PokerNewsDaily is reporting that Cake Poker Network is to be purchased by PokerListings. That combined with the negotiations between 888 and Ladbrokes and the bwin / Party Gaming merger should dispel any questions about whether or not the online poker industry is experiencing any consolidation.
One of the interesting angles here is that an affiliate is buying them. It sort of validates my post from May 2009, Why Affiliates Will Always Trump Online Poker Rooms, where I make the argument that poker rooms have never had the right mentality to run their businesses effectively. Affiliates understand how to attract customers. Poker rooms never quite understood how to go directly to the source and acquire their own customers.
As a business in the current market (but not necessarily the future market), I would rather be an affiliate than a poker room. In fact, I’ve had people approach me about starting up their own poker room and I always advise them that unless they’re thinking of plopping down big, big money they should invest their time and efforts into becoming an affiliate first and seeing if they can make it. The profit margins are better and you don’t have to pay for all of the overhead of running an online poker site.
Kim Lund has noted this as well. He says:
Large affiliates are showing interest in taking their business one step further. Not surprising now that the industry is slowly and finally waking up to the absolute monstrosity that has been the online poker affiliate market. Having outplayed the operators in the affiliate game, affiliates, for good reason, are confident they can also outplay operators on their own turf as well. In regards to a company like PokerListings I think it is interesting to note that poker is not the only industry they affiliate. Far from it. So their customer database of current and potential players ought to be massive.
It seems we’re entering a new phase in the evolution of the online poker business model. As my previous post today shows things are getting tougher in the online poker space. It’s much harder to make a buck today than it was a few years ago. The market just can’t support 600 poker rooms all doing the same thing.
100% agree on the fact than running a profitable poker room today is almost impossible. Let’s say pokerstrategy has a 70% revshare deal with most poker room, it means they do 70% of the job : recruiting new players !