The Economics of Rakeback...

[PITTM]

ive seen a lot of calls for sites to have a permanant rakeback system for all of its members. this is a bad proposal because the more people who are getting rakeback, the less rake they will actually be getting back. When people get some sort of under the table rakeback scheme with an affiliate they can get a pretty good percent of their rake back, i know ive been offered between 18%-29%, which are both pretty decent numbers, but i would imagine a larger rakeback system would limit the rake we get back to somewhere between 8%-15% because so much more will be given. By keeping smaller, more secretive rakeback deals players on this board are able to get a higher percentage and therefore a higher marginal percentage of their rake to be given back to them then if we all formed a union or somesuch and got site-endorsed rakeback. It seems like continuing down the road towards "poker unionization" or whatever we were looking for would be a poor choice.

rj

[trainslayer]

Did you forget to take your medicine?

[jokerthief]

PITTM, is right. What's your problem?

[TruePoker CEO]

You write; "this is a bad proposal because the more people who are getting rakeback, the less rake they will actually be getting back."

I disagree. What I would suggest is that, under any reasonable plan, the amount of rakeback would be based upon an individual player's productivity. This likely would preclude a pooling of funds to finance rakeback divided by the number of participants, which seems to be what you are discussing. ...

what the overall rake effect would be is our worry, we would watch out for our end and encourage players, within certain parameters yet to be set out

There are a number of issues to settle to optimize benefits for both a site and players in a well designed rakeback program. However, your apparent concern likely should not going to arise as a problem.

Comments ??

Truepoker CEO

[spkid]

I keep posting this question and it keeps getting deleted. Somebody HELP me!!!!!! Question: Is getting rakeback from an affiliate wrong or against the rules of internet poker sites???

thanks to any replies

[jokerthief]

Why not just allow affiliates to offer rakeback deals? That way everyone who is in the know is satisfied and those who aren't in the know are paying you guys full rake. I think the majority of your players will never hear about rakeback deals.

[jokerthief]

Yes, it is against the rules of most sites. Is it wrong? I don't think so. Will anything happen to you if you get a rakeback deal? Doubtful, worst thing that can happen is that you won't get it anymore.

[bort411]

[ QUOTE ]
I keep posting this question and it keeps getting deleted. Somebody HELP me!!!!!! Question: Is getting rakeback from an affiliate wrong or against the rules of internet poker sites???

thanks to any replies

[/ QUOTE ]

Read This. (http://forumserver.twoplustwo.com/showflat.php?Cat=&Number=1282574&page=0&view=colla psed&sb=5&o=14&fpart=1)

[TruePoker CEO]

We do.

[spkid]

Yeah. I read it. And it struck me as a message intended to keep advertising out of the threads. Because, let's face it, why can't we talk about something that this site gets paid to advertise in the classifieds??

[spkid]

Then again, Philadelphia Weekly has many ads for prostitutes in the back of the paper, but probably wouldn't allow a Q&A section on how to find the best whorehouses....
Maybe I do understand....

[jokerthief]

I haven't played at your site yet but because of the myriad of debacles happening at the Party network, I should be looking into it soon. I didn't know that rakeback is kosher at your site, that is a big plus for me. If you really want to get market share, develop good software. There is nothing that creates ill-will faster and more permenantly than software issues. That is also Party's biggest weakness. Also, do you have a casino that links to your cardroom? I think that would be a great way to a lot of softgames going.

[Rudbaeck]

The profit for an online poker room is so insanely high compared to the operating costs that economic theory dictates that sites will start undercutting each other.

As most people don't really understand rake just lowering the rake will do little for PR.

Rakeback in clever packages is the form it will have to take. "Man, these guys are actually paying me to play poker!" is the thought of the sucker. That in fact it's a cleverly disguised rebate will never cross their little minds.

There is no mature market on earth with anything near the profit margin of online poker sites. And I doubt it will continue to be as profitable for the companies. You just can't keep selling a $12.95 service for $7500 and get away with it. Or so I sincerely hope.

