The Online Poker Arms Race

Before I get started I wanted to take a second and thank Michael Jones over at Part Time Poker for bringing together three seemingly unrelated topics which I had been stewing on for awhile. Him mentioning all three in the same article sort of forced me to sit down and put digital pen to digital paper and get this blog post out.

I’ve mentioned it before but I don’t really see the value in building up a small army of pros to represent your company. PTP highlighted the fact that PokerStars has recently signed Andrew β€œFoucault” Brokos to their lineup and I couldn’t help but think, “Who is that?” I don’t mean that to be taken as a sleight. I really had no idea who he is. He’s not a household name. Apparently he’s had some deep runs in the WSOP main event.

But what is his value? Like I said, he’s not a household name so you’re unlikely to be bringing in new players and the kinds of people who live their lives on 2+2 and other poker fanatic poker forums that might be more familiar with his name are the people least likely to switch between poker rooms simply because a particular player is now sporting a PokerStars logo on his hat.

That sort of brings me to another topic PTP highlighted in their Hit and Run article, they linked to an article on Wicked Chops Poker that essentially said that despite the huge success of PokerStar’s PCA it is likely to do very little to get new players to sign up. The format is too boring and there simply aren’t enough strong personalities compared to young whiz-kids who sit there motionless for hours crunching complex problems in their heads.

Now, PTP didn’t mention it in this particular Hit and Run but I believe they covered it another one where PartyPoker’s Tony G is demanding a rematch against PokerStars’ Isildur1. Tony G has even offered to throw in an extra $50K prize money if Isildur1 will play the match on PartyPoker (the first game was played on Stars). But that match will never take place because it’s extremely unlikely Stars would allow Isildur1 to play on a competitor’s site (Why Tony G agreed to play on Stars is a tad baffling). PokerStars has already communicated to their pro players that they shouldn’t appear on Poker After Dark because the show’s strong affiliation with Full Tilt Poker.

How is this all related? Well, the more the online poker sites attempt to exert control over the poker industry the more the poker industry as a whole suffers. There’s already a shortage of colorful, strong willed, personalities in poker and if they’re going to be sectioned off and told under what conditions they can play it hurts everyone. When I think back to when I first got involved in poker I loved seeing the top pros talking trash to each other and having the clout and skills to back it up.

Now you’ve got PokerStars owning the PCA, EPT, NAPT, APT, LAPT, etc. Full Tilt has PAD plus a bunch of other programs that they either produce or advertise so heavily on that other sites don’t want their pros associated with them. PartyPoker has the WPT. Those are just the ones that rolled off the top of my head. I know there are a lot more examples.

The WSOP seems to be one of the only big-audience tournaments that isn’t affiliated with an online poker room (actually, not 100% true since Harrah’s has interests in a small online poker site). You could also make an argument that the WPT might fall into the same category as they haven’t overly done it as a PartyPoker tournament series nor has Party gotten too heavily into the sponsored pros arms race.

Could you imagine if the same thing was going on in other sports? What if sponsors held their representatives out of various events based on who had won sponsorship rights for the game/match? What if Rafael Nadal was told by Nike that he can’t compete in the US Open because Adidas had won out as the event’s official sponsor? Or what if sponsors got tired of having to compete for sponsorship rights and you starting seeing the Nike Tennis Tour and the Adidas Tennis Tour and only players who are representing them (or weren’t representing any of their competitors) were allowed to play in each tour?

Overall I think that it would be better for the sport if the online poker sites worked together. Why not co-promote the Tony G vs. Isildur1 matches? PokerStars hosts one and PartyPoker hosts one. Winner gets crowing rights and maybe you get the CEO of each company to agree that the losing team’s CEO has to be photographed wear the winning team’s logo’d t-shirt or something like that. Maybe the sponsor of the losing player has to donate $50K to a charity. It doesn’t matter what it is. It’s all just PR hype anyway.

But stuff like that doesn’t happen because everybody’s asking “Well, what’s in it for me?” “Why should I let my big name pro play on my competitor’s site and give them some free PR?” And as silly as it may sound, the answer is that maybe there isn’t anything in it for YOU. Maybe you do it to help raise poker, in general, in the public consciousness. Maybe it elevates the story beyond the normal poker press and into some national or international press outlets where people who don’t normally read the poker press. Maybe it shifts the focus from poker being just like any other gambling to poker is a competitive game where skill and intelligence are rewarded.

