Yesterday I wrote a post on how Zynga will not become the next PokerStars in the event that the US legalizes online poker. One of my readers, zimba, posted in the comments:
You elude to Zynga monetizing play money players, but you don’t mention specifically how they do that. Can you elaborate?
To be clear, I didn’t elude to it, I said it. :-)
I was going to post something in the follow up comments but I wanted to share this as there really are no poker rooms actually monetizing their play money players. Maybe someone from one of the poker rooms will read this and the light bulb will go off.
I’ve actually thought about this issue a lot. When I was at Party Poker right after the UIGEA was passed we had a problem. We had a huge database of real and play money players based in the US that we could not offer real money gambling to. I was looking for a way to monetize this asset. Unfortunately we never did do much with these players but I have given the subject a lot of thought and figured I would share some of those thoughts here.
First off, let’s look at how Zynga makes money. I’ll be completely honest and say that I don’t have an intimate knowledge of Zynga Poker. But just to answer zimba’s question, Zynga make money selling chips to users. In the past (and they may still do this, I don’t know) they also partnered with third parties and would issue points if players did something like download some software or complete some tasks on the partner’s website.
In this Startup@Berkeley event Zynga CEO, Mark Pincus, discusses what Zynga’s strategy was coming out of the gates:
I knew that i wanted to control my destiny, so I knew I needed revenues, right, fucking, now. Like I needed revenues now. So I funded the company myself but I did every horrible thing in the book to, just to get revenues right away. I mean we gave our users poker chips if they downloaded this zwinky toolbar which was like, I dont know, I downloaded it once and couldn’t get rid of it. *laughs* We did anything possible just to just get revenues so that we could grow and be a real business…So control your destiny. So that was a big lesson, controlling your business. So by the time we raised money we were profitable.
Granted, Zynga experimented in some questionable advertising but that’s not the point. The point is that they understood from the first day that they had to make their money via some method other than rake so they approached the problem from a fresh perspective.
So if one is looking to monetize play money players your basic strategies are:
1. Charge them a monthly fee to play
2. Sell them chips
3. Advertise to them
Charging them a monthly fee is a business model some companies have attempted with very limited results. IMHO, The biggest problem with this model is that the people running the sites come from the real money world and think about everything from a real money perspective. I do think this could be a viable business model but I think you have to target a different kind of audience.
Selling them chips is, as far as I know, the primary monetization technique of Zynga Poker today. This fits right into something I’ve been saying for many years which is that for most casual players they view online poker as a form of entertainment. The beauty of Zynga’s approach is that many people are spending as much buying chips every month as many casual players spend depositing on real money poker sights but Zynga’s players don’t think that they’re gambling because there’s no way to cash out.
Lastly, you can monetize your players by advertising to them. At least one online poker site has attempted this but I don’t feel they did a very effective job with it. They simply slapped banner ads on their client. I think it would have been far more effective to work with various advertising partners to come up with innovative promotions. For instance, you sign up Coca Cola and have them sponsor a $5k freeroll once a week where their logo is on the felt of the online poker table. In order to get the code to sign up for the freeroll you might make them go to the Coca Cola website and perform some sort of action (survey, game, treasure hunt, etc).
Although I don’t consider this a form of monetization you can also utilize play money players to accomplish other business goals as well. Several years ago PokerStars did this on their real money site. To enter a freeroll you had to put a badge on your page saying that you were playing in the freeroll. Once someone verified that you had placed the badge on your site you were given a password. This can provide a massive SEO boost. It can also help sites raise awareness for certain real money campaigns that they might be running. All in all, getting your players to help you accomplish certain business goals is an excellent way to use this otherwise non-performing asset of a large player database.
So the big question is why have none of the major online poker sites done much to monetize their play money players? It can be done. Zynga is proof of that.