[GrannyMae]

Because, let's face it, why can't we talk about something that this site gets paid to advertise in the classifieds??

then what goes on the classified page? how do they get back all that income? what goes in the banner holes that would crop up instantly?

please don't forget that this is a for-profit site run by guys that know exactly what they are doing. classifieds and banners here generate a TON of income for them and they will not compromise it. matter of fact, they raised rates again. we get nice apology letter for the new increase, but apologies mean more money is going from me to them, so i wish they would not be apologizing. they can justify that because this is a superior product. if commercial content becomes acceptable, then this place is destroyed.


GREAT non-moderated, unrestricted rakeback and affiliate discussion here:

http://www.recpoker.com/index.php?group_id=1

[Pokeraddict]

[ QUOTE ]
Yes, it is against the rules of most sites. Is it wrong? I don't think so. Will anything happen to you if you get a rakeback deal? Doubtful, worst thing that can happen is that you won't get it anymore.

[/ QUOTE ]

This is a bit misleading, it is against the rules on Party, Poker Stars, Paradise and the B2B Network. Most of the other rooms are OK with it.

[PITTM]

[ QUOTE ]
You write; "this is a bad proposal because the more people who are getting rakeback, the less rake they will actually be getting back."

I disagree. What I would suggest is that, under any reasonable plan, the amount of rakeback would be based upon an individual player's productivity. This likely would preclude a pooling of funds to finance rakeback divided by the number of participants, which seems to be what you are discussing. ...

Truepoker CEO

[/ QUOTE ]

because the more easily accessible you make rakeback, the more people will take advantage of it, the more people that take advantage of it, the more money you have to pay out. HOWEVER, when you arent paying everyone and just paying a few people you can afford to pay them more because you can afford to pay them a portion of the extra money that is generated by users not taking advantage of rakeback. if you continue to make rakeback more accessible, more players will play, but the marginal rakeback profit per player will drop drastically as compared to when it was only a few players playing. can you really tell me you disagree with the fact that i could easily get 25% rakeback on most sites, but i wouldnt get much more than 15% from a site sanctioned program? i think rakeback sucks anyways, i would rather just clear bonuses everywhere.

rj

[PITTM]

thats what im saying, we should be getting better offers than 15% of our rake back from these sites. I paid thousands of dollars in rake across many sites last year, and the site got all of it, are you really trying to tell me they cant give me a nice juicy bonus once in awhile? especially since they have a great overlay on the fish who play without taking the bonus anyways.

rj

[SinSixer]

The only losers would be affiliates. Players would get higher rakeback.

Since you are an affiliate, then yes, you would lose money.

[wateronrock]

I was starting to think PITTM was retarded, now I understand, he's an affiliate.

[jokerthief]

Affiliates hate rakeback deals.

[Synergistic Explosions]

[ QUOTE ]
Affiliates hate rakeback deals.

[/ QUOTE ]

Theres an affiliate war going on right now. The ones not offering rake back are winning this war with the help of Pary Poker. Below is a typical non rake back affiliate attitude.

[ QUOTE ]
I had a thought about trying to police affiliates that do not adhere to the TOS that Party sets forth.

Put a bounty on them.

I.E, i as a TOS abiding affiliate see affiliate"so and so" blatantly advertising a rake back at party. Or for instance, since i work in a 45 table poker room, i hear about some affiliate offering rake back or "flipping" players( convincing current players to rejoinin under their tracker).

If i report that affiliate, and their viloations can be verified, why not pay me a fee...

Perhaps a few of the reported affiliates best RMP players can be transfered over to me : )
OR cut off the reported affiliates earnings, but still pay me as if that affiliate was my sub, 20% of what he would have made. : )

Either way, Party would be saving alot of money over the long run.

Party would have quite a police force out there enforcing the TOS for them if they implimented something like this.

Any thoughts?

Top


[/ QUOTE ]

[wateronrock]

Do you think it's going to stop, at getting rid of affiliates who kickback a % to players?

I love how the affiliates who follow the TandC's like to portray themselves in such a positive light. Their heads may be next on the chopping block, the greedy bastards.

