There was a recent article in eGaming Review quoting William Hill Online COO Peter Marcus making an appeal to the industry to reject rakeback [what is rakeback?]. He pleaded with the industry to “get together and be strict.”

I think Marcus seems rather unrealistic.

Interviewed for a special feature on rakeback in eGaming Review’s August edition, Marcus continued that rakeback in its present form “has a limited shelf life” and that “licensees who just want to give rakeback and not spend money on marketing will find it’s not going to work, because someone coming up behind working on smaller margins will just steal their customers.”

“It’s the wrong way of building a sustainable industry – you do this by brand marketing, giving great customer service and rewarding customer loyalty,” he added.

I do agree that rakeback has a limited shelf life. Sooner or later online poker sites are going to have to realize they can’t pay out 40% or more of net revenues to affiliates for life. Customers simply aren’t going to support that model.

The existing rake model is simply a tax on the ignorant. It’s basically saying that if you’re too dumb to know about rakeback then we’re going to charge you full price until you figure it out and leave and go to another site that offers you rakeback. The longer they can keep you in the dark the higher their profit.

So instead of trying to artificially keep rates high, operators would be better off lowering the cost of their services. Players wouldn’t need rakeback if the industry priced itself correctly. Rakeback is basically an industry created ill based on the failure of the industry to adapt to changing customer expectations and increased knowledge of how the industry works.

There’s also the problem that many sites operate on a network model. And there I will agree with Mr. Marcus that licensees that cheat the system do the entire network great harm. If there are three sites on a network and two of them are spending their money going out and acquiring new players and the third simply steals the customers away from the other two by offering rakeback or under the table deals then they are benefitting off of the hard work being done by the other two rooms. And if the other two rooms decide to copy the rakeback room and put all their efforts into stealing the customers of their competitors then it just becomes a vicious dogfight nobody can win.

But I think Mr. Marcus is barking up the wrong tree. It’s the networks that need to crack down on this. You don’t have to rely on the rooms doing the right thing if the network operator is willing to shut down licensees who continuously violate the terms of service of the network. But most don’t because shutting down a licensee cost the network operator revenue.

It’s funny how a network’s fraud department can catch two players colluding or chip dumping based on IP address blocks, previous playing history, etc but no alarms are sounded when one poker room on a network starts being the net recipient of players being lost to other licensees on the same network. They don’t catch it because they don’t want to catch it.

Rakeback is here to stay. Because it’s not just a network or industry problem; the players are part of the equation. Unfortunately, between affiliates, licensees, operators, and networks few people seem willing to concede that players have a choice and can vote with their wallets.

Photocred to timparkinson

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