Two Plus Two Publishing LLC Two Plus Two Publishing LLC
 

Go Back   Two Plus Two Poker Forums > >

Notices

News, Views, and Gossip For poker news, views, and gossip

Reply
 
Thread Tools Display Modes
Old 02-06-2012, 09:16 AM   #1
Korn
centurion
 
Join Date: Oct 2007
Posts: 126
View: The Future of Poker

It is now a well understood fact in the poker industry that attracting and retaining recreational players is key to a poker room's success. In my two previous columns, I pointed out how some poker rooms misunderstood this principle by turning against professional players. The conclusion was that the right strategy for a poker room is to attract recreational players, while not discriminating against those who become successful.

I want to focus on the former part, how to attract recreational players.

An ecosystem based on gamblers

Back in the early days, around 2004, running a poker room seemed to be easy if one had a stable software platform (which most companies did not). Allegedly, the cost to acquire new real money players was sometimes as low as $10, while average customer lifetime values were in the thousands.

Back then, the typical composition of tables was usually a mix of very unskilled gambler-type players, and a set of stronger players who made big profits due to the low overall skill level.

Even then, the churn rate of recreational players was very high. However, as the market was still maturing and poker was booming, there were always enough new players to take their place.

Nowadays, this is different. A key market - the US - is closed to online poker. Other countries are regulated or about to be regulated. The poker boom, by and large is pretty much over, with overall poker revenues in decline. Typical 'gambler-type' players are much harder to acquire than before.

So what is the large scale picture? On one hand of the equation, we have a worldwide monthly poker rake of around $300m. Typical cash-out-to-rake ratios in the poker industry are rumored to be about two to one, so we can assume around $600 in monthly withdrawals. Therefore, to maintain the poker ecosystem at the current level, monthly deposits of $900m must be generated by the poker industry.

Where is this money going to come from?

Now, first of all, some of the deposits generated are 'pseudo-deposits' made by winning players, i.e. they will not become available to the poker ecosystem as they will be withdrawn again after some time by the same player. Let's assume that this accounts for 1/3 of all deposits made, leaving $600m per month that has to come from losing players.

Let's assume - optimistically - that the average recreational player deposits $600 in his lifetime before he churns. Based on that, per month, 1 million new losing players would have to be generated by the industry to maintain the status-quo.

Given the current state of how poker is marketed - targeting gambler-type players - maintaining this level is, quite frankly, impossible. To illustrate this, let's look at Germany, which is - now that the US is closed - the world's largest market for online poker, with a worldwide market share of around 10%. In the key target group for poker, which is male, between 18 and 40 years of age, there are about 23 million people.

Now, we all know that online poker is not for everybody. The current way it is being marketed, I would assume that no more than 10% of that target group could realistically become online poker players - and I'd say, this is an optimistic assumption. Therefore, there are 2.3 million potential online poker players in Germany, compared to an estimated 300k of active ones right now.

Germany, which is around 10% of the world-wide poker market, could at most sustain the current levels of liquidity for only two months. Even if we assume that the rest of the world is as 'deposit friendly' (despite lower GDPs) as the German market, we are left with 20 months worth of recreational players at most.

Now, of course, we will not see 20 months of the market staying at the same level followed by a sudden decline to zero. Rather, we will see an ongoing drop of rake levels and liquidity, given that the current poker ecosystem cannot sustain itself.

Ironically, some poker rooms that think they will resolve this by focusing even more on attracting gamblers might actually accelerate this development. All in all, if nothing is being done, I would not be surprised to see liquidity halved in 18 months time.

Solutions

Based on the model above, there are different angles which can be used to attack that problem:

1) Increase the Deposit to Rake Conversion rate, thus, getting more liquidity from the same amount of deposits.

2) Increase the lifetime deposits of recreational players.

3) Make poker more accessible to a wider target group: establish a new type of recreational player.

Lots of things can be written on point #1, as it's a highly interesting and poorly understood topic. In fact, some poker rooms currently might be accelerating their ultimate decline by seeking to acquire more gamblers more quickly, while at the same time losing out on deposit to rake conversion due to discriminating against grinder-type players.

Point #2, realistically speaking, is not going to happen. The current average lifetime deposits per recreational player are insanely high, though the reason for this is that the products and marketing strategies are too often targeted at gambler-type players - a very narrow target group.

