February 04, 2011
Bear in mind - this is an outsiders viewpoint and some of these are educated guesses.
Say we talked about a fictional site JokersFull.
How does the site make money?
(a) It is a fee per service website.
(i) Each time you get an eligible hand dealt at a cash table the site will charge a fee known as the rake.
(ii) MTTs and SNGs - they will charge a one off registration fee.
(b) The website - will accept deposits and then convert them to a common currency match edin your account - with cash on deposit in their financial institution. It is highly likely that the Jokersfull website would receive interest for a large % of the monies it holds on behalf of its customers.
e.g. if Jokerfull had 100000 clients with an average of $1000 in their accounts - Jokersfull would have $100 million of their customers money in their control. Some portion would always be in transit being withdrawn/deposited but say that portion is <20% - that would mean that $80million could be used by the site in an extremely low risk/short term money market account. Even if annual rate of return was 1% that would still be $800k worth of earning for Jokersfull.
* they probably do not make money on currency conversion and either bear part or all of that expense but certainly are not bearing any risk.
(c) Merchandise: There is probably a small profit in the sales generated on all Jokersfull merchandise.
(b) and (c) are completely dependent upon and dwarfed by (a) which is the principal business of JokersFull.
So there are two key drivers for Jokersfull Profitability
1) To increase the total amount of money held by Jokersfull
2) To increase the turnover and rate of turnover of monies held.
So the ideal world for JokersFull - is to have all available monies held by Jokersfull turnover at the highest rate.
It makes sense that JokersFull wants regulars who have a permanent amount (Bankroll) on site but its not just that. That want the regulars to be winning as a low a rate as possible whilst playing at the highest rate possible. For the very obvious reason, to increase the total amount of rake events for each $ earnt by the regular.
The inverse is true of a losing player for Jokersfull - they want the fish to lose at the slowest rate possible but with the highest volume possible. This increases the share of the losing player deposit that the Jokersfull keeps and reduces the % all regulars keep of that players money.
As you might have been able to deduce - that means there will tend to be an equilibrium point reached between the regular and Jokersfull - with the bounding factors being
(a) Total rate of non-winning players deposit
(b) Minimum amount of yearly earn for a regular to continue to play on the site
(c) Total surplus generated by the site
Now I am not a trained game-theory economist so I cannot prove the mathematical mechanics of the equilibria and the optimal payoff structure for each party - but my hunch is that it was inevitable that games have reached their parlous state.
Maybe this is/was very obvious to you....but I think it always worthwhile to breakdown what is actually going on in the 'poker economy' and if you want to change what is going on - you have to argue in a form that would be best for Jokersfull because they appear to have the dominant strategy.
This one is for tommy Angelo fans - well sort of