Online Poker in 2013

Several years ago I wrote a couple of articles about the gap between online poker software and what players had come to expect from other, non-poker related, products. You can scan over the two posts here and here.

Being back amongst my World Poker Blogger Tour brethren in December and chatting with folks like Grubby made me think back about those posts recently.

As I went back and reviewed my posts I noted to myself that some of the issues had been addressed and others have yet to be addressed by even a single online poker site. While I guess we should applaud the advances we have seen, I wrote both of those posts back in 2005 and most of the larger issues are still outstanding.

One of the biggest issues, as I see it, is that operators are fixated on the top raking players. Even in my blog posts, I approached the issue from point of view of someone who spends hours in front of their software every day like a typical high-raking grinder (which I’m not).

But, that isn’t the majority of a site’s players. Most players are recreational in nature. Your average poker site has 80% – 90% of their player base in this category. However, it’s the other 10% – 20% who rake the most who tend to dominate the mindsets of online poker software developers. It doesn’t help that that forums like Two Plus Two amplify the voices of this 10% – 20% and make their needs sound more important than the needs of the rest of the players.

That is possibly one of the most difficult aspects of managing poker software design. Trying to balance the needs of both groups when one group has a very powerful megaphone and the other group simply disappears and never comes back to your site.

So, I wanted to revisit the topic of what online poker sites could be doing but with the knowledge I’ve gained since I originally wrote those two posts.

Player Segmentation

I brought this up back in 2005 and, sadly, nothing much seems to have changed since then. The part that frustrates me so much about this issue is that ultimately the poker rooms would be making a lot more money if they actually understood their customer base.

If I’m a limit poker player, it seems crazy that I would get a constant stream of promotional information about no-limit games or tournaments. Or, if someone has never held a balance in their account over $100, what purpose would it serve to continuously promote tournaments with $200, $300, or $500 buy-ins?

I remember a player contacting me once and saying, “I don’t understand why you guys keep doing reload bonuses. I’m a winning player so I have no need to deposit. All that ends up happening is that I withdraw enough money to max out the bonus and then redeposit it. You pay the processing fees both ways when you could tell me how much I have to play and just give me the bonus money.”

He was absolutely right. The reload bonus has a horrible ROI for players who don’t need to deposit. It costs the room money to ship the money back and forth and the player would have played the required number of hands with or without the bonus.

The problem is that reloads are great for players who make frequent deposits or players who need an incentive to make a deposit but horrible for another segment of your players who already have more than enough money on deposit. Likewise, many promotions that benefit your top grinders (i.e. rake races, leader boards, etc), offer almost no value to recreational players.

Player Motivation

Once you start to look at player segmentation, you must also look at the psychology of players in different segments. The guy who deposits $50 a month and plays a $10 tournament every Saturday night when his wife goes to hang with the gals has an entirely different motivation to play than some grinder trying to make his mortgage payment this month. One of them views playing poker as a job and the other just wants to have fun.

Not only do you need to market to these players different but you need to treat them differently as well.

For a grinder, things like rabbit hunting or social media feature integration is of little interest. Meanwhile, features like that may be a major decision factor for a recreational player.

But here’s the catch, the grinder is in your vocal 10% – 20% and recreational players are in the silent 80% – 90% so most poker sites give little, if any, thought to the kinds of features that recreational players might enjoy.

This is one of the major reasons why online poker sites have designed their software around the grinders and had to throw obscene amounts of money financing AFPs (advertiser funded programming, i.e. High Stakes Poker), print advertising, and hiring throngs of poker “celebrities” to get the attention of recreational players.

It wasn’t until Zynga came along and grew larger than even the largest real money poker sites before it dawned on the operators that the problem in attracting recreational players was deeply rooted in the fact that they weren’t listening to them.

To further illustrate how ingrained this thinking is in the industry, think about the millions of dollars that were spent on television advertising of .NET sites in the hope that the operator could eventually lure them over to real money. Online poker sites have databases with millions upon millions of players who never made the jump to real money and rather than look at that as an opportunity to monetize the players in some other way, they wrote them off as a cost of doing business.

So, in reality, any of the online poker operators could have squashed Zynga several years ago had they recognized the fact that players could be monetized without becoming real money players. Zynga understood the mindset of these play chip champions while most online poker sites cursed them as being an expense they had to incur to get to the real money players.

