Who will win?

So, this is my first post. Having been reading the 2+2 forum for several months now (as an outsider), and spending a lot of time thinking about the future of online poker, I felt compelled to express my thoughts in order to see if the wise 2+2 posters agree or disagree. For what its worth, here is my interpretation, (opinions/corrections appreciated either way).

I'm trying to determine who of the "Big 4" will become the Microsoft of online poker and why?


Liquidity

With the recent "dumping" of its Skins, I believe PartyPoker has TRULY initiated the quest for online poker room consolidation. The name of the game is first and foremost player liquidity. Liquidity can be seen across all levels, not just the $.50/$1 tables. Sure, 5000 players may make a site "liquid" but that doesn't mean the higher stakes players (lets say anything $3/$6, $500 NL, or $30 stud tournaments and above) can see all the action they want. From the stance of player liquidity (especially at the higher stakes levels, which coincidentally is where all of an online poker rooms revenue comes from), Partypoker takes the cake. If an online poker company wants to succeed and be profitable, they will surely understand that liquidity at medium-high stakes is essential. Anyone who lacks that liquidity (and even more so if they lack low stakes liquidity) will soon be gobbled up by larger poker rooms, or risk being buried alive. If anyone has the money and prominence right now to swallow the small rooms and add to their player base it is certainly PartyPoker.

Score 1 pt for PartyPoker.


Rak*B*ck & Bonuses

First and foremost, it is important to establish that the actual rake taken by any site is practically equal when compared with any other site. A typical 3-5% with a $3 max rake is standard, and high limit people are maxing out everywhere and low limit either aren't being raked or aren't noticing much of a differece site to site. That being said/assumed the real thing people care about are the Rak*B*cks and the bonuses not the rake itself.

So here is where PartyPoker is hurt. Previously, it was a no brainer, play at Empire. You get Partypoker's liquidity and you get the benefit of a Rak*B*ck. Now with Empire's liquidity failing to have enough players to field a baseball team, it poses an odd question. Do you signup with PartyPoker knowing there is no chance at Rak*B*ck or do you go with another less liquid site to get the Rak*B*ck. Moreover, do you go to PokerStars and fail to get a signup bonus? I think this area is very tricky right now, but I can say this. In due time it will all even out, and only the strong will survive. Upstart poker rooms can only give away 100% matching bonuses and 45% Rak*B*ck for so long. The point is, its just not profitable, and only opens them up to bonus whoring. In an online world where poker consolidation is coming and one (or a few) will emerge at the top, it is clear that profit demons like 100% matching bonuses and high Rak*B*cks will become a thing of the past.

Score -100 for small pokerrooms and skins

Tournament Play

Tournament play, although less profitable for the poker rooms, seems to be an increasingly popular style of play over the typical ring game. I myself enjoy tournaments more than ring games because I feel I get "more bang for the buck" and since I don't play to pay my bills, tournaments work best for me. Needless to say, the big consensus (at least on here) is that Pokerstars is the place to play. Apparently they have figured out the most appealing combination of starting chip amounts, blind structure, etc. that allows talented players to "play their style and win". I'm not sure why Partypoker hasn't moved to that similar format, but thats not to say it couldn't be an easy switch/addition somewhere down the line. I am a fan of some of the unique tournament ideas at Partypoker, like the Step Tournaments, but it still seems that if you are serious about tournaments and you ask around, you will probably find yourself at Pokerstars.

Score 1 pt for Pokerstars.

Frequent Flyer Points

In an activity that seems almost like a commodity (is one steel company better than another, or one brand of salt better than another), something down the line will need to separate the true brands from the has-beens. Almost all sites offer free rolls, players' club tournaments, free clothes, etc, etc. but the question is who's the best. What is the best measured by? Well, the biggest and the most. Where can I get the biggest "Guaranteed" tournament, where can I win a new car just for playing 1000 hands, where can I have the chance to pay $5 for the chance to win $10 Million? And which sites can afford to give out the most and best, the ones with the most free cash. I highly doubt that the free rolls and bonus tournaments and car giveaways produce a lot of revenue for the poker rooms, but rather eat away at it. Users eat up bandwidth and computer time for free. Thousands of players sit at hundreds of tables for free and the chance to win $1000s of dollars or a new car or a trip or whatever. Despite this being a losing proposition for the poker rooms, this is what attracts, and will attract more players for years to come. Just think about it, the day there is a free roll with a pot the size of the WSOP pool, you'll see that poker room on the cover of Time magazine.

And who is in the best shape financially to ensure they are always offering the biggest and best frequent flyer programs?

