Two Plus Two Older Archives  

Go Back   Two Plus Two Older Archives > Internet Gambling > Internet Gambling

Reply
 
Thread Tools Display Modes
  #1  
Old 12-11-2005, 10:38 PM
Guest
 
Posts: n/a
Default High rake online poker a good business model?

I know this topic has been addressed several times but I want to attempt to put a different spin on recent rake increases. From what I understand the biggest culprits in raising rake are Pacific Poker and Poker Room. Heck, even my stomping grounds (Pokerstars) made a slight adjustment on the ultra-micro limits (taking rake in dollar increments instead of 5 dollar increments on .25/50 limit and adding juice to $1 to $3 tournaments).

My understanding of some dominant theories are that online poker is relatively new and is still seeking an equilibrium point. While $3 as a baseline might seem high relative to B&M this number is not set in stone. As the market forces of supply and demand take hold some competitor should be expected to come in with dollar or two dollar rakes. Ultimately, the high rakes will wither on the vine. Or will they? I have already pointed out the recent rake increases of some big players in the game.

But then I'm told there has been a reduction in the cost to play online poker. We're told of rakeback schemes and bonuses which effectively lower the rake. These rakeback programs weren't around when I first started playing poker. Some rakeback programs are pretty generous and cut the rake by a third or so. Unfortunately, these rakeback programs are not universal and have seemingly escaped the big giants (some rakeback programs have been eliminated even).

The general trend seems to be larger rooms increasing the rake; usually by a direct increase or less commonly indirectly (e.g. Party Poker cutting rakeback programs). And yes, there are start-ups who offer very extensive bonuses and rakeback which bucks the trend. But looking at the industry as a whole I have yet to see any major player offer substantial reductions in the cost of playing poker.

The promise of a 1 dollar or 2 dollar rake has not matured. In fact, I have recently wondered about how long online poker will be able to sustain itself. Behind the scenes, perhaps executives smartly are increasing the rake because they know their industry is facing impending doom.

Suppose you have a base of 10,000 players. The current rake is 5% to 3 dollars. If you raise the rake 8% to 4 dollars and immediately lose 1,000 players you will still make extra profit. If poker is a dying fad and the players will soon leave anyway why not help them empty their wallets faster. And as mentioned, many players are oblivious to the rake anyway.

Maybe it should be expected that the big sites are increasing rake. Even though the growth at the websites is declining, there still is more players online this year than the last. And that boom was very substantial. With more players online, the sites can increase costs without destroying their customer base. However, the growth in the number of online players has also resulted in a plethora of new card rooms. It would seem the supply of firms is growing so fast the demand should easily be met and hence increases in prices would be counterproductive.

Perhaps the hidden variable here is the value of 'trust and credibility.' Sites like Pokerstars, Party Poker, Pacific, Paradise, Ultimate bet, etc have been around for a while and have earned a strong reputation as credible and trustworthy players. I wouldn't (after the Pokerspot fiasco I was involved with) place my trust in a relatively unknown cardroom, even if it was rumored to be a trout stream. Hence, I'm willing to forego rakeback (effectively lower rake) and pay a higher price for the assurance of timely cashouts, modest security and responsive customer service.

However, if the rake ever becomes $4 at Pokerstars I'd likely never play there again. But I wonder how many people actually have the same vantage point I do. If Pokerstars, Party, or Paradise decided to raise the rake over $3 (like PokerRoom or Pacific) would you still play there? What is your threshold? I have this feeling that the majority of players would play there anyway. In any case, enough players might stay there to make raising the rake profitable while losing part of its customer base.

Anyway, these represent a few thoughts (admittedly somewhat unrefined and incoherent) I've had on the recent rake increases and the future of online rake policy. Hopefully, online poker isn't a giant Titantic and the executives will be purchasing escape yachts with newly implemented $4 and $5 dollar rakes.

JeffreyREBT "Wherein I don't promise to make you rich without trying, or even trying very hard; I do promise to say things that will make you FEEL rich."
Reply With Quote
  #2  
Old 12-11-2005, 11:35 PM
Uglyowl Uglyowl is offline
Member
 
Join Date: Nov 2002
Posts: 66
Default Re: High rake online poker a good business model?

[ QUOTE ]
If poker is a dying fad

[/ QUOTE ]

Online poker is currently thriving! Most businesses would love to have this kind of growth.

Stat for PartyPoker for November 2005

Active player days in the period were 8.4 million, a 38% increase over the same period in 2004.
Reply With Quote
  #3  
Old 12-12-2005, 06:19 AM
gabyyyyy gabyyyyy is offline
Senior Member
 
Join Date: Dec 2003
Posts: 730
Default Re: High rake online poker a good business model?

[ QUOTE ]
Perhaps the hidden variable here is the value of 'trust and credibility.' Sites like Pokerstars, Party Poker, Pacific, Paradise, Ultimate bet, etc have been around for a while and have earned a strong reputation as credible and trustworthy players.

[/ QUOTE ]

Ya pokerstars is deemed credible even though there are about 100 posts made daily on various forums that the shuffle there is rigged.

Guess we are all nuts.
Reply With Quote
  #4  
Old 12-12-2005, 06:55 AM
daveymck daveymck is offline
Senior Member
 
Join Date: Nov 2003
Posts: 388
Default Re: High rake online poker a good business model?

In business you look to do two things to grow adding customers and getting more from the customers you have already. We are seeing the pokerrooms increasing rake but also adding games like blackjack etc as a means to get extra money out of the existing customer base.

The rooms imho are more bothered about getting in the leisure players most of whom dont know or care that much about the rake. They log on play a fews hours a couple of times a week maybe have the odd sidebet or a few hands of blackjack and have a bit fun and they either win or dont win but they will be back with their cash the next month.

The increases in rake works because most of the players dont care and those that do generally chosse their games based on their potential earn ie the fishiest easiest games than looking for value (and generally have rakeback as well), although I know some regular players dont play some sites cos of the rake.

I can only see the poker sites consolidating over the coming year so I suspect we will rake rising rather than falling in the short-medium term, as growth reduces and competition increases we may see some price wars but I think we are some way form that happening yet.
Reply With Quote
  #5  
Old 12-12-2005, 08:26 AM
Guest
 
Posts: n/a
Default Re: High rake online poker a good business model?

[ QUOTE ]
Guess we are all nuts.

[/ QUOTE ]

The first step in conquering any problem is to admit it. Congratualations on this big step.
Reply With Quote
  #6  
Old 12-12-2005, 08:37 AM
FlFishOn FlFishOn is offline
Senior Member
 
Join Date: Jul 2004
Posts: 142
Default Re: High rake online poker a good business model?

The poker boom has the same look as a gold rush. I expect a crash to be about equally abrupt as the days when the gold runs out.

There's still gold in CA. It just supports about 1% of the number of miners that it did in 1850. Actually, in 1850 the gold supply didn't support all the miners. Many busted out.
Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -4. The time now is 07:08 PM.


Powered by vBulletin® Version 3.8.11
Copyright ©2000 - 2024, vBulletin Solutions Inc.