But it’s more than just real money vs. play money players. It’s the fact that Zynga was successful because they understood that these two types of players had different motivations for playing the game. Zynga simply figured out how to tap inside their heads, delivered an experience they found compelling, and found a way to generate revenue from them.

Loyalty

I always cringe whenever I hear the term “loyalty program” in reference to poker sites. There’s no such thing. Nobody rewards loyalty. They all reward activity that generates revenue. And since the loyalty programs are activity based, again, they favor the grinders at the expense of the recreational players who will likely never earn enough loyalty points to ever do anything with them.

We call it rakeback today but really it’s like your credit card cash rewards or cash back programs. The more you spend the more you get back.

Loyalty should not be based on how much revenue you generate. If poker rooms want to call it a loyalty program it should actually reward loyalty.

For instance, nearly every room tries to lure in grinders by making it easy for them to switch. I can become a Super Nova Elite Grand Poobah Master Wizard 14th Level at any point. Even if I started playing on the site last month, as long as I grind out enough hands, I can reach the highest “loyalty” reward level nearly any site has usually in under 12 months.

On the other hand, if I go on the same site and deposit $100 a month and play 4 or 5 sessions a month, I won’t make Super Nova Elite Grand Poobah Master Wizard 14th Level in ten lifetimes.

That’s not to say that grinders shouldn’t be rewarded for generating lots of rake for the poker operator. It would be stupid not to recognize the value they bring to the operator. However, if that is the only mechanism that the operator has to reward “loyalty” then many players will never realize any value regardless of how loyal they are.

A better system would be to have a cash back program for those who opt into it and a loyalty program that actually rewards loyalty for those who don’t.

Now, before we go too far on this topic, I want to clarify what I mean by loyalty. Loyalty can be measured in time but it can also be measured in a player’s willingness to do things that the poker operator deems helpful.

For instance, even a player who generates little revenue can be turned into a valuable asset to the operator. Someone who tweets to 2000 followers on Twitter has value. Someone who will purchase goods and services based on your recommendation has value.

So, let’s say that one aspect of determining loyalty depends on a player’s willingness to share their experiences using your software with their social media following. They’re displaying loyalty to your brand so why not reward them for it?

Or, let’s say that ABC Poker partners with Coca Cola and you can earn loyalty points by purchasing a can of soda.

These are rather simple examples but the idea is that once you quit discounting the value that low raking players can bring to your business, it opens up an entirely new universe of possibilities.

Gamification

Gamification is sort of a natural extension of all of the previous topics. Once you segment your player database and understand that different players have different wants and needs, and you realize that loyalty should be rewarded for things other than generating rake, you can really start to think about your online poker product as a real gaming platform.

One of the problems with the current loyalty model is that its designed to reward players generating lots of rake. Most recreational players never achieve enough points to ever do anything useful with them though. So, for them, the points are essentially worthless and for the poker operator they become a potential liability that has to be kept on the books until they can expire them.

But what if you made the cash back/rake back model opt-in for your grinders and provided alternative rewards to players that was more in tune with their motivations for playing?

For instance, a few years back someone showed me a site that was running a points buy-in tournament that had an all-in or fold structure. I think the site might have been Ladbrokes but I could be mistaken. I was blown away at how many players they had playing.

Basically, every hand you only had two pre-flop options, all-in or fold. And you could do endless rebuys in the first hour. I couldn’t even begin to calculate the number of loyalty points the operator was sucking out of the player balances.

But it illustrates the fact that because the chips were perceived as worthless they didn’t care about a crazy all-in format because for them they were just having fun gambling it up with a chance to win something for nothing (they perceive the points as having little or no value). And if they did well in the tournament they could actually win enough points to buy something more than a stress relief ball in the site’s points store.

Now, what if you extend that thought out a bit and eliminate the points altogether and simply devise a loyalty scheme that rewards achievements rather than generating rake?

One of the best examples I’ve seen of that is the Full Tilt Iron Man promotion. I’ve talked to so many players over the years who gush at winning Iron Man status for X months in a row. Very rarely do they even mention what that translated into in terms of dollars in (or out of) their pocket.

Imagine a poker site that had no loyalty program for recreational players but incentivized them in other ways. For instance, what if playing 100 hands a day for X days in a row got you a free roll entry into a tournament with a large prize pool?

How many extra hands would those players play in order to get a free roll entry? What if you gave them virtual tokens (medals) like Full Tilt did so they can show off their achievement?

