While poker has been played for nearly 200 years, the online version of the game is a recent phenomenon. Online poker has boomed in the past couple of years, and it has forever changed the face of poker.
Other types of online gambling sites were launched significantly before the first online poker room. Online sportsbooks sprouted in the mid 90's. The mid 90's also witnessed the launch of online casinos. For example, Microgaming, a major online casino software supplier, developed its first operational online casino in 1994.1
It was not until 1998 that the first online poker room was established. Planet Poker, which has since become a relatively small poker room, enjoyed the status as the sole online poker firm for a short period of time. While Planet Poker has since been overtaken by many other online poker rooms, the initial rake structure it set, 5% up to a $3 max rake, has been mirrored by other poker rooms. So while the industry has drastically changed since 1998, the rake structure has remained fairly constant.
Other online poker rooms soon entered the fray. Paradise Poker was established in 1999 and would soon become the industry leader. During this initial period of entry, the infamous case of Poker Spot occurred. Poker Spot was an online poker firm founded by Dutch Boyd, a successful poker player.
Poker Spot was launched in May 2000. In September of that year, it would become the first online poker room to offer tournaments. However, troubles soon plagued Poker Spot. According to Dutch Boyd, it was unable to collect player deposits from its credit card processing firm. Essentially, all of the money players deposited and played with was not in the system, so Poker Spot was unable to pay its players their winnings. The firm soon went under.2
An incident like the Poker Spot case has so far not been repeated by any major online poker room. This is largely the result of the emergence of e-cash. In particular, Neteller has become the dominant funds transfer service for the online poker industry. Neteller has appeal for both users and online poker firms. For users, it allows them to deposit at a poker room without a credit card or wire transfer, and it also allows the user to generally receive quicker withdrawals. The online poker rooms like Neteller because it decreases fraud and has relatively modest fees for them.
It was not until 2001 that the two most dominant online poker firms entered the industry. Poker Stars became a popular destination because of its tournaments, and Party Poker made a splash in the industry.
Poker steadily gained popularity and the industry continued to grow. Paradise remained the dominant firm in the industry until 2003, when Party Poker launched its television advertising campaign. Party's advertising campaign during the World Poker Tour, and its launch of the Party Poker Million were very successful marketing moves that quickly catapulted the poker network to the top. Currently, the network represents roughly half of the entire online poker market.3
While Party Poker was spending millions on marketing, one man's $40 buy-in truly put the entire industry on the map. Chris Moneymaker's Cinderella story of winning the World Series of Poker was the type of advertising the online poker industry could once only dream about.
Moneymaker qualified for the World Series of Poker main event through a small buy-in satellite event at Poker Stars. At the WSOP, he outlasted a field of 839 entrants, the largest in World Series of Poker history at the time. He pitted heads against some of the most well-known poker professionals in the world. Moneymaker's first place finish earned him $2.5 million, which is not bad considering it was his first live tournament.
Nevertheless, clearly the most remarkable thing that occurred in 2003 was the launch of a poker information website, www.pokertips.org.
Online poker exploded in 2004. The increasing popularity of the poker and the "Moneymaker effect" resulted in even more play at the virtual tables. Because of this, the industry's revenues more than tripled.4 The industry also saw even more entry, with new firms such as Full Tilt Poker and Noble Poker.
Now it seems that the major online poker firms may soon become public companies. Paradise Poker was purchased by Sportingbet, a publicly traded online sportsbook, in October of 2004 for $297.5 million. Currently, other online poker firms are considering becoming publicly traded firms. Party Poker, Empire Poker, and Pacific Poker are all potential candidates for a public offering.
There have also been recent developments in the legal arena. The United Kingdom recently passed a bill that allows for the licensing and regulation of online gambling firms. Whether these online poker rooms soon make the UK their official home, instead of Gibralter or the Kahnawake Mohawk tribe, remains to be seen.
3. Egaming Review Magazine. "After the Party's Over." March 17, 2005. http://www.egrmagazine.com/
4. Cook, Steve. "Punters warm to online poker." The Register. January 12, 2005. http://www.theregister.co.uk/2005/01/12/online_poker/
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