Friday, February 11, 2011

The Online Poker Arms Race Revisited

The Online Poker Arms Race Revisited: "

I wanted to revisit a post I wrote not too long ago called The Online Poker Arms Race. Since that post Greg Raymer and PokerStars have announced that the two have decided to part ways. I’m not going to repeat all of the stuff people have said about Raymer being a great ambassador for the sport because it’s self-evident.


What I will say is that this does sort of go back to my theme about the rationale of signing up all of these players in the first place. Brian Ralentide over at Part Time Poker writes:


The Pro-Centric Marketing Model is Busto


While we may never know the whole story behind Raymer’s departure, Kathy Liebert (via Twitter) strongly suggested that Stars is looking to cut compensation for their pros, and one has to think that if Raymer was facing a cut, not many Team Pokerstars sponsored players would be dodging it.


Making such deep cuts – cuts deep enough to encourage one of your more visible spokespersons to walk – can’t be something Stars undertook lightly. They had to know that the cuts would result in some public exits (like Raymer’s) and that other rooms would then be able to cash in on Stars’ marketing of said pros by scooping them up.


With those consequences in mind, it seems that Stars would only make such cuts if they had concluded that the marketing model of assembling a stable of high-profile sponsored players was no longer sustainable, or at the very least not sustainable at its current scale.


Actually he goes through a list of very possible implications of Raymer’s departure but this is the one I wanted to focus on because I sort of danced around it in my original post (though I did address it again in the comments).


I’m surprised he didn’t also make the connection between Annie Duke and Phil Hellmuth leaving UB recently and replacing them with Prahlad Friedman. Friendman is an A-List player but I don’t really feel he’s an A-List poker celebrity. And that’s not meant as an insult. He can play with the best of him but he’s never been on Celebrity Apprentice or rode a chariot into the WSOP ME. As far as I know there are no rumors of Prahlad being on Dancing With the Stars either.


And I also want to make it clear that neither has stated that this is their reason for leaving UB. However, one can only notice that UB seems to be lowering the average age of their pro team. And that probably means substantially lower costs. Again a guess but I don’t think, for the above reasons, Prahlad commands anywhere near the juice that Annie or Phil do.


Even Wicked Chops noted after their departure was first announced:


UB is moving in a different direction with their team and marketing efforts, building up more of a youth-orientated squad headlined by Eric Baldwin, Adam “Roothlus” Levy, and Maria Ho. We expect this trend and complete remodeling of the team to continue in the near future.


From a risk-reward standpoint popular poker players who don’t bring people in the front door are a bad investment because they cost a lot. Unfortunately, I think there are more than a few big-name poker players who might be good role models but aren’t exciting to watch and thus don’t necessarily translate into new signups. I mean, look at Doyle Brunson. One of the most respected and well-known guys playing the game. Could he build a successful poker room off of that? I’m guessing their recent signing onto the Yatahay Network with the network’s 7 day average of 73 (cash game) players (according to PokerScout) says they are hurting a bit.


I don’t think anybody can say that Doyle is not one of the biggest names in the game even with the young whiper-snappers getting into the game today. Hell, even some of these youngsters worship Doyle but they won’t sign up on his website. Why couldn’t he make his card room work?


Likewise, I really don’t think Annie Duke, Phil Hellmuth, or Greg Raymer bring customers in the door. Why? Probably because they no longer represent the face of the players that the rooms are trying to attract today. And that’s not to say that their celebrity is worthless. It’s just not what drives young faces to your online poker site.


We’re sort of going into a second phase of the Online Poker Cycle. It’s just like the dotcom bubble. In the first phase you can throw money around like a drunken sailor and somehow everything you do seems to turn to gold. But as competition saturates the market or you have a bubble burst like the dotcom bubble or the UIGEA and all of a sudden it starts to become a business of grumpy old guys who staked you early on looking at the books and asking why you’re hemorrhaging money in your marketing department and still losing market share. Or, in the case of someone like Stars, why certain assets are performing and why others just keep coming up short.


So maybe what we’re seeing is a sobering up. Less and less money will be thrown at individual pro players because they’re risky investments that can come and go out of favor very quickly.


But here’s the kicker, this model hasn’t been proven either. It’s just that another model (paying anything to get big name pros) is starting to show some weaknesses. Signing up 6,000 less expensive “pros” hasn’t been proven to be a sure money maker either. Having several hundred or several thousand bets out there which were paid for by folding on a big bet that wasn’t paying off is at least a reasonable business response.


The bottom line is that other than some real superstar performers like Phil Ivey or Daniel Negreanu very few sponsored pros are big enough to really pull in new customers. Again, no offense to Tiffany Michelle but how many people do you think signed up on UB because of her? Isn’t the fact that both Tiffany and Maria Ho thought they could pass themselves off as non-profit workers an obvious enough indication that they have little mass media recognition?


How is that providing benefit to UB? They can stir up poker media press. But when is the last time you’ve heard a hard-core poker player say, “Dude, Tiffany Michelle plays on UB so I’m going to play there!”? It simply doesn’t happen.


So while lesser known players might be cheaper I’m not really sure they really accomplish the big goal so this all might be a transition from an expensive strategy that isn’t working to a less expensive strategy that may also not work.


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