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How the poker economy works
Here’s my simplified model of how the poker economy works:
- The bucket represents the poker room.
- There are two holes on the bottom. One hole is the rake and the hole is withdrawals.
- There’s also a faucet that brings new water into the bucket. That water represents new deposits.
The poker room needs to keep the water level in the bucket stable or rising. A decreasing water level will eventually spell disaster.
Before we proceed, I want to point a few weaknesses of this model.
- The poker economy is actually LOCALIZED. That means that $100NL could be a very healthy game, but $200NL could be on the verge of collapsing.
- This model doesn’t really factor in bankroll management. A fish that deposits $10,000 and plays $5/$10 NL is one thing. A fish that deposits $10,000 and plays $0.01/$0.02 is another. Same kind of thing for withdrawals. It’s one thing to withdraw your entire roll and stop playing poker, it’s another to be playing $50NL with a $10,000 roll and withdraw $1k.
Let’s consider some scenarios:
Scenario 1
The poker economy is booming. The water is flowing into the bucket faster than it’s leaking out of the holes. The right step for poker rooms is try to open up the rake hole. They’re leaving money on the table if they don’t. To open up the rake hole, they can increase the rake structure or they can try to attract players that play a TON of hands. Back when poker was booming, the poker rooms did just that. They started to let players play 16 tables at once, gave VIP rewards based on the number of hands played, etc. Many poker rooms probably understand we’re not in this phase anymore, but they’re not adjusting that well.
Scenario 2
The poker economy is declining. The water is flowing out of the bucket faster than it’s flowing out. The right step for poker rooms is to try to increase the flow of water OR decrease the flow of water out of the holes. You can increase the flow of water by marketing, deposit bonuses, etc. You can decrease the water flowing out of the withdrawal hole by VIP rewards and limiting withdrawals. Why are poker rooms not encouraging a guy playing $5/$10 with a $10k bankroll to keep his bankroll on the site? You can also plug up the rake hole. I know, raising or lowering “prices” is generally a rubbish way to compete against other poker rooms. But that’s NOT the point of lowering the rake. You lower the rake to maintain the health of YOUR poker room. It’s similar to what the U.S. Federal Reserve System does when it lowers the interest rate during a recession.
Scenario 3
The poker economy is stable. The water is flowing into the bucket as fast as it’s flowing out. Poker rooms can try to grow the economy the same way described in Scenario 2.
Now, it’s pretty obvious that Scenario 1 is great for poker players, Scenario 3 is OK, and Scenario 2 is disastrous. If I were to guess the state of the poker economy, I’d guess we were in Scenario 2. So why don’t I see any incentives to limit withdrawals? Why don’t I see more deposit bonuses? Why are poker rooms not lowering rake? Are poker rooms too focused on new customer acquisition when they can take easy, immediate steps to better the poker economy?
Comments
I play another well known site primarily. They have rake back and great bonus deals which keeps me on there with my main roll.
Is sky looking into any decent bonus or reward systems?
make the most of now,
Fascinating article, Ryan.
You may be aware that until earlier this year, I owned 25% of an Online Room, which was on the i-Poker network. They had their own way of addressing this - they "discourage" winning players.
We had (in poker terms) a very mature & sophisticated Client Book, with some awesomely good players, including several WSOP Bracelet Winners, GUKPT winners, EPT Winners, & huge Online winners like James Dempsey (who owned most of the rest of the Site) Chris Moorman, etc.
When I say "discourage" winning players, they took it to extremes. Because our book of players consistently won, they froze the Accounts of the biggest winners, (they could not even withdraw their balances until we paid a fine which equalled 30% of their "excess" winnings!) and the next month, they closed us down completely. Just like that. So we wrote to all of our Clients, & told them to withdraw their Funds, as we had been forced to close. So they all withdrew, & we got charged a fee for every withdrawal. Really, you cannot make this stuff up.
Some of those sites & networks out there are nothing short of scandalous as to their financial integrity.
Poker players being what they are, they keep the blinkers on, & chase bigger & better rakeback from more & more oddball rooms. If they did but know.
Sky Poker is far from perfect, but Customer Feedback tell us that a big part of our player loyalty is because players feel we can be trusted.
I would not trust more than a handful of Online Rooms, worldwide.
