The real reason for poker decline
Poker stagnating in Europe? Not so, says Dominik Kofert, chief executive of poker affilate and community site PokerStrategy.com, who explains that the answer to the game's declining value is more subtle...
People claim that poker’s golden days are over. Yet there still is a tremendous potential for growth in almost all European poker markets. The sad truth is that poker sites are simply not extracting the value that is right in front of them.
The reason for that is far less obvious than you’d think.
In fact, it has been my opinion for the last four years that the majority of people working in the poker industry still haven’t grasped the single most important core concept and its consequences: Every dollar of rake, or every dollar that makes a VIP player happy “ be it winnings or bonuses “ has to be deposited and lost by somebody first.
In the long term, the total rake cannot exceed the total deposits minus the total cash-outs.
One obvious result of this is that a great VIP promotion that costs $500k to run and generates $1m in extra right might actually not be that great if at the same time it gives rise to substantial cash-outs. Every dollar cashed-out won’t turn into rake later on.
The standard metric that is used by poker sites to calculate the ‘value’ of a player is flawed, as it is based on rake only and ignores the ‘money in, money out’ logic that is so important for a poker site and for keeping VIP players happy.
Poker sites under-value the recreational, net losing players. As a result, the return on investment (ROI) on large scale marketing campaigns is miscalculated and those campaigns are stopped – which is not only terrible for the poker site, but also for ambitious poker players, as we rely on fresh money coming in.
Most poker sites are not aware of this, and wonder why they lose market share even though they have great returns on their VIP retention. The reason why they lose market share is that they tend to short-term maximize their rake at the expense of their total poker wallet. Instead of building more substance, they are consuming it. In my opinion, this is the real reason why the European poker markets are stagnating.
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