lutz

PS: There is already a discussion on the matter at PokerAffiliateListings - http://www.pokeraffiliatelistings.co...keback-11.html

so you wont answer any of our legitimate questions(you have pretty much ignored the vast majority of those posed to you) and then state you wont discuss this with rakeback affiliates. Affiliates who are of course miffed with you, you called us parasites for god sakes. Show some integrity and answer questions, questions that arose as a direct result of your selfish actions.

Again, i am not soley a rakeback affiliate and i provide players of all levels to the rooms, so i am not worried about the changes you are lobbying for adversely affecting my revenues. i am just genuinely incensed at how irrational your article is, and then the manner in which you engage in discussions on these boards. you answer what you can fit into your thought process of 'ecology' but dont answer any of the more probing, relevant questions we ask. shoot, sometimes you post something completely different than the post you are responding to.

if you would like, i can go through the threads and make an easy list of questions you have entirely ignored answering. you must commit to answering these questions though if i am going to spend the time to make a question list for you.....

chris

Hey Chris,

it would be great if you could compile a list of specific questions & I will be happy to try answer all of them.

If we didn't answer some questions, it's not because we actively ignored them - but because it's hard to answer multiple long posts comprehensively in such a long discussions where you meet multiple posts to answer when you come back.

Best,
Lutz

I disagree with a lot of what the reps for PS state even though there are certainly some points that I agree with. For one you know that Poker Stars, who do exactly as the Poker Strategy owners suggest, are completely thrilled they never did rakeback and took many years to even offer rev share which prevented anything under the table. One could probably argue that Full Tilt must have at least some regret having gone the opposite road. It can't be undone now though. I'm sure if people could look ahead 6 years they would have gone about it different but this is where we are now. You can't really go back unless a room does what Party did and just revoke all existing previously legal rakeback deals. I certainly hope that doesn't happen ever again.

With that said big affiliates are always going to be able to offer more than smaller ones. It is the same as Wal Mart can sell the same TV for less than a mom and pop electronics store could buy it for. Sending players in bulk is the same as buying in bulk and therefor big affiliates will have more pull for promotions as they can place rooms that refuse to offer exclusive promotions in lower places or completely remove them.

Unless all of the poker rooms collude together and ban all of that at once it will keep happening. Even then the smaller rooms and networks will be that much more motivated to offer these exclusive promotions to try and take players from other rooms.

I think the Poker Strategy people will get what they are wishing for in the US though once the legal climate changes. I picture more states going the route of Austria and Sweden where the state lotteries will run online poker and I could see states networking like they do with power ball and less states going through B&M casino companies. According to wiki 43 states have lotteries and 5 other ones that don't have lotteries have casinos. Many of the states that have lotteries don't have casinos so if online poker was approved in those states it would almost certainly go the route of a video lottery type setup. This would mean no competition, no price points and likely few promos.

My guess is that it would also include no affiliates or if they do exist it would be a small commission. Most lottery retailers only make about 5%. Granted the owners of this forum don't take US players so that probably does not mean much to them. I really can't see how it is in their best interest or the player's best interest to take away price competition. Socialism has never been a proven winner when it comes to business. I can't see how it helps here either.

When or if the owners of this forum get their way with the structure IMO it will be so far down the road you won't even recognize the industry. Six months is like 10 years. There might only be a handful of poker rooms/networks left by then after consolidation, especially if US states start getting their players out of the world poker eco system. More countries going the route of Italy and France won't help either. I honestly don't see how in the world they would want what they propose but they are certainly entitled to their opinion and I respect that. How many industries wish they had only gone sideways in the last 1-2 years? Most of the world's industry is negative, many double digits.

I can't imagine how many small losers and break even players have stayed at the tables because of rakeback. It is as if the poker rooms get props at 1/3 of the price. These players truely make up the poker world IMO and there are thousands of them. Without the kickbacks many of these players would have been gone long ago and without them I don't think poker is where it is now, even if it is contracting some during a worldwide economic meltdown.

DISCLOSURE: I work for PAS, a competing company with Poker Strategy. IMO my views would be the same either way as I'm not in management nor have any financial interest in the company. If I didn't believe in the model I wouldn't work for them though. I've been around since rakeback could only be received by a PM. I launched a website that was part of what made rakeback mainstream, partly because I want players to receive the best value because to players rake is devastating and IMO every little bit helps.

Hi Xantos,
I don't understand one thing. If you try to save poker economic and you are againts all of canibalistic affiliates why you added Europoker site to your offer, why huge rake chace and up to 60% rakeback?? Your company doesn't act any different. You added around 6 poker room on Ipoker network while you have no skin on Merge or Entraction Network. Each time you added new Ipoker skin you offer special rake race there to encourage people to change Ipoker skin. Is this not a canibalistc thing??
Your advertisment acctivity is focused on young people,mostly university,high school students. I don't think that your website create any additional value that way (by that I mean longtime depositors) cause that people mostly give up when they get busto.

I have been member of poker strategy for a year and I still really like that site and I try to contribute to the pokerstrategy community. It is very good coaching site but as a affiliate you don't work any different...

Regards,
Frank

Hey gargamel_fk,

thanks for sharing your thoughts. I will try to address them:

Ongame
We added EuroPoker and their rake chase as currently, Ongame is unregulated and we need our deals to be competitive - as this is one of our core messages to players that it's no monetary disadvantage to play through PokerStrategy.com.
We would certainly prefer any regulation on Ongame - even if it's something like "XX% flat rakeback for everyone" - and would instantly obey any such regulation.

iPoker
1. 95% of our players on iPoker were generated by PokerStrategy.com. So it's not cannibalistic if a player switches between the different poker operators. It would be cannibalistic if we would target players that were not generated by us, i.e. random iPoker players - which we don't.
2. The reason why we work with 6 iPoker skins is that we want to work with all big sportsbooks (which William Hill and PaddyPower certainly are) - as we see them as important pieces in the long-term development of online poker. We want to show them that they can earn money in poker. And we want to convince them in our battle for regulation and long-term growth - and this works just better if you have a working relationship to them.
3. Also on iPoker, we would heavily prefer a perfect regulation where every player gets the same value, regardless of his affiliate or skin. This would eliminate parasitic cannibalisation and enable more value to the legit operators and to the players.

Recreational Players by PokerStrategy.com
Most of our members are young and male, that's true. But it's not true that there's just ambitious players. Not even 10% of all the people who get the $50 write even a single post in our forums. Way more on the other hand deposit their own money. In fact, we generate far far more recreational players than winning players - which is just by nature: people don't want to work hard for a game.

Best,
Lutz