Score 1 pt for PartyPoker

Advertising

Finally, no one will signup for poker and grow this industry without advertising. Whether it be word of mouth, affils, or TV commercials, something will continue to drive this industry (and anyone who knows the tip of an iceberg when they see it can see this is most certainly a long lasting phenomenon, not a fad). The question here is how? Frankly, I'm not sure the best way to advertise, but I can say this, money and advertising seem to go hand in hand. I might not push all in, but I'd certainly raise 20x BigBlind on the fact that the wealthier poker rooms will have the most successful advertising campaigns. Perhaps the question is who to advertise too? Not sure if the demographics are tapped out in the teen-twenty-somethin range or not? When it comes to word of mouth, there is no coincidence that the companies with the largest market share recruit the largest amount of players. When every other person you talk to plays partypoker, 1 out of 8 play Pokerstars and 1 out of 10 play Ultimate Bet, Paradise, Pokerroom or Pacific, all other things being equal, the recruits will fit the same mold.

Score: +3 pts PartyPoker, +2 Pts PokerStars, +1 Pt UB, Paradise, PR and Pacific


Final Score

So when its all said and done,

PartyPoker: +5
PokerStars: +3
UB: +1
Paradise: +1
Pacific: +1
PokerRoom: +1
All others: -100


I'm not saying it has to happen, but the world is poised for an exploding market that could turn out like computers did for Party, PokerStars, and "The few others" (i.e. Microsoft, Apple, and the rest).

Any thoughts, answers, comments, corrections, etc. will be eagerly read.

Hope you enjoy and approve my first post.

[mosquito]

Nice first post. You make a few good points. Probably the market will go to more than one major player, either two or
three. I don't see Party or Stars not being "at the top". Plus there are several possibilities for a third or even fourth, through consolidation.

[mattw]

wow. very impressive first post. welcome aboard.

[Freudian]

Disagree with a few points.

First, rakeback isn't really important for the growth of really big sites (providing we are talking about player numbers and not rake numbers). For a small site I am sure it is an incentive to attract players, especially when you are part of a network where other sites attract recreational players with plenty of advertising.

Second, I think the size of the room in itself is an important factor for growth. Not only do sharks often stay away from small sites but also recreational players should want to play at the bigger sites. Many recreational players worry about things like security and the huge successful sites certainly radiates an aura of security that smaller sites don't. Would you feel safer opening a savings account in a bank with thousand customers or one with a million?

Thirdly, I think Pokerstars is ahead of Party when it comes to player points. I don't think it is a huge factor in growth but I am sure it can have some marginal impact (mainly through word of mouth from casual players who are happy that they get stuff for playing poker).

Two questions then....

1) If you believe rakeback is not important to big sites for attracting new players, do you think rakeback will begin disappearing as the big sites continue to grow bigger?

2) Can you say what things make you believe Pokerstars is ahead of party when it comes to player points? I wasn't sure how to quantify that one.

Good point about security, although its probably safe to say that party,stars,paradise,etc. are all pretty safe. Scoring points though, Party = +1 b/c they are the biggest and therefore seemingly the most "safe and secure".

thanks

This a perfect example of a "Winner Take All" economy. Or, to quote one of my favorite movies: "As you all know, first prize is a Cadillac Eldorado. Anybody want to see second prize? Second prize is a set of steak knives. Third prize is you're fired." (Glengarry, Glenross)

Long term, the poker space will consolidate through merger and bankruptcy. Party poker is and will remain #1. Second place is up for grabs--Stars, Prima, Crypto, whatever. Third place doesnt exist in 3 years. Standalone companies like Pokerstars won't remain standalone, since online poker will become just a portfolio offering for a broader online gambling experience (table games, sports, poker, etc.)

[MyTurn2Raise]

Don't forget about Absolute...they have over 10k players at times now and are very aggressive with bonuses/rakeback to draw players.

[bholdr]

as far as first posts go, this was a doozy. welcome to the forums.