Don't the TandC's also say something to the effect of.. " We reserve the right to terminate this arrangement at anytime."? I can't wait to see their attitudes change when TandC's no longer serve their interests.

[Synergistic Explosions]

No doubt they will stop all rake backs since they are making it impossible to track each individual seperately.

I really hate affiliates with the attitudes like the one quoted above..

I see no reason affiliates shouldn't be able to share their share of the rake with those producing it.

[Kevin K.]

[ QUOTE ]
PITTM, is right. What's your problem?

[/ QUOTE ]

He's wrong. There would be no affiliates involved. They would be paying out less than the % of MGR they give to affiliates now anyways.

[jokerthief]

[ QUOTE ]
They would be paying out less than the % of MGR they give to affiliates now anyways.

[/ QUOTE ]

That is why I think he is right. I doubt the card room would give out more than 25% in a rakeback to everyone.

[Kevin K.]

[ QUOTE ]
[ QUOTE ]
They would be paying out less than the % of MGR they give to affiliates now anyways.

[/ QUOTE ]

That is why I think he is right. I doubt the card room would give out more than 25% in a rakeback to everyone.

[/ QUOTE ]

No. He's wrong. Reread his post. His point is that somehow people would be getting less rakeback. They wouldn't. Hell, they could get more. There would be no middleman.

[Rudbaeck]

[ QUOTE ]
are you really trying to tell me they cant give me a nice juicy bonus once in awhile? especially since they have a great overlay on the fish who play without taking the bonus anyways.

[/ QUOTE ]

No, I'm telling you that they can and will give back not 15% or 25% but more like 50-75% eventually. Sites which offer equivalent services to Party are usually not even making a $1M profit a year...

And I think the current owners of Party actually know this. Which is why the IPO has such genius timing. Selling a company that has had huge profits, but is projected to have modest profits, is brilliant.

[jokerthief]

[ QUOTE ]
Sites which offer equivalent services to Party are usually not even making a $1M profit a year...

[/ QUOTE ]

What exactly do you mean by this? Are you talking about affiliates offering rakeback or cardrooms?

[daveymck]

I have an revolutionary idea why nbot instead of having rakeback schemes reduce the rake, the fish dont understand the concept of rake and the better players would still be attracted as the tax on their winnings is reduced.

[_And1_]

The economics of rake and fish dictates this:

The casual player (fish) doesnt understand the concept of rake, but they understand bonuses, kickbacks and cash in hand concepts. ("I m earning money as i play"). These players come in numbers.

The sharks do understand the concept of rake and look for low rake (or rebate). But the sharks will always feed on the fish fish is regardless of fees. (these players dont come in numbers but put in alot of hours, ie alot of play anyway).

So how to attract both these groups? A new site that wants to get a bite of the market should go with higher rake (couse most wouldnt be able to tell the diffrence) but with greater kickbacks, HUGE bonusdollars. This will benefit both the fish, who comes when he sees that good bonus in the adds. the high volume playrs wil attend as volume kick in and as their actual rake isnt that great (due to official kickbacks (as champs).

The net could be the same, its the players that pay for the increase of bonuses/kickbacks. It just looks better but in the end you are paying to yourself...

So in the end i dont see how the rake will go down, it's more likely to increase, but so will kickbacks, bonuses and other stuff to keep the masses happy. (No site in the industry will be able to or would like to educate the masses on what rake really is or what it does to the economics of poker.) Cutting the rake just isnt an good argument to gain custemors since they wouldt know the diffrence...

[Rudbaeck]

[ QUOTE ]
[ QUOTE ]
Sites which offer equivalent services to Party are usually not even making a $1M profit a year...

[/ QUOTE ]

What exactly do you mean by this? Are you talking about affiliates offering rakeback or cardrooms?

[/ QUOTE ]

No, I'm talking about other services, which have bigger server parks, about the same number of regular users, higher development costs etc. Specifically online computer games such as Everquest.

[Rudbaeck]

[ QUOTE ]
The net could be the same, its the players that pay for the increase of bonuses/kickbacks. It just looks better but in the end you are paying to yourself...

