I was sorting through some old news stories and I was wondering if anybody can spot the trend here:
We delivered another robust financial performance in the first half and also made great progress in executing our strategy. While poker was impacted by the football World Cup and remained difficult from a competitive perspective, our other verticals continued to perform strongly.
Poker net revenue fell 15.7% during the period to £10.7m. Ladbrokes said this was due to the general decline in the European poker market and because of the World Cup.
Beraud concluded: “I think we are near the beginning of more consolidation and only the biggest will survive. We know there are Bwin, PartyGaming. Probably in Europe, within the next five years, you will have only three or four operators for egaming.”
BWIN is feeling the pressure of US-facing poker companies operating in Europe, the Austrian operator’s first quarter results reveal, with poker revenue having fallen 17% year-on-year (YoY) if the contribution of Italian poker giant Gioco Digitale is deducted.
Lindwall (pictured) said this week: “This transaction is a step in order to change Betsson’s trend in poker, as the poker business has shown a negative trend for some time.”
Casino and bingo also saw growth, up 11% and 53% respectively, although the bookmaker was unable to completely ward off the tough competition in poker, which saw net revenue fall 11%.
Have you spotted the trend yet? In case you haven’t the message is that online gaming, specifically poker, is a very, very tough business unless your name is PokerStars or Full Tilt Poker.
Denis Campbell wrote a piece titled Online poker: differentiate or die? which is very sobering and very dead on.
Campbell makes the following statement:
So could it be that spending more and more chasing increasingly marginal players is not too rational a strategy and perhaps not a sustainable one? When marginal return is lower than marginal spend, one normally stops for a radical rethink.
It’s hard without cutting and pasting his entire article but basically what he shows using Party’s recent data is that players are playing less and worth less in terms of revenues generated. Campbell tries to explain this by asking us to consider a hypothesis.
Consider for a moment a hypothesis: The majority of the serious poker players who want to play online are already doing so.
There are no “New” markets. The US has matured. Europe has pretty much matured. Russia seems to have reached it’s threshold. Latin America still has some room but is nearing maturity.
Where else? Africa? Asia? I haven’t seen any sort of major success in Africa and gambling is illegal in most Asian countries.
So I think Campbell’s hypothesis has some merit. When you look at the industry overall, it is growing but the rate of growth has been slowing which seems to indicate that the poker market is reaching a saturation level. At the same time, the gap between the largest rooms and the smallest rooms is increasing meaning the rich are getting richer and the poor are getting poorer. Or to put it bluntly, less new players are entering the market and those that are playing are gravitating to the market leaders.
That’s pretty much a death sentence to smaller operators.
I mean, just look at the huge gaps (data from Poker Scout)
PokerStars 7 day average cash game players: 26,000
FullTilt 7 day average cash game players: 14,400
Party Poker 7 day average cash game players: 3,550
Stars is almost twice the size of Full Tilt and Full Tilt is nearly five times as big as Party. These economies of scale work against smaller operators who simply cannot compete on price.
Campbell goes on to say:
It is only differentiation that can counter the vicious spiral of price competition There are technologic possibilities for adding real differentiation by better targeting prospects to recruit, improving sign-up, developing novices into confirmed players, and maintaining a direct relationship with adaptive personalised commentary, reports and progress tracking – delivering pleasure through customer intimacy in a real sense. Contagious pleasure creation. Solutions already exist which have been deployed successfully in other client management situations and prototypes. The egaming industry just needs to embrace these.
Truer words were never spoken (except when I’ve said the same thing many times in the past). If you are a poker room operator and you aren’t heavily investing in the areas mentioned above, sell your room and get into another business. I’m dead serious.
Poker is essentially a commodity product offering. There is nothing that separates one poker room from the other in terms of offering players the chance to play poker. So how can you compete? Most poker players, even recreational players, are interested in two main things, price and liquidity. Price is not just the rake but bonuses, freerolls, promotions, etc. If you’re a tenth or a hundredth of the size of PokerStars how can you compete on either major buying consideration? You can’t.
You can’t compete unless you change the playing field. Changing the playing field means doing something different. If means altering the value equation for the players so that you can mitigate the price advantage the big rooms have over you.
But if you’re not willing to do that, you’re toast. Maybe not today or tomorrow or next quarter but there’s no denying what the market trends are saying. Unless something dramatically alters the poker landscape, traffic will continue to gravitate towards liquidity and the best pricing.
For the last few years nearly the entire industry has been in denial. You see companies constantly reshuffling their poker and marketing operations thinking that all they need is someone fresh to turn things around. But they’re not willing to make the fundamental changes needed to effectively compete in today’s market so essentially, all they’re doing is bringing in new people to execute the same flawed strategy.
What’s that saying, the definition of insanity is doing the same thing over and over and expecting a different result?