Sky Poker traffic continues to show strong growth, both v Forecast, & y-o-y. Maybe thats because the Business Model here is unique.
the big sites will always have massive user bases, and thus loads of fish.
the smaller sites/a lot of the network skins will disappear tho. as TK said a lot of them are very untrustworthy and you should be careful with keeping large amounts of money on them.
i feel safe knowing that Sky is its own site and not piggybacking off another.
Oh my oh my, there is gonna be some pain out there, & a lot of players are going to get their fingers burnt. Nothing is more certain.
sky is definately a proactive site, and no other sites can u feel that you could influence business decisions, whereas with sky i get the impression they sit down and discuss what moves to make (with attention paid to community suggestions).
I also think it will be fine in the years to come, poker will always survive, there may be waves of affluence and
waves of poverty within the poker economy, but ppl will continue to play.
totally agree. the good thing is that i doubt many casual/recreational players will be the ones who are hit. the rooms/skins that are at risk are those who have grabbed a skin and gone hunting for grinders offering massive deals. without naming names there are so many sites out there who's site branding is really weird and they have so little chance of getting casual players as even if i typed in 'poker room' into google they wouldn't make it in the top 4/5 pages. so yeah bonus hooooos will suffer the most, so i don't think that it will do much to damage the reputation of online poker.
i did read at the time about the issues that you had with your room/network. while their behaviour was disgusting i can see why they did it from a business point of view. the big boys on the network spent shedloads on marketing in getting casual players on the site wheras your site was aimed for very good players and the liquidity suffered.
Nice article,
I have often wondered about the ways poker rooms encourage ppl to keep a decent roll on their site.
Why cant they maybe offer interest payments on a players br, the bigger the roll the bigger the payments. Like a secondary rb.
The payments would more than likely not be as much as a player would get by withdrawing and putting their money in a seperate bank account, but it may deter some players.
In todays climate with interest rates at rock bottom, I doubt its even an issue, but before the crash I dont think it was ever done.
The amounts would probably miniscule either way to be fair so I probs dont know what Im talking about.
I feel for you TK a few of the ipoker skins have had this happen in recent times, even titan poker had to force loads of their top players to close their accounts and go elsewhere, not fair on the players is it and without players they have no business, i dont expect ipoker to last forever tbh
I have a question, on sky poker there are a handfull of players who make heafty profits and I wouldnt expect them to leave those funds in their sky account, how many players build up bank rolls then get crushed by the sky high rollers for the bucket (in the above example) to stay full?
Players money is 100% safe with Laddies, too, (the Parent company is a UK-domiciled PLC) although only as long as Laddies own the Room, which I don't expect to be for much longer, as traffic there is reportedly in a tailspin, & it has been said to be heading south for 3 years or more now.
The Titan example you quote is a direct copy of what happened to "my" place, next door. It just happened we were the first to suffer, but the other i-Poker skins are all getting the same brutal treatment now. It's not sustainable.
I cannot answer your third question, as I just don't know. But the Sky Bet Group (Poker, Bingo, Vegas, & Bingo, + Oddschecker, which is slightly different) all operate a "common wallet", & there is enormous player-migration between them. Which is a great thing, as it creates a much larger pool of liquidity.
These views are my personal views, bye the bye, & may not necessarily represent those of Sky Bet. So the libel action comes to me, not the Company.
It'd be lovely to get more of that sort of stuff, & debates like this, going.
or just grind live cash if online gets too hard. that will always be hilarious.
But the market is very fragmented right now, & it needs to consolidate. And it will, it's started already. The strong will get stronger, but it's gg the marginals.
The clues are there for all to see. When you see Rakeback Offers going, 40%, 45%, 50%, 55%, and Deposit Bonuses of 400%, 500%, 1,000%, da de da, that's all the clues you need. I wiould not risk a penny of my money on those fly-by-night sites, & I'm constantly amazed at how trusting poker players are. But I have no sympathy for them either. caveat emptor
And as for the subject matter I could not agree more. How anyone can trust the site after the last revelations is beyond me. I can see no reason why Hellmuth would put his name to it other than the large cash incentives but couldn't he get that with another site??? mind you if any pro is going to associate with such a site then Hellmuth and his diminishing poker reputaion is probably the best suited
Excellent Article has opened my eyes to what goes on with other poker rooms tho most of my cash is here at Sky Poker as i feel its in safe hands & have a few dollars on stars to practice my cash table game so for now i won't be joining anywhere else