But that’s difficult to quantify. How can you measure the ROI on promoting the game of poker? Most marketing people only know that you spend X and you get Y. They do “branding” when they can get free tickets to a football match or wined and dined by people selling advertising space. They’re not really tuned into growing poker at the grassroots level.

That’s why they keep sticking with the tired methods. Buying ads in poker media. Doing AFP’s (advertiser funded programming – i.e. the poker rooms pay all of the production costs of bringing you some new poker television show). Working with only the top 5% – 10% of affiliates. Signing up poker pros and slapping ridiculously obnoxious patches on their clothing making them look like NASCAR drivers.

Meanwhile look at companies like Zynga and their poker application. According to some estimates they have 300K players online during their peak hours. PokerStars’ peak cash game numbers are only around 50K (according to PokerScout). Sure, Zynga is less profitable per player than Stars or Full Tilt but either of those companies could have and should have been the market leader in this area. They could have found a way to monetize those players, as Zynga has, and run it as a side business. Promote the sport of poker whether you play for free or for money.

That’s what drives a grassroots movement. That’s what legitimizes poker.

Unfortunately, everybody is so focused on looking out for their own self-interests that they fail to see the bigger picture.

26 thoughts on “The Online Poker Arms Race”

  1. Personally I’m glad that a company like Zynga has spotted a piece of business that the giants like Pokerstars and Fulltilt left to waste. I guess they were making enough money as it is. It’s not something that they still can’t develop but I doubt they ever will now.

    Fair play to Zynga!

  2. @Shamus: It’s not a perfect analogy but to some degree it can’t be because the industry has no due diligence or equal in not doing due diligence.

    Do you think for a second that anybody who makes the final 9 in the WSOP ME won’t get a sponsorship offer? I don’t give a damn if Osama Bin Laden made the final table there’s some poker room who would sponsor him just to get their logo on television.

    And that, in itself, is the problem.

    There is almost no selection criteria. Everybody is sponsor-able. All you have to do is get yourself in a position where you might be able to generate some publicity.

  3. Good piece, Bill. Wrote something over on Betfair a couple of weeks ago about online sponsorships and in fact employed the same shoe sponsorship analogy when comparing online poker to other sports.

    Didn’t have time to explore it fully there, but I while I used the analogy in the piece I also mentioned that I didn’t feel like it perfectly applied. Online poker sites are not just selling a product used by the players (e.g., a shoe or piece of equipment) — or even an unrelated product, for that matter (e.g., beef jerky, beer, etc.) — but rather the game itself, or at least the version of it played on their site. Thus (I suggested) the sites’ control over the sponsored players maybe seems easier to accept as normal — even if, as you suggest here, it really doesn’t have to be considered as such.

    Anyhow, I def. agree with your view that poker (and all sites) would stand to benefit greatly if such self-segregation didn’t occur.

  4. Point taken, but either way it was a win situation for Party. Tony’s challenge to Isildur1 for a rematch gained publicity for Party, regardless of whether or not the rematch ever takes place. The challenge blog post obviously got tons of reads, not to mention other bloggers like yourself mentioning Party in their posts.

  5. I find it baffling in the sense that Tony G is a hell of a businessman and didn’t get the agreement to play on Party up front before dumping his cash.

  6. I don’t see why you find it all baffling that TonyG would play Isildur1 on PokerStars. Though Tony is a Party player, his situation is obviously unique. He has sites that promote PokerStars in the top spots, mostly flying PokerStars banners in prime positions. He has millions of reasons to play everywhere – and Party inevitably gets more exposure even when he plays somewhere else.

  7. Nah you make valid points man, I simply never gave the topic any thought before now so this little discussion was a great way for me to internalize it all and start forming and opinion πŸ™‚

  8. @Mark, you could be right but I just feel it’s all a bit foolish. Because the fact that rooms are snapping up lessor known pros already drives up the prices that they’re getting paid. It’s an endless loop of costs. Those are costs that the poker room is taking from you. Do you want your poker room to sing up ksdjfksldj del la lksfjlksdjlsdj or give you a $100 bonus? That’s what this is about.

  9. @David, If you’re right you should tell Daniel Negreanu since he was the one who first leaked/confirmed the information.

