Yesterday I wrote a post on how Zynga will not become the next PokerStars in the event that the US legalizes online poker. One of my readers, zimba, posted in the comments:
You elude to Zynga monetizing play money players, but you don’t mention specifically how they do that. Can you elaborate?
To be clear, I didn’t elude to it, I said it. 🙂
I was going to post something in the follow up comments but I wanted to share this as there really are no poker rooms actually monetizing their play money players. Maybe someone from one of the poker rooms will read this and the light bulb will go off.
I’ve actually thought about this issue a lot. When I was at Party Poker right after the UIGEA was passed we had a problem. We had a huge database of real and play money players based in the US that we could not offer real money gambling to. I was looking for a way to monetize this asset. Unfortunately we never did do much with these players but I have given the subject a lot of thought and figured I would share some of those thoughts here.
First off, let’s look at how Zynga makes money. I’ll be completely honest and say that I don’t have an intimate knowledge of Zynga Poker. But just to answer zimba’s question, Zynga make money selling chips to users. In the past (and they may still do this, I don’t know) they also partnered with third parties and would issue points if players did something like download some software or complete some tasks on the partner’s website.
In this Startup@Berkeley event Zynga CEO, Mark Pincus, discusses what Zynga’s strategy was coming out of the gates:
I knew that i wanted to control my destiny, so I knew I needed revenues, right, fucking, now. Like I needed revenues now. So I funded the company myself but I did every horrible thing in the book to, just to get revenues right away. I mean we gave our users poker chips if they downloaded this zwinky toolbar which was like, I dont know, I downloaded it once and couldn’t get rid of it. *laughs* We did anything possible just to just get revenues so that we could grow and be a real business…So control your destiny. So that was a big lesson, controlling your business. So by the time we raised money we were profitable.
Granted, Zynga experimented in some questionable advertising but that’s not the point. The point is that they understood from the first day that they had to make their money via some method other than rake so they approached the problem from a fresh perspective.
So if one is looking to monetize play money players your basic strategies are:
1. Charge them a monthly fee to play
2. Sell them chips
3. Advertise to them
Charging them a monthly fee is a business model some companies have attempted with very limited results. IMHO, The biggest problem with this model is that the people running the sites come from the real money world and think about everything from a real money perspective. I do think this could be a viable business model but I think you have to target a different kind of audience.
Selling them chips is, as far as I know, the primary monetization technique of Zynga Poker today. This fits right into something I’ve been saying for many years which is that for most casual players they view online poker as a form of entertainment. The beauty of Zynga’s approach is that many people are spending as much buying chips every month as many casual players spend depositing on real money poker sights but Zynga’s players don’t think that they’re gambling because there’s no way to cash out.
Lastly, you can monetize your players by advertising to them. At least one online poker site has attempted this but I don’t feel they did a very effective job with it. They simply slapped banner ads on their client. I think it would have been far more effective to work with various advertising partners to come up with innovative promotions. For instance, you sign up Coca Cola and have them sponsor a $5k freeroll once a week where their logo is on the felt of the online poker table. In order to get the code to sign up for the freeroll you might make them go to the Coca Cola website and perform some sort of action (survey, game, treasure hunt, etc).
Although I don’t consider this a form of monetization you can also utilize play money players to accomplish other business goals as well. Several years ago PokerStars did this on their real money site. To enter a freeroll you had to put a badge on your page saying that you were playing in the freeroll. Once someone verified that you had placed the badge on your site you were given a password. This can provide a massive SEO boost. It can also help sites raise awareness for certain real money campaigns that they might be running. All in all, getting your players to help you accomplish certain business goals is an excellent way to use this otherwise non-performing asset of a large player database.
So the big question is why have none of the major online poker sites done much to monetize their play money players? It can be done. Zynga is proof of that.
@danm: Agreed. Although I don’t think we’re talking about much of a difference here. Your 80-100 players are like the play money players who convert to real money players. It’s the other 400-420 that we’re talking about. Once they’ve demonstrated that they aren’t going to cross-over to real money play you have to find a way of monetizing them. Your suggestion of Harrah’s marketing to them is basically what I classify as advertising. You’re giving up on making money off their gambling and trying to make money off of them via hotels, spa packages, etc.
And that is what most online poker rooms don’t get. They just keep letting these players play and play and play and they hope that eventually they’ll make a deposit. It’s not going to happen. They should just accept it and start up a separate line of business that tries to make money off of their usage of the play money services.
Don’t forget that in a world of partnerships with online sites and b/m’s, the “value” of a freeroll player extends beyond just future rake.
even back in the boom days … i ran a free poker tournament for 3 years that had a direct hard-money value to the club hosting it (and the strippers dealing it) … and lots of residual revenues. A portion of those players — maybe 80-100 or so, out of 500 that crossed my path — would step up to real cash games, and thus these players were seen as extremely valuable to the various 1/2 game hosts around town.
in a more contemporary setting, just imagine if PokerStars.net not only sent a fractional percentage to the dot-com, but also could market a whole host of, say, Harrah’s products to those dot-net players … shows, restaurants, vacation packages, etc.
(Of course, that I think, frankly, is why Harrah’s will work hard to make sure Stars is not able to stick around and partner with one of their potential competitors.)
Micro – that’s not monetizing player money players, that’s a reason for having a play money site.
I agree that real money poker sites could monetize their play money players better but I would think they are getting some value from them.
Some play money players do move into real money games, especially if they win some freerolls.
Having play money sites (.net) allows them to advertise in the US in ways the .com sites wouldn’t.
FullTilt and PokerStars both run commercials and even have their own shows on tv that wouldn’t be possible without having a play money version of their software.
@Dan: I am. Not today or tomorrow but eventually. And what I said in my previous comment reflects that. The bigger poker rooms will simply buy out their biggest affiliates and then eventually stop offering an affiliate program or make it more like Amazon (i.e. a relatively low monetary payout). The whole affiliate business operates on the 80/20 rule. So when the big poker rooms buy out the guys in the 20% bracket there’s little or no reason to even do business with the 80% who are bringing in so little business.
I thought you were of the belief that the affiliate model was dead, or dying?
Well, another prediction of mine is that eventually the poker rooms will buy out the portals and valuable affiliates.
I couldn’t agree more. It has become a rat race to appease the 20 table grinders, which in all reality isn’t the lifeblood of their business anyway. Your video game example certainly fits, as people will pay out the ass to play video games with little or no monetary reward. The poker site that finally figures out this very simple concept will be in for a huge payday. Do you think this could be done by a larger poker portal rather than an existing poker room?
I’ve long held the view that in order to engage more recreational players poker sites need to quit listening to the 20 tabling grinders and start looking at video games.
Bill interesting read for me, especially since I got my first online poker experience through World Play Games (an EA game) on AOL. I wrote an article series on my history in online poker that talks about that, but I will give the short synopsis here. AOL began by charging $2.99 an hour, which later dropped to $.99 an hour. There were hundreds of people logged in all day long paying an hourly fee to play free poker. On top of this a black market developed for selling chips – we started charging $300 per million though it gradually dropped. This worked because the games had a community feel, and the players felt some sort of power by having alot of chips. Very interesting that Zynga has pretty much monetized in this same fashion. It sounds absurd to most of us who play real money poker, but it’s not far fetched at all if you are able to give your games a community feel. Like you said, players don’t really view it as gambling, but rather as an entertainment expense. It may be completely absurd to some people that there are people who are out there who won’t deposit to poker sites, but will buy play money chips – but I can tell you from first hand experience that this oddity is indeed real.