In the remainder of this column, I want to talk about point #3, which carries a lot of potential.

A new type of recreational player

How is it possible that the computer games industry keeps growing and growing? After all, playing computer games is quite expensive - taking hardware, software, subscriptions and all other gimmicks into account. In addition to that, it costs a lot of time and could get you addicted - it's not really that different from poker.

The answer to that is two-fold:

The first reason is that computer games players simply have extremely low churn rates. Customers will of course switch games, but rarely will they stop spending on their hobby. Do a little mental check of people around you; those that used to spend money on computer games five years ago, do they still now? In most cases, the answer is going to be yes.

Compare this with the players who sustain the poker eco-system, the gambler-type recreational players whom we talked about above, will spend a lot in a short period of time and then churn, most likely to never come back.

The second reason is even more relevant; the computer games industry has constantly grown its target group. 20 years ago, playing computer games was for a very small percentage of the population only. Hardware was hard to come by and expensive, games were not very accessible. The public perception of playing computer games was extremely negative.

If you contrast this with today, in particular, with the 'social games' you find that nowadays, there is almost a game for everyone. On average, games are far more accessible than they used to be (everybody can play Farmville), far more recreational (playing 10 minutes per day is absolutely fine) and on average, far cheaper (no need to buy expensive hardware, you can play on your phone almost for free).

As a result, per active player, the computer games industry earns much less than it used to, however, the target group is drastically bigger. This development was only possible because many companies in the industry actively sought to widen their target group. Those companies that did not mostly do not exist anymore.

An addiction to gamblers

Now, in poker, a corresponding step would be to try to move away from the industry addiction to gambler-type players, as they will run out.

If you check out the websites of most poker rooms in the market, you will really see that their websites and products are optimized for those players. You usually see green felts, lucky symbols, huge deposit bonuses and the chance to become a world champion at the next WSOP. Also, you are encouraged to get out your credit card straight away and make a large deposit. Hardly any poker room does a good job at engaging and educating their customers first.

I'm convinced that in order to sustain itself, the poker industry needs to move away from its addiction to attract gambler-type players.

The goal needs to be make poker far more accessible, acceptable and fun to a much larger part of the population than currently. The goal needs to be to establish poker as a long-term fun hobby where it's absolutely okay to spend, say, $20 per month on an ongoing basis.

If you think this can't be done, think again. Look at Zynga: they are making money with a game of poker where players spend real money but in return, cannot even win anything!

How should this be done? I can think of the following steps:

1) Change poker websites to be more focused to potential hobby players as opposed to gamblers. Use softer means of conversion; push the 'get rich quick' advertising more into the background. Here, the poker industry can learn from 'free to play' computer games.

2) Educate your player base - this will make them enjoy the game more, be more responsible with their spending and avoid frustration. Also, somebody that is educated will stick to their hobby far longer than somebody who is not.

3) Make poker clients and lobbies easier to understand and use, or eliminate poker clients altogether and offer great browser/app based solutions.

4) Make poker more entertaining for players - don't solely rely on the money aspect to provide the entertainment (See how Zynga does it!).

5) Drastically lower the rake on the micro and small stakes.

6) Optimize for customer lifetime, as opposed to, short term customer lifetime value.

7) Keep in mind that doing all the above does not entail discriminating against professional players. They are a necessary part of the poker ecosystem to make sure that liquidity generated per dollar deposit remains high.

Based on the estimations at the beginning of this column, the above transitions need to happen really quickly.

Currently, the poker industry is strongly lagging behind other forms of online entertainment, such as computer games, and must catch up - otherwise they will be overtaken by Zynga, who are already very good at the points above.

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

TL, DR:
- Current levels of poker liquidity cannot be maintined with the current business model and target groups of the established poker rooms
- Poker needs to be made for more accessible to a wider population to stay at it's current level and grow
Korn is offline   Reply With Quote
Old 02-06-2012, 09:27 AM   #2
Rob1543
old hand
 
Rob1543's Avatar
 
Join Date: Sep 2008
Location: location, location
Posts: 1,414
Re: View: The Future of Poker

I'm the COO over at LeggoPoker and I just wanted to say your recent posts have been great. This latest latest post being the best. I agree with you on all points and truly hope you are able to spur industry wide change.
Rob1543 is offline   Reply With Quote
Old 02-06-2012, 10:19 AM   #3
Iamcloud
grinder
 
Iamcloud's Avatar
 
Join Date: Sep 2011
Posts: 646
Re: View: The Future of Poker

100% agreed, poker needs to become the fun game we all can play and enjoy instead of gambling.