[/ QUOTE ]

The net can't be the same. If it remains at the level it is today everyone will open a poker room, as it's the most lucrative market on earth.

Competition will seriously lower the profits for online card rooms one way or another.

[ggbman]

[ QUOTE ]
[ QUOTE ]
are you really trying to tell me they cant give me a nice juicy bonus once in awhile? especially since they have a great overlay on the fish who play without taking the bonus anyways.

[/ QUOTE ]

No, I'm telling you that they can and will give back not 15% or 25% but more like 50-75% eventually. Sites which offer equivalent services to Party are usually not even making a $1M profit a year...

And I think the current owners of Party actually know this. Which is why the IPO has such genius timing. Selling a company that has had huge profits, but is projected to have modest profits, is brilliant.

[/ QUOTE ]

Man i hope your right. It would be sooo nice to have an extra 3-4k in my pocket every month.

[TruePoker CEO]

Come off it Granny, we all know Mason blows his whole bankroll from this site on those expensive Harry Winston jewels he is always plying you with.

[TruePoker CEO]

Affiliates, both those who offer rakeback and those who do not, represent an incredibly valuable marketing system to attract and retain online poker players.

There is a definite added value to a site to enroll and keep affiliates' marketing reach, ingenuity and expertise.

This does not mean a site should market exclusively thru affiliates, but they are extremely important. Similarly, a site should facilitate affiliate-offered rakeback where necessary for effective player marketing.

That is how our site feels.

Truepoker CEO

[PITTM]

my point: if an affiliate offers an under the table rakeback scheme less people will sign up and since the players paid:rake pool ratio is very small, the site can afford to pay players amounts like 25%, if EVERYONE gets rakeback we go from like 5k of the 100k users of a site getting rakeback to 100k of the 100k users getting rakeback, you dont think they will pay a massive number of people less than they would a small number of people? i understand that there is no middleman, but those fees are more than paid by the fact that there are thousands and thousands more people getting their rake back.

rj

[CountDuckula]

I see this as giving high-volume customers a break. With a multi-tiered rebate scheme, only those whose volume justifies it get the break. The sites would still be getting plenty of rake. People who play 40+ hours a week might be getting 25% back, but on the other hand, they're also still paying 75% of the rake that they would have paid in the absence of the program, and they're spending lots of time on the site, quite possibly much more than they would have otherwise. People who only play recreationally, maybe 5 hours a week or so, wouldn't necessarily get anything other than the occasional reload bonus. If they decide to double their time on the site, in order to qualify for something like a 5-10% rebate, they may be paying 190-195% of the rake they were paying at the lower activity level. Worst case, lots of people hit the 25% rebate level (or whatever the max is), but if they do, their volume more than makes up for the discount; if they play 10 times as much as someone who doesn't get the discount, they're generating 7.5 times the rake as those. The site still wins. Wouldn't they rather have 25,000 people playing at a discounted rate than 2,500 paying the full rake?

Note that all of my numbers are examples only; I have no idea what the actual numbers would be. But the principle remains the same.

-Mike

[Kevin K.]

[ QUOTE ]
my point: if an affiliate offers an under the table rakeback scheme less people will sign up and since the players paid:rake pool ratio is very small, the site can afford to pay players amounts like 25%, if EVERYONE gets rakeback we go from like 5k of the 100k users of a site getting rakeback to 100k of the 100k users getting rakeback, you dont think they will pay a massive number of people less than they would a small number of people? i understand that there is no middleman, but those fees are more than paid by the fact that there are thousands and thousands more people getting their rake back.

rj

[/ QUOTE ]

You're still not making much sense. What about affiliates who don't offer rakeback at all? They still get the same cut as affiliates who offer rakeback. The site pays affiliates the same amount regardless.

[_And1_]

[ QUOTE ]
The net can't be the same. If it remains at the level it is today everyone will open a poker room, as it's the most lucrative market on earth.

[/ QUOTE ]

Ofcourse. My bad. the net for the site would be somewhat smaller, but as you say the cut is so big at the moment so giving up some of it wouoldnt make it a non lucrative market.