A couple more things to consider:

[img]/images/graemlins/heart.gif[/img] afillite programs and online advertising in general- this is how party built their business in the first place, and will be the diference maker. TV and other adverts are such a science that there will be little diference between the sites and their PR, but the web is still pretty much the wild west.
[img]/images/graemlins/heart.gif[/img] tournament results- i think a big part of stars' sucess comes from moneymaker/raymer and the associated media coverage of their WSOP wins.
[img]/images/graemlins/heart.gif[/img] legality: this is such a huge grey area with massive implications for the future of online gambling that i think nobody can really make accurate predictions of profitability yet... also, what if the US goes for full legalization and Harrah's or the WPT starts a site or buys one? purely online businesses have always had a hard time competing with B&M companies that are ALSO online. (see: online retail sector- B&Ms squashed most web-based start-ups). conversly, what if it's banned? i used to think that Napster, etc, was unstopable, but, here we are...
[img]/images/graemlins/heart.gif[/img] the 'fad' thing... is poker going to continue to grow, or is it just another bubble? this is the question upon which all others depend...
[img]/images/graemlins/heart.gif[/img] Site networks: i think that most small sites will eventually join networks like prima, apex, bossmedia, etc rather than go it alone.
[img]/images/graemlins/heart.gif[/img] cost. sooner or later, the general public will figure out what 'rake' is. well... maybe not (gamblers tend to overlook things like that). but it could make a big difference if they do.
[img]/images/graemlins/heart.gif[/img] finally, leadership... Dikshit has been very impressive, but so much could turn on one person's ability at the helm of a poker site, it's a bit of a crapshoot...

IMO, and this is almost pure speculation, i think that as the sites get bigger, advertise more, and consumers become more savvy, there will be room in the market for between three and five big sites- like online shopping, the sites that cannot afford to aggressivly advertise and absorb losses while building their business will not be able to keep up. obviously, party and stars will remain competitive for the forseeable future, but after them... who knows?

One thing i am quite sure of, though, is that the smaller sites and the deluge of start-ups are on their way out- remember 'poker mountin'?... i didn't think so. Places like golden palace, bet365, eurobet, pacific, etc, will survive based on their affiliation with major online gambling and sports betting operations, but the smaller ones will not be able to compete.

In fact, if 888 ever gets their sowtware fixed (and their heads out of their asses), they could easily jump into the top three or four very quickly (888.com, otherwise known as casino-on-net and pacific poker, is the biggest online gambling company by a long shot- much bigger in terms of profits, value, and gross wagering than party if i remember correctly).

I'd guess that in five years or so (and this is a fairly uninformed guess) there will be around five major sites profiting in the biz and a few dozen or so others trying to stay liquid. if i had to predict... it'd be, in order, Stars, Party, 888 group (provided they try a little), and a couple networks of smaller sites (prima, etc). Sars because of all the media attention and stronger advertising (not to mention two WSOP ME champs), Party because of the name recognition, Dikshit, and sheer size, and 888 and prima because of their links with other online gambling. Maybe paradise or UB will remain competitive as well.

The preceeding is all pure, semi-informed speculation, but that's how it looks to me right now.






OH YEAH.... one more major thing that people almost never mention...

BOTS. it's unlikely but definitly possible that within a couple years bt writers will find a formula that can and will beat the best online players, and then it's all over... this is the doomsday device of online poker- it's very possible, and should worry any poker-site investor or online pro.


jesus, i spent a lot longer on this than i meant to. you can all make fun of me in a couple years when i'm shown to be dead wrong.

[Freudian]

[ QUOTE ]
Two questions then....

1) If you believe rakeback is not important to big sites for attracting new players, do you think rakeback will begin disappearing as the big sites continue to grow bigger?

2) Can you say what things make you believe Pokerstars is ahead of party when it comes to player points? I wasn't sure how to quantify that one.

Good point about security, although its probably safe to say that party,stars,paradise,etc. are all pretty safe. Scoring points though, Party = +1 b/c they are the biggest and therefore seemingly the most "safe and secure".

thanks

[/ QUOTE ]

1. No. I think rakeback is valuable in that it gives the pokerroom plenty of action. So they earn more money. High volume players are more likely to play exclusively on a site.

But for Party who has 9 million accounts, even if they introduced official rakeback there wouldn't be a huge increase in player numbers. For a newly started Prima skin, rakeback should be able to account for a significant player growth.

2. I think Pokerstars have a much more developed program for FPP. And you are able to buy things beyond low quality advertising clothes. At Stars you can get books, chipsets etc. As for the dollar value of each point I think Stars is ahead but I'll admit it was a long time since I thought about it. I think it is pretty much a non-factor for site growth though. Might attract a few new players through word of mouth.

I forgot another factor that surely must have had an impact on the growth of Party, the "refer a friend and get $50" deals. That is smart marketing.

[MicroBob]

i'm sorry...but there are unspoken rules on 2+2 that only my posts are allowed to be that long.
And when they are that long they have to be extremely rambling and repetitive.

just kidding obviously. welcome to the forums.
interesting observations. post more often.