I hope Zynga will be able to provide that image.
Iamcloud is offline   Reply With Quote
Old 02-06-2012, 10:23 AM   #4
Nouveau Pauvre
centurion
 
Nouveau Pauvre's Avatar
 
Join Date: Oct 2011
Location: whatweekly.com
Posts: 139
Re: View: The Future of Poker

I hate to say it but it's a little hard to take your post seriously with your username being KORN
Nouveau Pauvre is offline   Reply With Quote
Old 02-06-2012, 10:26 AM   #5
Disinterested
journeyman
 
Disinterested's Avatar
 
Join Date: Jul 2011
Location: London
Posts: 324
Re: View: The Future of Poker

so 2+2 posts are the way to get jobs in the ipoker industry now i take it.
Disinterested is offline   Reply With Quote
Old 02-06-2012, 10:45 AM   #6
Ygkjh
newbie
 
Join Date: Apr 2009
Posts: 47
Re: View: The Future of Poker

fyi. OP is CEO of PokerStrategy
Ygkjh is offline   Reply With Quote
Old 02-06-2012, 10:50 AM   #7
Korn
centurion
 
Join Date: Oct 2007
Posts: 126
Re: View: The Future of Poker

Quote:
Originally Posted by Nouveau Pauvre View Post
I hate to say it but it's a little hard to take your post seriously with your username being KORN
This dates back to my Starcraft times back in 1999.
Korn is offline   Reply With Quote
Old 02-06-2012, 11:07 AM   #8
BabyImUrNightmare!
journeyman
 
BabyImUrNightmare!'s Avatar
 
Join Date: Apr 2010
Location: streets of rage
Posts: 255
Re: View: The Future of Poker

[pG]Korn one of the best german starcrafters back in a day?
BabyImUrNightmare! is offline   Reply With Quote
Old 02-06-2012, 11:08 AM   #9
DiggertheDog
Pan Troglodytes
 
DiggertheDog's Avatar
 
Join Date: Mar 2008
Location: cras ingens iterabimus aequor
Posts: 57,447
Re: View: The Future of Poker

5) is an idea I have been pushing to PS for about 4 years.

They do not listen and proabably won't ever.
DiggertheDog is offline   Reply With Quote
Old 02-06-2012, 11:20 AM   #10
Korn
centurion
 
Join Date: Oct 2007
Posts: 126
Re: View: The Future of Poker

Quote:
Originally Posted by BabyImUrNightmare! View Post
[pG]Korn one of the best german starcrafters back in a day?
yep
Korn is offline   Reply With Quote
Old 02-06-2012, 11:20 AM   #11
bmwteam
veteran
 
bmwteam's Avatar
 
Join Date: Aug 2011
Posts: 2,427
Re: View: The Future of Poker

Quote:
Originally Posted by BabyImUrNightmare! View Post
[pG]Korn one of the best german starcrafters back in a day?
off: not even close to the best

btw nice post
bmwteam is offline   Reply With Quote
Old 02-06-2012, 11:21 AM   #12
Klakteuh
banned
 
Klakteuh's Avatar
 
Join Date: Oct 2011
Posts: 1,978
Re: View: The Future of Poker

Very good post, and I strongly agree.

The one most obvious problem with your approach of getting players to stay longer is that in computer games, the user's costs are fixed and not variable like in Poker. AND, in computer games, people get better simply by playing. This is less true for poker (Yes you get better, but at a much much slower rate than in say Call of Duty).

When you play a computer game, whether you play 2h a day or 16h a day, you pay the same amount. If you want to play poker, and are a recreational player, it costs you 10x more to play 20h than to play 2h. This is one reason why players will "churn out" at a fast rate, because the cost/learn ratio is very high (especially today since the gap between recreational and good players is much bigger).

