Why Affiliates Will Always Trump Online Poker Rooms
Before I got into the online poker industry I was always amazed at how much money poker rooms threw at affiliates. I thought they were stupid because most of the sites that were promoting them would have been happy to take a flat CPM deal if some site hadn’t been dumb enough to offer to give a flat rate referral or a lifetime cut of the MGR.
After having worked in the industry for several years I’ve come to the conclusion that online poker sites aren’t stupid. They just lack the internal framework to compete with affiliates.
Affiliates live or die by being good at what they do which is to convince people to come to their site and then to be able to direct those players to another site. In the beginning it was easy, you slapped a few ad banners on your site, created some content, and collected the cash.
But as the market became more and more competitive amongst the affiliates they had to get better and better at performing their job. That involved driving larger amounts of traffic to their sites and improving their conversion rates.
Obviously different affiliates have taken different paths on driving the traffic to their sites and most have begun investing in their own conversions via freerolls, rake races, and other methods designed to provide a unique and compelling reason for a player to click on that link and download a piece of poker software.
The one thing most successful affiliates have in common is that they’re better at their job than the poker rooms are. You would think that new signups being their lifeblood and the fact that they are grossly better funded than the affiliates that it wouldn’t be difficult for them to be better and more efficient than their affiliates but generally that isn’t the case.
The online poker sites have more or less turned into branding machines. Instead of concentrating on luring players in they blast out their branding message via as many media outlets as they can afford and then hope enough people will type in their URL into their browser or at least know the brand well enough to click on the affiliate banner on a poker affiliate site they may already be visiting.
I think the best way to illustrate this point is to cite just a few mistakes that online poker sites have made:
1. Not buying out 2+2 in the early days of online poker. Maybe someone approached MM and he didn’t want to sell or maybe nobody even asked him. Whatever the case 2+2 has blossomed into one of the most trafficked poker sites on the internet and even though it could use a big overhaul up in terms of monetizing traffic one can’t argue with the numbers.
2. Not buying out PokerNews or creating a well-funded competitor. I’ve heard rumors of PN being on or not on the auction block a few times over the years but they remain independent and bigger than ever which means anybody who balked at their price probably walked away from a bargain.
3. Not creating a poker coaching site. Granted, Full Tilt now has their poker academy but that was only after PokerStrategy.com became the most trafficked informational poker website on the internet.
And not only did the online poker sites not do any of the above they helped create these powerhouses. Not just from affiliate revenue but if you’re a decent sized affiliate and call up any major poker room and tell them you’ll throw a few hundred new signups their way if they host a $5,000 freeroll that’s only open to your players the online poker site can’t set up the tournament fast enough. In essence, the online poker sites picked up part of the marketing costs of acquiring the players they were paying the affiliates to acquire.
It’s not that the people at online poker sites are stupid. In fact, I’ve met some absolutely brilliant people in the industry. It’s that they’re always two steps behind.
Since Otis is busting my chops about Facebook and Twitter at the moment, let’s take social networking as an example.
Someone will create a successful poker related business model using Twitter. I’m sure of it. I’m equally sure that it won’t be an online poker room.
The reason why is that there will be some people within the online poker sites who are all over Twitter. They’ll be Twittering fools. And they’ll mention it to this or that executive who may or may not have even heard of Twitter and perhaps, just maybe, they’ll throw some token resource at it. Maybe someone will be authorized to tweet an hour or two a day. As a result the effort will be half-assed and so will the results which leads the poker room to believe that it’s a wasted effort.
On the other hand affiliates see Twitter as a possible source of driving more players and for them that means more possible sources of revenue. They’ll put more resources into than the online poker site and experiment around with models until they find something that works.
By the time Twitter starts becoming a big enough buzz word in the industry that CEO’s and other top level executives hear about it and start asking why nobody is doing anything about Twitter the affiliates will already dominate the space and the online poker rooms will do one or both of the following things:
1. Pay the affiliates a lot of money for the players that they’re pulling in from Twitter.
2. Attempt to start their own Twitter marketing channel and either do what the affiliates are currently doing but less effectively or they’ll start from scratch and repeat all of the mistakes the affiliates made long ago and have already learned from.
Again, I don’t say that because I think that the people who run online poker sites are stupid but my predictions are based on what how I’ve witnessed blogging, Facebook, and just about every other online phenomenon develop.
The problem is that most online poker sites throw their best and brightest at staying ahead of the competition on the known playing field. The unknown, or untested playing fields are mostly ignored.
Right now, my guesstimate would be that 90% of the online poker rooms have less than one full-time person devoted to social media. Many sites might have a Facebook page but it probably only gets a few hours of month devoted to it. Many sites have blogs these days but how many are nothing more than marketing channels where all they blog about is promotions, their own events, and bonuses? Many poker site blogs don’t even allow comments. How social is that?
Almost every time I’ve heard someone on the operator side of the industry discuss something like blogs, Facebook, or similar technologies I’ve heard the following phrase (or something like it) spoken, “We should do it because it would be good for SEO.”
Affiliates don’t start social media or blogging because it’s good for SEO. They do it because they know they can drive traffic with it. In order to drive traffic they need to create something compelling, sticky, and of value for the readers. Since they approach the challenge from a completely different objective they usually get radically different results. And take a guess who’s going to get better results; Let’s do it for the SEO or How can I make money off of this?
I wouldn’t even lay the blame at the feet of the poker rooms though. The industry is so new and evolving so rapidly that quality people are rare. There simply aren’t enough bright, creative, and business minded people to go around the industry. So if given the choice of throwing your best and brightest at untested technologies with unknown potential or throwing them at keeping you in the fight with your competition the ROI says to put them on keeping up with the competition.
