In the beginning, there was Planet Poker.
Although really, the savvy ones were making money from online poker even before that. Russ "Dutch" Boyd--who would later take inspiration from
Steve Miller's classic joint in his poker industry career--was one of the earliest adopters. He and others discovered in the latter half of 1997 that an online company called 2AM Games offered a platform for legally parting fools from their money. 2AM Games hosted online Texas Holdem Poker.
Before the Money
Playing online for virtual chips wasn't a new experience. Multi-player poker games were available in several corners of the web prior to 2AM Games. The graphically-challenged IRC poker had been hosting games for years. In fact, despite no money ever changing hands, IRC poker had grown into a thriving community of players and enthusiasts.
IRC stands for Internet Relay Chat, and it describes an online communication protocol that allows users to chat with each other in different channels. Think back to when AOL chat rooms were cool, and then try to imagine a time several years before that. In this era, IRC acted as a gathering place for some of the game's top minds. They would spill over from the Usenet group rec.gambling.poker to chat in real time about poker hands and strategy.
IRC Poker came about in 1995, when an enterprising programmer with too much time on his hands wrote a program which acted as dealer for a virtual game, making use of the text interface to deal hole cards, collect bets, and award the pot appropriately at the end of a hand. Players communicated with the program using simple chat line commands like "/msg dbot p fold." "Simple" meant something different in 1995.
The program, known as IRCBot, also kept track of players' bankrolls from day to day. New players were given 1000 "etherbucks" to get them started, and were allowed to reload to 1000 once per day in the event of a BUSTO. Because there was no way to move etherbucks out of the system, each player's bankroll represented the sum total of their efforts in the IRC poker games. Like a 1990s proto-PokerTableRatings, IRCBot made these numbers public, and poker geeks the world over devoted countless hours to chasing the top spot on the leaderboard.
As the number of etherbucks in the system proceeded steadily upward, the regulars' bankrolls soon outgrew the original 5/10 limit holdem game. To accommodate the O.G. class of play money ballas, IRCBot was programmed to deal a no-limit game, one that require a minimum buy-in of 2000 etherbucks--twice the initial stake granted to new or broke players. Anyone who went bust in the no-limit game would be forced to return dejectedly to the smaller, less respected 5/10 limit holdem game. The slog from 1000 chips back up to a 2000 chip buy-in for the no-limit game was so unappealing that players started referring to the smaller stake as "holdem hell." The threat of it was enough to keep players sharp at the higher stakes game, and--somewhat incredibly for anyone who's spent any time at the
PokerStars.net play money tables--the overall level of competition was very high.
Part of that was no doubt due to the nature of the format. The people with the technical savvy to install and navigate the IRC software, the focus to play poker in an entirely text-based format, and the dedication to return to the game for hours and hours with nothing at stake but pride tended to be pretty big nerds. Instead of shoving blindly just for the hell of it, they would spend hours debating hands and strategies on IRC and rec.gambling.poker, and then when it came time to back up their points with actual play, they brought their A-game. By uniting a small but passionate community under the banner of honest competition for its own sake, IRC Poker kept the game in a purely recreational state; players would have fun, and that was enough.
2AM Poker changed all that.
Like IRCBot, it gave users an initial bankroll of 1000 playchips, but the 2AM scoreboard was more than just a measure of pride; each player that accumulated 1,000,000 in playchips was rewarded with 100 dollars legal U.S. tender.
When you calculate the proportions, it turns out that each player was given a bankroll valued at exactly 10 cents. Unsurprisingly, no one felt too invested in the game, and blind shoving commenced. But for anyone with the notion to take it seriously, it was easy money. And it was steady money. Not realizing what they hand on their hands, 2AM games was willing to pony up $100 over and over again to players who could consistently work a bankroll from 1000 to 1,000,000. Dutch Boyd took full advantage of the opportunity, and by the time 2AM closed the loophole by allowing each user only one $100 payout, he'd played his way into a $1000 bankroll. If he was disappointed about being cut off from earning money in the game, it didn't last long. He and the other online grinders were about to get something much better.
The Birth of an Industry
On its first day of real money business--January 1st, 1998--Planet Poker offered exactly one table of $3/$6 limit holdem. Despite having only those 10 seats to fill, the first real money poker "room" struggled to stay at capacity. The game usually played shorthanded and would break often. It wasn't until well into February that it ran overnight for the first time.
The online poker discussion community--comprised primary of rec.gambling.poker and the recently created 2+2 forums--looked at Planet Poker with a wary distrust. There were dozens, maybe hundreds of posts questioning the legitimacy of the deal. Everyone had a theory about the nature of the online game: small stacks never lose an all-in! Flush draws hit more than 50% of the time! If you cash out any money, your account will be flagged and you won't win anymore! The flops are rigged to stimulate action!
The Planet Poker management was worried--although unsurprised--about their public perception. They had realized from the beginning that trust and security would be vital to the success of any online poker venture. It wasn't doing any favors to the legitimacy of their organization that Planet Poker was based in Costa Rica, or, as one internet commenter put it, "a known source of corruption and syndicates in gaming."
To combat the skeptically negative buzz, Planet Poker brought in a high profile endorsee: Mike Caro, known to gamblers as the
"Mad Genius of Poker." I know it sounds crazy, but you'll just have to trust me that Mike was well respected at the time. He put his reputation on the line in ensuring that the game was fair. Although the internet boards continued to spawn fanciful theories about the peculiarities of online holdem, the Mike Caro stamp of approval eventually gave hundreds of gamblers the courage to trust their hard-earned dollars to the Planet Poker servers.