Instead of issuing millions of dollars in points that muddy up your accounting as potential liabilities and eventually expire worthless at some point in the future, you pool that money and hand it out to a smaller group of players? Sort of the difference between giving 1000 people a $1 each or giving 1000 people a chance to win $1000.

This is more fitting to the recreational player mindset. While a grinder looks at ROI the recreational player is more likely to be influenced by the fact that he can win something for nothing (which is what he considers existing loyalty points to be worth).

And once you wrap your head around the fact that these players really are seeking a form of entertainment, a lot of possibilities begin to open up.

Value

Continuing on the previous thought that recreational players view poker as a form of entertainment, now we have to consider whether or not we’re offering recreational players sufficient value for their entertainment dollar.

You’re competing against film, television, video games, sports, books, hobbies, the rest of the internet, and anything else that people do to occupy their time. That’s why it’s important to realize that the gamification model in poker isn’t about getting people to play more poker (though you hope they do), rather it’s about keeping the player’s attention as compared to other forms of entertainment.

That doesn’t mean a race to the bottom in terms of price (i.e. rake) but whether you provide an experience that players feel is a good value for their money.

Vegas gets it. The Strip is a horrible value for the dollar but people flock from all over the world to get mediocre odds on the tables. Meanwhile, the locals usually gamble far off The Strip where the casinos offer the best odds.

Now, that may appear as if I’m arguing that poker rooms should aim to be like the off-strip casinos but that’s not the case. The locals who go to the off-strip casinos are like the grinders. They don’t care if they’re playing in a dingy, beaten down casino as long as the casino is offering the best odds.

While the recreational player is like the millions who invade the Las Vegas Strip every year. For them, gambling is about entertainment. They want to have a good time, gamble, party, eat great food, and be wowed at all of the sights and attractions. They take the mediocre odds because the difference in slot machine payouts or how many decks the casino keeps in the shoe is irrelevant to them.

Of course, they want to win. But for them it’s all a form of entertainment.

Depositing $100 and losing it in an hour isn’t very fun. There’s little entertainment value in that. That’s why such a massive percentage of online poker players only make one deposit, are active less than one month, and never play on the site again.

So I would argue that the problem here is that the poker site didn’t offer the player $100 worth of value. But if you start viewing your gaming platform as an entertainment platform and think about how you can offer an experience that is not strictly tied to playing poker, you can offer that player $100 worth of perceived value for his entertainment dollar.

Build Relationships

Over the last five or six years I’ve received exactly zero birthday emails from online poker sites. They have my birth date in their database but they haven’t even used that very basic data point about me to further their relationship with me.

Meanwhile, I spend a couple of weekends in Vegas and both my wife and I have received birthday greetings from M-Life (MGM’s loyalty program) and Total Rewards (Caesar’s loyalty program).

It becomes very evident how differently online and offline casinos make use of the information they collect about you. For instance, my wife, who likes to play the machines, receives twice as many invitations and comps as I do. Almost all of the offers I receive are for discounted room rates and discounts on meals or shows. My wife’s offers are for free rooms and free play on the slots.

It’s fairly obvious which companies understand us and which don’t. Even though I’ve played far, far more hours online than I’ve spent in Las Vegas poker rooms, the land-based casinos understand me and I feel a closer relationship with them than I do the online poker sites I’ve played.

Come to think about it, even though we both have player’s cards from Commerce, The Bike, and other LA poker rooms, I’ve never received anything from them either. Yet, I get a monthly newsletter in the mail from Pechanga with all of their poker tournaments for the coming month.

So it seems like it’s not just online vs. offline but poker dedicated poker rooms vs. land based casinos that cater to different types of players. Land based casinos that have a range of games seem to understand that relationship building is part of the equation while poker-only venues (online or offline) don’t understand the value of relationship building.

Balance

Notice that I have not said that one side is right or wrong in all of this. Grinders have valid wants and needs as do recreational players. No side is more important than the other. That’s why I’ve always referred to it as a “poker economy” or “poker room ecology.” All of the parts of the economy are important. If you focus too much on providing for one segment you harm the other segments.

It’s all about balance.

In the end, that’s what all of it comes down to. At the moment the pendulum is swung too far towards the grinders. Even though, as a business, it would be much cheaper for poker rooms to retain their low-raking players rather than go out and trying to find more. It’s in the poker room’s best interest to ease the pendulum back towards center.