The network: Rakeback solution
Yair Panet, head of poker at Playtech, explains how the firm has adjusted its approach to rakeback and how player values are changing in online poker.
Player value across the industry has suffered a downturn in the last two years, as a result of both the recent economic recession and the maturing market. However, a large part of this decline may be down to the methods that operators chose to navigate this overcrowded marketplace.
Operated by listed software firm Playtech, iPoker is one of the largest and most experienced online poker networks in the world, and is the largest network in the European market. The new network policy released by iPoker aims to change the game for card rooms and players alike.
Yair Panet, head of poker at Playtech, explains how this new policy will address the issue of using rakeback as an acquisition tool in card rooms’ marketing efforts: ‘The new policy seeks to move the network economics towards a rake attribution mechanism working on a “contributed” rake – as opposed to the traditional “dealt” rake attribution – and encourage a focus on promotions geared for recreational players,’ he says.
‘It recognises that recent acquisition trends that rely on aggressive rakeback competition have caused instability in networks, and aims to return to a marketing-led dynamic with competition based on promotions and quality of service attracting new players.’
In certain areas of the industry there has been a shift, misguidedly says Panet, to focus on bonuses rather than branding in card rooms’ marketing efforts. Within this strategy, the use of rakeback has proved a key, yet controversial, component but it cannot be a viable long-term tool for sustainable growth. Poker networks are like ecosystems, and as such their survival is based on a balanced interchange between the individual elements that make up the whole. For a poker network, this means a constant supply of depositing players. Through incentivising card rooms to focus on maintaining sustainable growth, iPoker’s new network policy aims to restore the balance and ensure the continued health of the network.
For Panet the ideal network is all about finding ways to accommodate sometimes-competing priorities, like creating network-wide continuity, without sacrificing individual identities and healthy competition. ‘We want to make sure our card rooms continue to focus on branding and mainstream acquisition channels; thereby creating a good blend of brands on the network that will bring in a range of players without resorting to artificial methods of acquisition. The value of a player to the network should not be focused on counting the rake but counting the deposits. It is the deposits that maintain the network dynamics, and as long as the deposits continue the rake will follow,’ he says.
One of the biggest threats to a well-balanced, thriving network is the use of rakeback as an acquisition tool. Rakeback is not without its advocates, who argue that it encourages healthy competition between rooms, gives smaller skins a chance to compete for essential liquidity and rewards players for their loyalty. However, as Panet points out, using rakeback to incentivise loyalty is a self-defeating exercise. ‘The very nature of a rakeback war encourages players to move skins, constantly on the hunt for better rakeback percentages.’
The rakeback bonus model attracts players driven by the need to generate rake rather than playing a strategic and entertaining game, and as we have seen with some competing networks, this is detrimental to all players in the long run as games become tighter and slower. ‘We want iPoker to be a place where people can enjoy poker for what it was always meant to be – a game,’ adds Panet.
Rakeback poses a classic prisoner’s dilemma. If one operator on the network offers rakeback, they force all of the card rooms to make the same choice, therefore harming everyone. Player value will decrease and the network will suffer. The way out of this dilemma is through strong enforcement by an objective party, and this is where network policy needs to step in.
Despite calls from many corners for an industry-wide banning of rakeback, iPoker is one of only a few networks to respond to this. In December 2009, iPoker held a summit to discuss with operators the proposed changes on the network and from this the new policy was formed. ‘Everyone understands that the moves iPoker are making are for the good of the whole network, and since implementing the policy and new rake attribution, players are experiencing looser games, and operators are seeing player value on the increase.’
While iPoker offer some excellent bonuses, through loyalty plans which incentivise the players to play through their usual operators, it is against bonuses as the focus of their card rooms’ marketing operations. While other marketing methods, like increasing brand equity, may require initial investment and are harder to evaluate in terms of quantitative results, they are a more sustainable way to ensure long-term profit and growth for operators.
For Panet, the way to effectively end rakeback violations lies in providing card rooms with alternative tools for attracting and retaining players. ‘Our new network policy sets out the steps to reward card rooms for what we consider “good marketing”, and penalise those card rooms that aren’t bringing in a balanced mix of players. This will in turn create a self-regulating system for the benefit of all our operators.’ iPoker is focused on increasing brand equity through media and advertising, by providing uniquely lucrative tournaments like the European Championship of Online Poker (ECOOP), and with sophisticated loyalty schemes. Panet says that while both operators and players might consider rakeback as a loyalty scheme, this is not the case. Rakeback might reward play, but it doesn’t encourage loyalty, or even reward those players that are loyal to a skin. ‘We need to move away from focusing on bonuses as retention tools. Yes, they play their part, but are ultimately counter-intuitive as players become bonus hunters,’ says Panet. ‘The idea is to develop more appropriate schemes that have various tiers, rewarding the right players, at the right time, with the right amount.’
Poker for the people
What is driving these decisions is iPoker’s ultimate belief in poker for the people – fun, fast-paced, loose games that can be enjoyed by everyone. ‘The dynamics of the network demand this, which is why we are taking steps to focus our efforts on providing for the recreational player. Promotions that focus on recreational players ensure that marketing budgets are allocated towards the players who are contributing to the network growth, instead of the aggressive rakeback schemes that disperse the funds in an uneven way, only towards professional players. ‘iPoker’s licensees use Playtech’s backend optimisation for their marketing and retention campaigns, and we are constantly launching new tools to make sure that our licensees can target their marketing efforts effectively.’
If you want to attract recreational players, you need to understand what they are looking for: a recognisable brand with reliable, easy-to-use software, good customer support and plenty of achievable promotions. It is the responsibility of the network to provide operators with these tools, and iPoker continues to improve and evolve their offering in response to the needs of card rooms. ‘Our recent software developments have given the lobby and table design a huge overhaul, providing a sleek interface that is focused on player convenience. We have a major programme lined up for 2010 that will ensure operators on the network have a competitive product with which to operate, with innovations on the software level as well as the promotional level,’ says Panet.
While iPoker understands that competition is a good thing, but it does not come at any cost. ‘We listen to our operators and anticipate their needs,’ he adds. ‘Card rooms on a network have different brand identities and conflicting interests, but they also have many joint interests and this is where the network comes in, as a kind of mediator.’ The idea is to create equilibrium, effectively combining competing operators on the same network, so that everyone can benefit from the reputation, increased liquidity and financial resources that the network can provide.
It is important for card rooms to be focused on their own efforts, looking at how to improve their operations from within, rather than engaging in activities that cause the kind of cannibalisation that we have seen with some other networks. In this way, more players will play and for longer. ‘Card rooms can’t invest in attracting new players if they are too busy jealously guarding their existing ones. Equally, if new players are introduced to poker with tight, aggressive games, then they aren’t just going to move skins; they will stop playing altogether,’ says Panet.
With the start of a new year, and a new decade, iPoker’s network policy comes at a decisive time for the poker industry. iPoker are sitting in a prime position, as one of the largest poker networks in the world, with a large portfolio of successful, committed and renowned licensees. Panet is confident that incentivising card rooms to attract new players that are focused on playing the game, rather than constantly calculating their rakeback percentages, will maintain the iPoker network as a healthy, loose, fun place to play. ‘We will provide our card rooms with a superior network on which to operate, both on a business level and on a software level, so that they can focus on what they do best – marketing their brand as the best place to play poker,’ he says.
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