When Rakeback is a Bad Idea

While most of my posts typically defend rakeback and rakeback affiliates (since I am a rakeback affiliate myself) I’m also quick to point out when rakeback is a bad idea.

I recently received an affiliate email from Betsson that I a little surprising.

Betsson Poker:

-Launching a secondary Poker network on the Entraction platform only in Euros, which will also offer rakeback only for players coming in through affiliates.

-This will guarantee higher loyalty amongst your players and higher lifetime value.

At first glance this seems perfect. You have your high liquidity Ongame skin and you have a rakeback skin on Entraction. But now you’re marketing two different products. Not just two different rooms but two completely different value propositions.

One one side, you have your Ongame skin which you have to market based on the VIP program and then you have a rakeback skin which you have to market to high volume players.

Running a skin entirely to offer your players rakeback is essentially having 100% of your signups come from affiliates because you have to pay out the rakeback to every player just like you would if you were paying an affiliate. That’s never good. If you’re a big room like Full Tilt or PokerStars you might be getting 10% – 20% of your signups via affiliates. If you’re a smaller or less well known room that could be up to 50% or 60%. As a rakeback skin you’re at 100%. Where are the margins in that?

Second, what about players who signed up with an affiliate on the Ongame skin but now want to move over to the Entraction skin? Is Betsson going to hose the Ongame skin affiliate?

And you know that if a player comes to them and says he’s thinking of leaving the site for a site that offers rakeback Betsson is going to cross-sell them the Entraction skin. Are they going to cut the affiliate who brought them the customer in on the deal?

And no offense to rakeback players but there tends to be zero brand loyalty. They play where they get paid the most. Not just in rakeback percentages but where they can find soft games or where they have the most table selection at the limits they enjoy playing. That’s why so many rakeback players play on Full Tilt at 27% rakeback instead of some room offering 50% rakeback.

Ongame is the 5th largest room/network and twice the size of Entraction. Is a player who is playing at Betsson on the Ongame network willing to halve his table selection just to stay with the Betsson brand or would he rather go to a different network/room altogether? Considering that Entraction is openly allowing them to offer rakeback that means that the skin is probably full of other rakeback players on other skins rather than the fish that Ongame’s skins attract.

Last but certainly not least is the fact that, in my experience, online poker rooms never staff properly. Even though they’ll be running two entirely different poker rooms they’re likely to assume that many people can work across skins. For some services that can work. For instance, customer support isn’t likely to receive twice as many customer contacts because they’re not doubling the number of customers. They’re simply splitting the number of customers across two skins.

But what about marketing? What about retention management? What about website development?

Again, in my experience, management always assumes that it’s no big deal to send out one more newsletter or maintain another website but in reality it’s not that simple.

People, as a general rule, will either knuckle down and do high quality work on both brands and burn out from too large a workload or they’ll work the same number of hours and just do whatever they absolutely need to in order to get by. Neither of those scenarios sounds optimal. Especially in this very competitive marketplace.

Is that what Betsson is doing? I don’t know. Perhaps Betsson’s executives are enlightened and have staffed properly. I simply don’t know but I do know what the industry’s tendencies are.

All in all, I don’t think this was a good move for Betsson. And depending on how they handle people jumping from Ongame to Entraction it could be really bad for affiliates. For players, I think it’s a big fat meh. If you’re already playing on the Ongame skin you’ve come to accept a world without rakeback and you’re certainly not going to go chasing dollars (or Euros) playing on a skin half the size and with tighter games. If you’ve already left Betsson because you couldn’t get rakeback on their Ongame skin you’ve already jumped ship. You’re already playing on Full Tilt, Absolute, Ultimate Bet, or whoever.