Differentiate or Die

These are certainly difficult times for the online poker industry and it may be tempting for second-tier sites to simply wring their hands and say, 'Oh, we can't compete with the big boys.' But this is not how you succeed, particularly when times are tough. First, find ways to differentiate your product from the big boys. At Cake Poker, we've come up with a unique feature that adds a completely new dimension to our poker offering. It's called The Exchange.

To understand The Exchange, you need to understand Gold Cards. We give our players Gold Cards as a reward for playing in cash games on Cake Poker. The Gold Cards are denominated with the same ranks and suits as regular playing cards. One Gold Card is given to a table each time the table reaches a specific amount of rake collected. We randomly choose a Gold Card and attempt to match it to a card in a player's hand.

For instance, suppose we randomly choose the four of hearts. We look at the table which has reached the rake threshold and see if any player at that table has the four of hearts in his hand. If so, he's awarded the four of hearts Gold Card. If not, we select another Gold Card and wait for the next hand to try the match again. We repeat this process until we successfully give away a Gold Card at that table.

In the Gold Card vault, there are hundreds of thousands of two of clubs cards, extending up to a single Ace of spades card. The Ace of spades has orders of magnitude more value than a two of clubs. Since we randomly select a card from the vault each time, a player at any table is eligible to get any card, but obviously players at higher stakes tables will collect more Gold Cards and have a better shot at the rarer high value cards. 

THE GOLD EXCHANGE

Players can use Gold Cards to enter freeroll tournaments for which a specific Gold Card is the only permitted buy-in. Of course, the fewer people holding that particular card, the fewer will register for its tournament and the value of the card will resultantly be higher. This is where The Exchange comes in. 

Cash players often don't want to play in tournaments, but tournament players don't collect Gold Cards. The Exchange is simply a player-to-player marketplace in which players can buy and sell Gold Cards. This provides value to both parties because cash players are often willing to sell their Gold Cards for (often dramatically) less than the equity of a seat in the corresponding tournament. For instance, suppose we hold a freeroll tournament for which you need a six of diamonds to buy in. The tournament has a $2,000 prize pool. If 400 players enter, then each seat in the tournament has an expected value (EV) of $5.

In a perfectly efficient market, a six of diamonds Gold Card should sell for around $5 as the tournament nears. So far, however, we see that card selling closer to $1 and sometimes less. This means that the tournament player gets his $5 in tournament equity for just $1; the seller gets a dollar added to his account (less a 10% commission).Interestingly, some people are actually making a market in Gold Cards, acting as arbitrageurs.

INCREASING VALUE

The Exchange ultimately increases the value of Gold Cards to both buyers and sellers and provides a marketplace in which the arbitrageurs can seek a profit. Furthermore, the whole notion of gaining value from the marketplace is congruent with the general poker player's philosophy of looking for opportunities to leverage a profitable situation. I have gone into some detail to emphasise the value of providing a different, but complementary feature to our players. This is unlike anything offered by another site and creates important market differentiation for us.

The flip side of this point is to manage your differentiation carefully. For example, The Exchange is much like similar features offered in the best-known massively-multiplayer role-playing games (MMRPGs). Because the player demographic for MMRPGs is so similar to that of online poker, The Exchange works well as a differentiator. But we all know examples of poker sites branching out in ways that did nothing to help their core business or attract and retain their target audience.

When casting about for ways to differentiate yourself from the pack, ask if your plan will look coherent to your players and be consistent with your overall mission as an online poker provider. The annals of business are filled with the wrecks of companies who lost focus on what they did well and the marketplace in which they lived.

Be creative and clever in your differentiation, but don't lose sight of your bread-and-butter business; make sure that everything plays well together.