Is PartyPoker Sitting On A Gold Mine Or Mining Fool’s Gold?

Steve Ruddock June 26, 2017 2644 Reads
partypoker rakeback

As the entire online poker world continues to zig, PartyPoker has decided to zag, revamping its loyalty rewards program by taking a page from online poker’s past.

Its new rewards program is just the latest in a string of radical changes at PartyPoker, as it tries to capture some of the wayward poker players who feel shunned by PokerStars.

PartyPoker’s strategy appears to be working with poker enthusiasts, as cash-game traffic has been ticking up since the changes. However, the long-term wisdom of PartyPoker’s new direction is a subject of robust debate, as there are only so many of these players, and as PokerStars has learned they can wreak havoc on an ecosystem.

On the one hand, PokerStars’ new rewards program focuses on personalized and semi-randomized rewards spread across all of its platforms: poker, casino, and sports betting. On the other, PartyPoker has gone back to its online poker roots with its new/old cash-back loyalty scheme that emphasizes simplicity and volume.

That’s a recipe many online poker operators are discarding.

Treasure shaft or money pit

After climbing out of a hole they dug by disproportionately heaping rewards on a small group of high-volume players for several years too long, PokerStars and other operators are moving toward a model friendly to casual customers. They’re now trying to appeal to the people who play poker, casino games and everything in between. More importantly, these customers tend to be net-depositors, not net-withdrawers.

This strategy has ostracized serious poker players. Their rewards have been stripped down; games where they have the biggest edges have been eliminated or rendered obsolete by rake hikes.

In effect, PokerStars has closed down one gold mine and is now exploring other spots to dig.

The people at PartyPoker don’t agree that mine’s stores have been exhausted. It feels these companies were just digging in the wrong direction, and they’ll be able to strike gold by making some small tweaks and creating a welcoming, poker-player-friendly environment.

2017: a period of change at PartyPoker

Considering how multi-faceted it is, the strategy appears heavily considered.

Along with growing its roster of sponsored players, PartyPoker announced a new live poker tour headed by European Poker Tour founder John Duthie in February. More recently, PartyPoker appointed Mike Sexton its chairman after he left the World Poker Tour.

But the central cog of the company’s new strategy is its rewards program, overseen by PartyPoker Ambassador Patrick Leonard.

At its core, the program uses a simplistic cash-back model.

The program’s goals

There’s no fuss or frills in the new PartyPoker rewards scheme, which is by design.

Leonard, the architect of the new program, explained that one of the key motives was to create a simple, accessible system. That is definitely a good thing.

Another positive is the high floor the rewards program uses. Unlike previous rakeback models where entry level players might receive five or ten percent rakeback, the PartyPoker model starts off at 20 percent.

However, the new system also moves away from immediate rewards. As nice as 20 percent cashback sounds, when players are generating $40 a week in rake and losing a few hundred dollars, the $8 they get at the end of the week doesn’t really move the needle.

The program is definitely aimed at certain players.

Chasing unicorns rec-regs

PartyPoker’s new rewards program should provide a soft landing spot for the cadre of poker players who have grown disillusioned with PokerStars’ direction.

But beyond that, Leonard believes PartyPoker will be able to attract what he calls rec-regs (high-volume recreational players), a group Leonard believes is overlooked and the most important in the poker ecosystem.

But did the industry really fail these players? And more importantly, as Chris Grove asked on Twitter, are there enough of these players to warrant a business model?

I think the answer to those two questions is “no.”

The real beneficiary: The ‘reg’

PartyPoker’s new path has been trod many times before. The company can aspire to do it better and more efficiently. But the gist is still the same as the programs we’ve seen in the past.

In a nutshell, it’s about giving serious poker players, the people who consistently fill seats, what they want — a chance to thrive and live the poker dream.

Leonard made it clear he believes the net-withdrawing players PokerStars has isolated have significant value. PartyPoker is trying to win them over.

For aspiring pros or serious poker players, winning money and receiving nice bonuses from the site will certainly make them happy. And yes, these players do have fans, but the fans are usually like-minded individuals, not exploratory players.

People who like to play poker, but aren’t interested in studying it (the people a site should be trying to attract along with the rec-reg), want entertainment. They want their time at a poker table to make them happy.

For the rec-reg and casual players, it’s more about action and excitement. If they watch televised cash games where businessmen are pitted against pros they will notice the businessmen are constantly trying to increase the amount of gamble in the game, be it through straddles, flips, side bets or just needling tight players. If they win they win, and if they lose they lose, but if they have fun they’ll come back.

Without creating other barriers, rewarding volume players with rakeback acts is like a homing beacon for pros and aspiring pros.

The problem with pros

PartyPoker is bringing an invasive species into its ecosystem: a species whose only goal is to win the most money possible, not to entertain or be entertained.

Don’t get me wrong, high-volume players do a lot of good things. They:

  • Start games;
  • Keep games going;
  • Generate rake;
  • Have a certain amount of marketing value;

But they also:

  • Play a boring style;
  • Are net-withdrawers;
  • Increase the attrition rate of casual players and rec-regs.

And a volume-based rakeback system encourages them to play more tables. That often leads to them playing a tighter, even more boring style at lower stakes.

How is this going to end?

The model to which PartyPoker is reverting has proven highly flawed. Rakeback schemes reward the wrong type of behaviors. These behaviors diminish the fun and excitement poker can deliver.

Without putting constraints in place (table caps, for example) all they’re doing is placing a bucket under a leaky roof. It solves the immediate problem, but it just exacerbates the underlying issue.

For the first time in a long time, PokerStars’ grip on the poker community seems vulnerable.

The disillusioned players are looking for a system like PartyPoker’s. And if its plan is to build a customer base in the short term, it might have a plan to deal with the inevitable long-term consequences. But if not, this is probably not going to work out very well.

So far, PartyPoker is reaping some rewards. But talking to some of the industry people who have been down this road before, a quick gain is to be expected. The problems with this strategy only start to surface down the road.

PokerStars learned the hard way what catering to high-volume players for too long causes.

I’d imagine many inside PokerStars’ Isle of Man headquarters are giggling at PartyPoker’s new loyalty scheme and the way some PartyPoker people are making the solution sound so simple and obvious. They might even be happy PartyPoker’s numbers are ticking up, as it may embolden the company to double down on its new strategy.