Poker sites invest money?

[GrannyMae]

player funds are kept seperate. i'm certain that the account is interest bearing tho. party poker is trying to go public. i'm sure they have undergone heavy scrutiny and audits because of this. while they may have the ability to mess with peoples money, i'm sure they currently are not playing games with these funds because of the pending IPO

[Niwa]

At least the ones that work for party [img]/images/graemlins/smile.gif[/img]

[maryfield48]

[ QUOTE ]
player funds are kept seperate. i'm certain that the account is interest bearing tho. party poker is trying to go public. i'm sure they have undergone heavy scrutiny and audits because of this. while they may have the ability to mess with peoples money, i'm sure they currently are not playing games with these funds because of the pending IPO

[/ QUOTE ]

Separate from what?

Insurance companies make most of their profit from investing the float during the interval between collecting premium & paying it out. As long as they are breaking even (or even losing not too much - depends on investment returns) on the Premiums minus (Claims+Expenses) equation, the investment income is free money.

I would think online gambling operates similarly. If I have $1m worth of players' money, I know (based on analysis of the past) I will be called upon to pay out x% over the next 90 days, so I can invest 100-x in semi-liquid investments, at a good return, and keep x% on deposit or whatever that I can have access to quickly, at a lower return.

Anybody who thinks they aren't taking advantage of this opportunity is dreaming. If the industry continues to grow, I expect the cost of rake to be significantly eroded as the sites battle for business, so that their float can be as large as possible. It's like Geico vs Progressive.

Businesses usually don't regard lack of regulation as a bad thing, but the more responsible & ambitious online gambling investors ought to be concerned about situations such as the one that occurred with whatever-is-the-name-of-that-site-that-Dutch-Boyd-was-connected-to.com.

If a site goes down and can't pay out to its customers, the entire industry will suffer. And just as has happened from time to time with financial institutions, there is a pretty good chance that someone will decide to set up an online gambling site, grow it really fast with bonuses, lower (or no) rake, heavy advertising, etc., and then disappear leaving a bunch of players with empty bankrolls. It doesn't have to be that sinister of course, it can happen through mismanagement, adverse business conditions, bad luck, whatever.

[GrannyMae]

Insurance companies make most of their profit from investing the float during the interval between collecting premium & paying it out.

invalid comparison.

insurance companies are not processing cashouts hundreds of times a day. yes, they cut plenty of claim checks, but this is not even close to the same type of business.

[sfer]

There's a big difference between separate, return earning short term, liquid investments, and treating player deposits as working capital. I think that was Granny's distinction.

[maryfield48]

[ QUOTE ]
Insurance companies make most of their profit from investing the float during the interval between collecting premium & paying it out.

invalid comparison.

insurance companies are not processing cashouts hundreds of times a day. yes, they cut plenty of claim checks, but this is not even close to the same type of business.

[/ QUOTE ]

I don't think this invalidates the comparison. It doesn't matter how many cashouts per day, it matters what percentage they represent of the float. If hundreds of cashouts per day = 10% of the float, then I invest 85% or 80% and keep the rest in cash. The more customers I have the more investment income I earn. Just like poker, it's all one big session.

[maryfield48]

And of course they are processing hundreds of deposits too. Today's deposits fund today's cashouts, I have some cash for any shortfall, and the float goes on earning.

[maryfield48]

[ QUOTE ]
There's a big difference between separate, return earning short term, liquid investments, and treating player deposits as working capital. I think that was Granny's distinction.

[/ QUOTE ]

True. That is a valid distinction.

[cbfair]

As a potential investor (I probably won't invest, but I could) I would hope that the company is doing all it can to maximize profit while continuing to provide high level customer service. [img]/images/graemlins/wink.gif[/img]

Strategies to maximize profit include advertising, server/software upgrades, negotiating contracts, and yes, investing available "float" while maintaining adequate liquidity to match their daily cash flow requirements.

I, for one, believe it would be irresponsible from the company's perspective to sit around with significantly more liquidity than is neccessary when there is an opportunity to invest at a greater return.

[GrannyMae]

I, for one, believe it would be irresponsible from the company's perspective to sit around with significantly more liquidity than is neccessary when there is an opportunity to invest at a greater return.

this is what the profits are for. they better keep their hands off our money, but we certainly expect that the player funds are making them a nice return in some kind of low-risk, medium return fund.