On the other hand, successful affiliates operations are often are born out of some very bright, creative, and fanatical person putting all of his or her energies into untested technologies and making an idea work. They live, breath, sleep, and eat their idea until one day they wake up and they’re clocking six or seven figure checks every month (or they go broke).
A lot of this is hardwired into the culture of the poker rooms. Most of the poker passion in a company is devoted to the retention side of the business. Poker players understand poker players so they are put into roles like poker room management, retention promotions, VIP, CS, etc.
On the other hand, the acquisition side of the business is run by traditional marketing people who may or may not have any particular passion for the game of poker. That’s not to ding marketing people but they’re expertise is buying media, organizing campaigns, and branding. They don’t necessarily have or have to have a passion for the game.
In fact, Raphael Arnold, CEO of Netrefer said something very similar, “While most operators were recruiting general marketers, spending money and hoping for the best; the affiliate, spending their own money, were learning to market in creative and frugal ways, becoming an important part of the industry’s growth,” which is notable not only for it’s truth but for the fact that I think he broke my own record for run-on sentence of the year.
On the acquisition side it’s easier for the marketing guys to partner with affiliates who do understand the customers and who are willing to develop innovative business models than it is for them to come up with these ideas on their own. For them it involves a lot less risk if they simply buy the customers from the affiliates. Besides, most of them are coming from other industries where they are used to spending to get. You buy television. You buy print. You buy CPA. You buy CPC. Actually creating organic traffic or viral content is not really the specialty of most marketing people.
It’s very similar to something I keep hearing over and over again when I talk to poker room operators. They’re all complaining that PokerStars and Full Tilt are dumping so much money into this or that market that they’re being pushed out of markets where they used to dominate. And my answer is always the same “You better come up with a strategy to counter that because their money supply is endless and they’re going to keep spending until they’ve completely choked you out of the market.”
And the funny part is that let’s say that Full Tilt comes into Imagistan and starts buying up all the media there. As an affiliate for Full Tilt your job would, on paper, get more difficult because Full Tilt is recruiting players directly and cutting you out of the chain. Sure building the brand helps you but once people know who Full Tilt is they can type in fulltiltpoker.com as easily as they can click on a link on your site.
But the affiliates are thriving in these new markets. The more money the poker rooms spend the more money the affiliates make because the affiliates leverage the bigger trend in poker awareness instead of going for the easy kill conversions. Affiliates figure out how to get long-tail search results and push themselves up the SERPs so as more and more players get into poker and start searching for poker related stuff they get out there where the poker rooms aren’t.
At one of the SEO panels I attended this week one of the roundtable members, Bob Raines spoke about how Everest Poker targeted a German celebrity who hosted some poker thing in Germany and the how well that did for them. From what Bob said Everest had no relationship with this celebrity but they recognized that people would put his name and poker together in searches and they captured a lot of traffic.
Perhaps Everest and Bob Raines are an exception to the rule here but I can tell you that most poker rooms marketing departments wouldn’t even think about trying to monetize a celebrity who wasn’t signed to represent them.
I just tested this out but I did a search on “boris becker poker.” Boris Becker is obviously a well-known German tennis star but he’s also a poker player and PokerStars signed him as a representative. Although the PokerStars Blog comes up as the first result and PokerStars.tv comes in at fifth PokerStars doesn’t own another result in the top ten for that phrase. Pokerati ranks higher than PokerStars.tv!
A motivated affiliate or a poker team with an aggressive acquisitions strategy would try to rank all over the top ten for that. Who cares if he’s affiliated with PokerStars if you can slide in there and steal their thunder by ranking #1 or #2 for that term and forcing those searchers to your poker room instead of PokerStars? Let them pay for sponsorships while you feast off of their SEO laziness. What kind of coup would it be for Full Tilt to rank #1 or #2 for “boris becker poker” when PokerStars was paying to create the keyword phrase?
Most poker rooms don’t have a SEO strategy outside of the ultra-competitive keywords. They all slug it out and spend ridiculous sums trying to rank for terms like “online poker” while the affiliates are out there making millions off of ranking for keyword phrases like “best party bonus.”
I just did a search on “best party bonus” and PartyPoker isn’t even in the top 10 results. And that was the first phrase that I snapped off when I tried to come up with a phrase that people would actually search for but most poker rooms would never optimize for.
I could go on for pages listing similar examples but the point is that in the online poker space affiliates do it better and faster than the online poker sites can. Perhaps that will change at some point but at the moment most rooms are too focused on other parts of their business.
The bottom line is that in order for online poker rooms to remove affiliates from the value chain they will need to do it better than affiliates do. They’ll need to buy out the sites that are already doing it better than they are and hire brilliant, cutting-edge, people to run their online campaigns.
But most won’t do that. Maybe the Full Tilt’s and PokerStars have that kind of money but your average poker room is going to keep paying out affiliates to do what it should be doing because it’s economically a sounder proposition.
Eventually though that will become a problem; What’s that saying about never picking a fight with someone who buys ink by the barrel? In today’s world you should never compete with a company that buys pixels by the terabyte.
The whole value model will need to reevaluated. When non-public companies shift their focus from market share to profitability there will be a lot of affiliates who find themselves in the crosshairs of online poker rooms.
That doesn’t necessarily mean the poker rooms will be successful. I could buy 2+2 and drive it into the ground. Many of these affiliate sites need an independent management structure that allows them to be out there on the cutting edge. But fi they start buying the right properties and getting the right management in it will be very difficult to compete for all but the biggest affiliates.
Like I said from the beginning, poker rooms aren’t stupid. They just have their attention focused elsewhere at the moment.
Photocred goes to extranoise