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Sunday 17 May 2020

The Purpose of Rakeback From a Poker Room Perspective

The Purpose of Rakeback From a Poker Room Perspective
Rooms such as Pokerstars forbid affiliates from offering Rakeback to their players and prefer to keep their loyalty scheme in house. This is ultimately is bad for the players but good for the shareholders whose interests the directors (rightly) put at the centre of their strategy.
The fish bear the brunt of these policies and regulars who earn money from exploiting the weaknesses in fish are indirectly affected. Rake is expensive. To understand just how expensive it is, take a look at the affiliate cost per acquisition rates paid to affiliates for signing up a player. The maximum offered by Full Tilt poker is $150 or 35% of lifetime rake. The net contribution by these players to the Poker room is therefore at least $430. If these fish were not raked so heavily (or were offered Rakeback by an independent body) then they would have an additional $115 in the bankroll - that's money that could be going to the sharks rather than the poker room.
Your earnings are not really a consideration for Poker rooms. It is important to appreciate that there are over 250 poker rooms across 60 networks - many of which make losses on an ongoing basis. Operating costs are extremely high and the expenditure on marketing is vast. Rake is a hidden cost to most players as it is quite small and taken frequently. Also, Poker rooms do not present statistics to players on exactly how much rake they are paying.
However, attracting high raking players is also important to poker rooms. Rakeback is an excellent way of facilitating that. A popular strategy by places such as Fat Poker is to ramp up the rake and offer extremely attractive Rakeback rates in the hope that player's won't research the net cost of rake - the net cost of rake is ultimately the figure that matters to the professional player but it is ambiguous to calculate once you consider temporary bonuses and varying levels of rake with different numbers of players.
The problem with bonuses is that they don't encourage long term play, once the bonus runs out (during which the effective cash back can be greater than 100%), players move onto the next site, often within the same network. Rather than focusing on the quality of play by investing in clean, fast and attractive software, these unprofitable poker rooms are engaged in a race to the bottom. Rather than each poker skin colluding for the greater good of the network (i.e. attracting poor players) they instead focus on attracting the high raking sharks which ultimately follow the fish. It is a false economy and helps explain the polarisation in fortunes between the likes of Pokerstars, Full Tilt and Party Poker compared with the rest of pack. These leaders discourage or forbid Rakeback and are not networks - maybe the likes of Cake and Merge should rethink their strategy.

1 comment:

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