Rakeback has been a contentious issue for online poker operators and their affiliates for years now, with its growing popularity very much a mixed blessing. On the one hand, openly offering to return to players 20-40% of the rake they pay each month can be a way to retain players and
not lose them to competitors; on the other hand the profit margin drops dramatically for players getting rakeback and is a difficult genie to put back into the bottle.
Once rakeback was offered openly by several major poker sites and networks it became difficult for other sites not to follow suit, with PokerStars one of the few sites to have the clout and market share to be able to refuse to play the rakeback game entirely. The second salvo in the rakeback wars has just been fired, with PartyPoker eliminating all fees entirely for its multi-table tournaments (MTT). While the move is largely designed to try to acquire players outside the US in the wake of Black Friday and the US government’s indictment of PokerStars and Full Tilt, it’s already had an impact with some rivals, with Titan Poker cutting the rake on some of its cash games.
Although Party’s profits will take a hit from the lack of tournament fees that they’d typically collect, they’re gambling that added liquidity and spillover play at Sit n Gos and cash games will more than make up for it. Looking at it strictly from a player base prospective, the early results
are positive, as PokerListings.com shows that Party’s traffic has grown by about 30% in July over June and is well above it’s 6 month and 12 month averages. Whether or not that increased player pool will equate to increased profits remains to be seen, as other factors come into play
such as the type of players that rake-free MTTs might attract and how the move will affect the flow of money to and from the site.
If Party continues to gain traction from the move, expect many other mid-tier and smaller sites to follow suit. While PokerStars may have the clout and size to thumb its nose at such efforts and continue to run and rake their cash games and tournaments as they always have, smaller
sites will likely have to follow in Party’s footsteps or offer similar promotions that cut into their gross profits. Just as with rakeback, it’s difficult to retain players in the cut-throat world of online gaming if rivals dangle a carrot in front of players without providing the same — even if cuts into profits and doesn’t provide a sustainable path for future growth.
Contributed by:
Andrew Perry
Michael – all players pay rake, losing players and professional grinders alike. When I look at my own Hold’em Manager, and all the pots I have won over the last month, my total income would be about $6,000 higher if there was no rake at all. That being the case, I do believe it is fair to say that I have paid that amount in rake.
Also, keep in mind that not all grinders are necessarily winning players. Last month was pretty bad for me, I lost almost $5000 in mid stakes cap games, and while doing so, I was filling a lot of seats, playing a lot of games, and generating a ton of rake for Pokerstars. Sites don’t care if you’re a winner or a loser – they only care that you are stuffing money into as many pots as possible, as much as possible, for the most time possible, because that’s what makes the poker sites money.
The players who make the poker sites the most money are the most coveted, and poker sites offering more and more rakeback to snag those (and plenty of other) players, is good for all of us.
I’m not a fan of Party Poker. I wouldn’t surprised if they didn’t change.
As far as I am aware, the rake is taken from the pot after the hand has been played. Therefore it is taken from the winner of the hand. Everyone player wins some hands therefore we all pay rake. However, most rake is payed by winning players as they win more hands (by definition).
An assumption could be made that many grinders are winning players (or else why do it) and if that assumption holds true then… yes, it is correct to account for high volume players as the people paying rake…
Although, obviously all players pay some rake – even losing players.
Ivan, is it right to account for high volume players as the people “paying” rake?
I say competition is a good thing. I understand that poker is a business and people in business are out to make money, and that’s fine. But from the consumers (you, me, and everyone else that plays poker) point of view, this is only going to lower prices (rake) and improve the quality of the product (software, service, etc.).
The thing about this business is that individual customers are potentially worth a *lot* of money. As a full time mid-stakes player, I pay more per month in rake than I do for all my other expenses – home, car, and student loans, groceries, vacations, you name it – *combined.* There are plenty of rank-and-file grinders out there paying $10,000 a month in rake to play poker.
What rakeback rate would a site offer to keep a player like that, if they had to? 60 percent? 70? More?
I say bring on the rakeback wars. The results are nothing but up side for all players, great and small.
It’s really hard for me to feel sorry for poker sites that lose a percentage of their profit to rakeback. These sites make an absolute fortune with even the mid-sized networks/independents worth billions of dollars. Winning players will usually pay many times their profits in rake – more rakeback please!
Party’s traffic gain had very little to do with eliminating rake in tournaments, but a lot to do with throwing a lot of free money on homeless tilt players. This gain has already evaporated. Party had 4,500 weekly average early July and raised up to 5,300 mid July. It’s now back to 4,500.
“Rakeback Pros” were killing the industry prior to Black Friday. Using pure math they were squeezing every dime they could from not only the sites but the poor recreational players as well. The average new depositing player with no clue about multitabling, rakeback, PokerTracker, etc…. really did not stand a chance in the shark pools created by the RB affiliate model. The passage of the UIGEA and loss of Neteller ended the Bonus Whore wars. It looks like the DOJ’s Black Friday may have ended the “RakeBack Pro” as we know it. This will be an interesting twist in the industry to keep an eye on until a new better affiliate model can be developed.
Well, that’s sorta the whole point of the argument, isn’t it? What causes players to choose one site over another?
I guess you could make the argument either way.
It’s interesting that the guest author thinks that PokerStars is so big DESPITE “thumb[ing] its nose” at third-party rakeback deals. Is it possible that PokerStars is the biggest BECAUSE they don’t do third-party rakeback deals, rather than despite it?
It’s a brilliant plan 🙂
“How do we make a profit by not charging fees for our MTTs? Volume!”