    [quote]So it looks like I will no longer be playing on any more sessions of Poker After Dark. When I first heard the news that PokerStars would no longer be allowing it’s players to play on PAD, I was a bit perplexed. However, when I heard the reasoning behind it, I agreed with their decision completely. I won’t go into too much detail as to what exactly happened, but the decision is absolutely the right one. PokerStars didn’t become the world’s largest poker site by accident, there are smart people making key decisions as to what’s best for the site, and this is another example of them getting it right. While it was fun to play on the show, I totally respect the decision to pull PokerStars players from the show.[/quote]

    You do have a point on the second issue but I think on the first one, one of their top pros flat out saying he was told not to play on the show, whether or not they followed through on their “rule” or if they softened their stance, doesn’t change anything about what I was getting at.

  10. I’m fairly convinced that the main reason for signing all these obscure pros is that, because they are (in most cases) required to play a certain number of hours per week, they effectively serve as prop players for the higher-stakes games. PS was losing much of its bigger action to FTP, which had a big head start on signing a lot of pros and is now playing catchup. In that context, signing someone like Andrew Brokos makes perfect sense.

    I think there are secondary considerations, some of which have been mentioned or hinted at here, such as (a) hoping some of these pros will turn out to be marketing gold; (b) buying loyalty from potentially influential players [Brokos has a popular blog]; (c) putting the hurt on competitors’ tournaments; and maybe even [d] just so the other site can’t sign these guys. I regard most of these as fundamentally irrational and/or detrimental to everyone’s long-term interest, but companies don’t always behave rationally, and the bigger they get, the less rational they are.

    But I really do think the main reason PS and FTP sign all these unknowns is to prop up the big games. It’s a similar mentality to why the Bellagio worked hard to get and keep The Big Game. It created the impression that the Big B’s poker room was The Place To Play in Vegas, even though it’s a poorly-run, overcrowded, uncomfortable poker room with crappy dealers, no waiting lounge, and no comps. Joe Tourist and Jane Onliner who don’t know that much about cardroom poker can be forgiven for assuming that where the big guns play must be the best room, or the big guns would play somewhere else.

  11. Bill,

    Thanks for the taking the time to respond πŸ™‚

    You make a valid point, especially considering your history as an employee of some of the biggest poker rooms, which I didn’t realize until now.

    One thing I’m still not entirely convinced of is whether it would really be better for the card rooms to wait until a player has achieved a victory. We need to keep in mind that once the player has won, or is close to winning, a major event, there will likely be more than one company interested in sponsoring him. By handing out sponsorships beforehand, however, the poker room is ‘securing’ its position as the sole sponsor and avoid the risk of being blown out by the competition, plus they can probably make a more profitable deal with him as he is still an unknown (but showing promise).

    The other thing is that I see more value in sponsorship than just having their logo flaunted in the press and media. I would suspect that when a sponsored player makes it big in a tournament, this gives the sponsoring card room tons of online exposure, even in the event that no pictures are posted. Tons of backlinks for search engine optimization, too.

    To conclude, you are definitely in a better position to judge the subject, so I am more inclined to go with what you say in general. But I still leave room for the possibility that, while certain individual sponsorship deals might not be profitable in and by themselves, the whole long-term benefits might be worth it — at least for those who make the proper decisions regarding who to sponsor.

    It is kind of like the poker rooms are playing poker right now, except they are not betting with chips, but with sponsored pros πŸ™‚

  12. One more wrong fact. PokerStars peak number of players is over 300k., just open its client at a peak hour. 50k is real money cash players but Zynga’s 300k is not, so apples to apples, Star has more players not less.

  13. Well said Bill – let’s change the headline to “reasons that poker is falling – #213”.
    Just a slight improvement to your CEO photo idea – they should take the picture in new york. I bet you poker stars CEO would spend millions to make sure Viktor blum does not lose to Tony G πŸ™‚

  14. Mark,

    I understand the investment approach but how many of these investments are turning into gold? I’m fairly sure that if you compared the cost of signing up tens or hundreds of up and coming poker players vs. waiting until they’ve actually accomplished something the ROI comes out in favor of waiting. How many of this year’s November Nine were signed to a room before they plunked down the $10K to enter the ME?