Also, if I start playing a new computer game, I will become "good" or, not a "noob" much faster than with Poker. If I play 200h of Call of Duty, I should suck a lot less than when I first started playing. With Poker, this is not true. If I play 200h of poker, I won't be much better than when I started (assuming I haven't read strategy etc..., which can be boring for recreational players).
Klakteuh is offline   Reply With Quote
Old 02-06-2012, 11:23 AM   #13
OurSurveySays
Pooh-Bah
 
OurSurveySays's Avatar
 
Join Date: Dec 2011
Posts: 5,044
Re: View: The Future of Poker

Quote:
Originally Posted by DiggertheDog View Post
5) is an idea I have been pushing to PS for about 4 years.

They do not listen and proabably won't ever.
They have though, they decreased the rake last week right?

Really nice post Dominik.
OurSurveySays is offline   Reply With Quote
Old 02-06-2012, 11:24 AM   #14
leviathan74
veteran
 
leviathan74's Avatar
 
Join Date: Nov 2008
Posts: 2,896
Re: View: The Future of Poker

Great OP.
leviathan74 is offline   Reply With Quote
Old 02-06-2012, 11:24 AM   #15
Matacow
journeyman
 
Matacow's Avatar
 
Join Date: Aug 2011
Location: Ask me about my cameltoe
Posts: 312
Re: View: The Future of Poker

I had a dream last night that I was playing cash-game poker over Xbox live.

If Zynga can make millions on play-money poker there deffinitely seems to be a wider market for poker than the gambling one.

I very much enjoyed reading this.
Matacow is offline   Reply With Quote
Old 02-06-2012, 11:32 AM   #16
Pun Intended
adept
 
Pun Intended's Avatar
 
Join Date: Jul 2007
Posts: 798
Re: View: The Future of Poker

awesome OP.

in the trash heap of NVG, this was a welcome surprise.
Pun Intended is offline   Reply With Quote
Old 02-06-2012, 12:04 PM   #17
rje8686
Pooh-Bah
 
rje8686's Avatar
 
Join Date: Apr 2008
Location: Nick Gaskin is a scammer
Posts: 3,603
Re: View: The Future of Poker

Quote:
Originally Posted by DiggertheDog View Post
5) is an idea I have been pushing to PS for about 4 years.

They do not listen and proabably won't ever.
I am all for reducing the rake but I honestly don't think it is a long term solution and is only part of the problem. You are starting a very quick downward spiral. What happens when you get to 1-2% rake and players & sites still aren't making money?

Reward high net depositors and cut rewards for all high stakes players would be a far better solution than cutting the rake. I'd like to think essence does this but there is almost no proof that the losing guys are getting the extra rewards rather than ongame pocketing them.

New markets are only going to delay the inevitable and put us back in the same position as we are today. Regulation hasn't improved anything as french market is showing.

I hate the fact that sites started taking a stance that games could be provided regardless if they were beatable or not. Take the super turbos sngs on PS.fr 9% rake or something iirc. When you compare them to Zynga you can understand why they don't care crossing this moral line because people are depositing money onto a site that you can't win anything on! The other crazy part was when PokerStars first offered Hyper-Sats they were rake free and until rake was added regs didn't want to play them!

One of the USP's of poker was that people could win long term unlike other forms of gambling. Once people tried it out and realised they couldn't they just left the system. Even a recreation player who has $10k that he or she is willing to spend to try and beat poker has a breaking point. They can burn through 10k so quickly at just 100NL no wonder it is so difficult to keep attracting recreational players.

Last edited by rje8686; 02-06-2012 at 12:28 PM.
rje8686 is offline   Reply With Quote
Old 02-06-2012, 12:07 PM   #18
molinn9
Pooh-Bah
 
Join Date: Jul 2008
Posts: 3,633
Re: View: The Future of Poker

Great post Jonathan, hell of a read.
molinn9 is offline   Reply With Quote
Old 02-06-2012, 12:09 PM   #19
reverie
adept
 
reverie's Avatar
 
Join Date: Mar 2009
Posts: 1,000
Re: View: The Future of Poker

Interesting thoughts on gambling V gaming. Of course most winning regs see it as gaming and not gambling, managing risks as well as they do. No reason why new players shouldn't be appealed to in the same way: money will still flow upwards if the rake is cut at the bottom.

Truth is a lot of people I know baulk at the cheesy high-roller gambling clichés that go into poker marketing so, yes, absolutely sites should be going for the low-risk gamer mentality.