Whoops!
Planet Poker went one step further in ensuring potential customers they were dealing a fair game, one that exactly mimicked the randomness of a real deck of cards in a real cardroom: they published their shuffling algorithm online. If anyone in the Planet Poker offices knew the first thing about hubris or irony, they would have seen what was coming. Instead, Planet Poker was blindsided when a group of researchers quickly published a paper explaining that they had cracked the software's random number generator.
The team of software security professionals realized that the time-seed used by Planet's RNG only allowed for 200,000 possible shuffles--a trivially small number next to the 52! (2^226) combinations that were possible for a truly randomized deck. The crackers built a program that used information from the table to ascertain which of the 200,000 states the deck was in. When fed with two hole and cards and the three cards from the flop, the program could determine other players' holdings and predict the turn and river cards with nearly 100% accuracy.
Incredibly, the team published their findings rather than exploit the knowledge for profit--although the relatively low stakes of the Planet Poker game may have factored in to that decision. There was more to gain by playing it straight and working with the site's management to remedy the situation. Planet Poker quickly adopted a more secure shuffling algorithm, but despite no one ever using this method to cheat at the tables, the damage was done. They would never recover from the blow to their reputation.
Competition
In the wake of Planet Poker's public embarrassment, several other newly formed sites moved quickly to increase their market share. Of these upstart competitors, Paradise Poker was the most threatening to Planet Poker's bottom line. Paradise had the advantage of learning from Planet's early mistakes, and their initial software release was much more reliable and accommodating to the players than Planet's.
Paradise also hit the jackpot when they hitched their star to a young web company that would go on to dominate the internet landscape: Google. Paradise was an early customer of Google's pay-per-click advertising method, and their savvy purchases soon ensured that no one could search for "poker" without being linked to Paradise Poker in the sidebar. Google and its present-day rivals no longer sell advertising space to internet gambling companies, but for a while at least, Paradise was richly rewarded for being in the right place at the right time.
Planet Poker wasn't going to die off quickly, though. From 1998 to 2001, both sites prospered, together accommodating the gradually increasing demand for more games and higher stakes. As players realized that--far from being a deliberate scam or haven for colluders--sites like Planet and Paradise were a great way to experience the rush of poker for real money without the hassle of visiting a brick and mortar cardroom, traffic increased exponentially. In December 1999, Planet was spreading $20/$40 limit hold'em, while Paradise played host to hundreds of players at stakes up to $10/$20. By the time Paradise followed suit by opening games at the relatively high stakes of $15/$30 and $20/$40, demand was so built up that the waiting list for one table quickly ballooned to 40 players.
Failure
In August 2000, Dutch Boyd--having set his sights on targets bigger than just a $1000 bankroll--announced that the internet cardroom he'd opened with his brother would be the first to host multi-table tournaments (MTTs) online. The site was called PokerSpot, and it used the allure of non-existent entry fees and the excuse of "beta" status to bring in a player base while programmers fixed bugs in the software.
And there were a lot of bugs. Dutch had launched PokerSpot with just an $80,000 investment he raised from friends and family members. He was in way over his head, and it showed. PokerSpot worked just like you'd expect a site thrown together by a 20-year-old on a budget to work; the software would crash frequently and the support staff were unreliable and hard to reach.
Most distressing to patrons was the matter of cashouts. Poker players are willing to overlook hideous business and design flaws if the money is right, and in this case, no one was sure if it was. Drawn in by the promise of MTTs,--free at first and then for a $15 entry fee--players had initially crowded the PokerSpot software, but many of those soon reported that cashout checks took months to arrive. Several players received checks that were returned for insufficient funds.
Dutch kept in touch with the online poker community, and was quick to ensure players through the discussion groups and forums that all cashouts would eventually be made good. Privately, he was telling a different story. The site's credit card processor had failed to transfer player funds in a timely manner, so he explains, leaving PokerSpot on the hook for several weeks worth of deposits. Instead of halting operations to deal with the problem, Dutch stalled, hoping it would be resolved before anyone noticed that no money was coming out. He told customer support staff dealing with cashouts to "spin it so that the players don't feel the need to make a mad rush on the cardroom OR the need to tell everyone they know that PokerSpot [is] going to hell in a handbasket. Spin it so that the players continue to just keep on playing."
The deception was too big to hide from the players. PokerSpot was swamped with cashout requests that it had no way of filling. In Dutch's version of the story, the credit card processor never came through with the money it owed, leaving his own site unable to Nearly $400,000 in player funds were lost in the fiasco. By the summer of 2001, PokerSpot was obviously doomed.
Thanks to some similarly poor management, Planet Poker was in the same boat. They had allowed Paradise Poker to overtake them on the issue of security, then continued to lose market share as Paradise steadily improved their software and offered up new features, including table statistics like average pot size and players/flop percentage, and the ability to play two tables at once. Planet would continue to offer real money play until March 2007, but it would never again be a serious player in the industry. A 2+2 poster summed it up in August 2001, whining "Why is planet so dead????"
The Next Generation
In spite of the high-profile cases of PokerSpot and Planet Poker, one a spectacular flameout and one a steady decline, online poker was still booming. Players continued to pour money into the market, and dozens of new internet gambling ventures open their virtual doors for business.
Three sites in particular that were founded in the summer of 2001 would go on to change the face of the online poker industry, each in their own unique way. Their names? Party Poker, PokerStars, and Ultimate Bet.
Last edited by Bobo Fett; 10-19-2010 at 04:58 PM.
Reason: Removed spammy part.