    Some rooms are more savvy than others. And obviously there is more prestige being a PokerStars or FullTilt pro than being a Reefer Poker pro but I have seen firsthand rooms signing up “pros” without doing even an ounce of analysis. The marketing side of the company looks at it and says, “He’s generating $5,000 a month in rake in an obscure market so we can afford to give him 100%rakeback and pay all of his live tournament entries for a year in the off-chance he makes it deep enough in some tournament that we can get some weblog post with him wearing our logo.” Since the $5,000 rakeback doesn’t come out of their budget and the tournament entries come out of another budget this is a profitable relationship for the marketing department.

    Seriously, you have to understand how big corporations or large entities work. If the marketing department signs them up and the poker team has to deduct their rake from their revenue figure then it’s very easy to make a highly unprofitable relationship look profitable.

    I will state this again because I don’t even know the guy and I have no desire to be insulting to him but do you really think that signing Andrew β€œFoucault” Brokos will being even $1 in extra revenue? First off, nobody outside of the poker world knows who he is (I consider myself an insider and I don’t even recognize his name). Those in the poker industry who do know who he is already have their rakeback deals set up or are striving towards SuperNova on Stars. My guesstimate is that they won’t get even 10% of what they spent on him back in revenue. In fact, my guess is that they lose money on sponsoring him. Not because he’s Andrew Brokos but because potential customers aren’t likely to respond to him since he’s not a “major” celebrity.

    I could be wrong. I’ve never been heavily involved in sponsorship deals. When I worked at Tilt most of the sponsored players had a piece of the company so that highly tilts (no pun intended) the value proposition. When I worked at Party we didn’t have any sponsored players. But I have worked with some companies and spent some time with the management at some companies that do heavily rely on player sponsorship and I can’t make the math work.

    Bottom line is that experienced players aren’t swayed by sponsorship deals and newbies aren’t likely to know who many of these more obscure players are. Do the math πŸ™‚


  15. Hi Bill,

    Great article. A few comments:

    “But what is his value? Like I said, he’s not a household name so you’re unlikely to be bringing in new players and ”

    I think PokerStars thinks of these players as a future investment. They calculate that this and that player have a chance of making it big in a popular event, and they get as many of those players as possible to maximize their chances. Plus, it makes them look “bigger,” what with the over 90 pros that are on their team right now.

    As for the overall situation on the market: I’m sure than there is more to it than meets the eyes. After all, if we can see it, then the people who manage these companies are, more likely than not, capable of seeing the same, and much more than that. I doubt that it is just a matter of greed. I’m pretty sure that there is more to it, and that they have some calculations and evidence which to them is proof enough to continue in this manner. Perhaps it has to do with investors being interested in only those poker rooms that achieve the best results short term. This is all just sheer speculation of course.

    My last comment is regarding the sports teams sponsoring analogy. I see one key difference between sports, and poker: in sports, there are so many different sponsors, and the games are generally so big and popular, that the teams have lots of choice when it comes to sponsorship. This in turn results with the sponsors having less room for negotiations when it comes to the sponsorship terms. In online poker, there are only a handful of companies that would be interested in in making a deal that could be interesting to the poker player being sponsored. So the poker players themselves have less of a choice, IF they want to be sponsored.

    Just my two cents. I appreciate the article very much, and thanks for bringing my attention to this problem.

  16. @Vik: I like the music industry comparison. Marketing in the online poker industry is simple cut and paste. Buy ads in Bluff, CardPlayer, etc. Do some AFP’s. Promise the top 10% – 20% of affiliates the world and sit back and wait for the traffic.

    I loooooooove to see companies thinking outside the box. I loved Full Tilt’s ads in London taxis. I really loved the old blogger tournaments where you had to post a link back to Stars. There are some moments of brilliance but 95% of online poker room marketing shows a total lack of inspiration.

  17. Very well put Bill. That’s exactly where I left the industry 4y ago: poker brands managed as financial portfolios, noses stuck to KPIs, good soldiers less afraid to charge thru the minefield, crawl under barbwire than to sit for a moment and use their brains.
    The truth is nobody wants to stand up to see the big picture for they are like the music industry before with internet, frozen and incapable of thinking straight because of a business model that has been so damn good to them for all those years.
    What they’re really waiting for (and deserve) is a big new challenger like Zynga, coming after them with a devastingly new business model…

Comments are closed.