Good post.
reverie is offline   Reply With Quote
Old 02-06-2012, 12:15 PM   #20
DiggertheDog
Pan Troglodytes
 
DiggertheDog's Avatar
 
Join Date: Mar 2008
Location: cras ingens iterabimus aequor
Posts: 57,447
Re: View: The Future of Poker

Quote:
Originally Posted by OurSurveySays View Post
They have though, they decreased the rake last week right?

Really nice post Dominik.
lol
DiggertheDog is offline   Reply With Quote
Old 02-06-2012, 12:15 PM   #21
DiggertheDog
Pan Troglodytes
 
DiggertheDog's Avatar
 
Join Date: Mar 2008
Location: cras ingens iterabimus aequor
Posts: 57,447
Re: View: The Future of Poker

Quote:
Originally Posted by rje8686 View Post
I am all for reducing the rake but I honestly don't think it is a long term solution and is only part of the problem. You are starting a very quick downward spiral. What happens when you get to 1-2% rake and players & sites still aren't making money?

Reward high net depositors and cut rewards for all high stakes players would be a far better solution than cutting the rake. I'd like to think essence does this but there is almost no proof that the losing guys are getting the extra rewards rather than ongame pocketing them.

New markets are only going to delay the inevitable and put us back in the same position as we are today. Regulation hasn't improved anything as french market is showing.

I hate the fact that sites started taking a stance that games could be provided regardless if they were beatable or not. Take the super turbos sngs on PS.fr 9% rake or something iirc. When you compare them to Zynga you can understand why they don't care crossing this moral line because people are depositing money onto a site that you can't win anything on! The other crazy part was when PokerStars first offered Hyper-Sats they were rake free and until rake was added regs didn't want to play them!

The USP of poker was that people could win unlike other forms of gambling. Once people tried it out and realised they couldn't they just left the system. Even a recreation player who has $10k that his or she is willing to spend to try and beat poker has a breaking point. They can burn through 10k so quickly as just 100NL no wonder it is so difficult to keep attracting recreational players.
We can agree to disagree.
DiggertheDog is offline   Reply With Quote
Old 02-06-2012, 12:26 PM   #22
FRGrinder
centurion
 
FRGrinder's Avatar
 
Join Date: Nov 2010
Posts: 176
Re: View: The Future of Poker

+1 OP

The sites need to learn from the online gaming industry.

I read on 2+2 recently where someone mentioned a ranking system. My friends play xbox games and are always talking about what ranking they are in the world, or next badge they are trying to achieve. Need to find a way to incorporate this into poker.

Doing a way with rake and bringing in a monthly charge would increase the player base to the numbers of these large online games.
FRGrinder is offline   Reply With Quote
Old 02-06-2012, 12:38 PM   #23
NoMeansYes_
veteran
 
NoMeansYes_'s Avatar
 
Join Date: Aug 2006
Posts: 3,498
Re: View: The Future of Poker

I agree with everything OP said, someone forward this to pokerstars!
NoMeansYes_ is offline   Reply With Quote
Old 02-06-2012, 12:39 PM   #24
Howard Beale
Formerly red
 
Howard Beale's Avatar
 
Join Date: Sep 2005
Location: Doing what my dog wants
Posts: 19,279
Re: View: The Future of Poker

I've got a question: What is the most popular game played by the rec players that OP is hoping to keep/attract?
Howard Beale is offline   Reply With Quote
Old 02-06-2012, 12:40 PM   #25
Gioco
veteran
 
Join Date: Feb 2008
Location: Las Vegas, NV
Posts: 2,030
Re: View: The Future of Poker

Great post. I can't get over the feeling that online poker will follow the same progression as casino poker did following the poker boom of the 1970's. The only way to avoid that will be to do some different things and no one is doing that yet.
Gioco is offline   Reply With Quote

Reply
      

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


Forum Jump


All times are GMT -4. The time now is 04:08 AM.


Powered by vBulletin®
Copyright ©2000 - 2017, Jelsoft Enterprises Ltd.
Search Engine Optimisation provided by DragonByte SEO v2.0.33 (Pro) - vBulletin Mods & Addons Copyright © 2017 DragonByte Technologies Ltd.
Copyright © 2008-2010, Two Plus Two Interactive
 
 
Poker Players - Streaming Live Online