The Evolution of Bonuses
THE WEEKLY SHUFFLE, 2005-12-18, by TwoGun
The internet poker world has changed dramatically over the past three years. More and more new poker rooms have popped up, and more than five times as many players are now playing online than there were several years ago.
With this boom, the major online poker rooms have become more professional as well. Most of the major online poker rooms are now publicly traded companies on the London Stock Exchange. Examples include Party Poker (PRTY.L) and Empire Poker (EOL.L).
Poker now seems to be in a plateau stage, with strong but consistent growth. Poker rooms can not rely just on poker's explosion to gain new players. The good ones are increasing the rewards and incentives to retain their existing players and attract new ones.
Another way poker rooms attempt to increase their market share is by differentiating themselves from their competitors. One way a poker room can differentiate itself is by simply having a larger player base. The case in point would be Party Poker, which retains its players effectively by simply having the most players. But poker rooms tend to be much more similar than different, so relying solely on their unique features is probably not an effective strategy for the long run.
In economic theory, when products are identical, they are referred to as a homogenous good. An example of a homogenous good is produce. To a consumer, it makes little to no difference if he buys potatoes from farmer A or farmer B. Thus, the only thing the consumer considers is the price. If farmer A's potatoes are cheaper than farmer B's, then all of the consumer's business will go to farmer A.
If online poker rooms were homogenous goods, the only thing a user would care about is the rake charged and the bonuses given by the poker room. However, online poker rooms are nowhere near the point of being homogenous goods. At each poker room, the number of players is different, the ease of competition is different, the customer service is different, and the software is different. Playing at a place like Party Poker or PokerStars is certainly a different experience than playing at Everest Poker.
However, most of the major poker rooms have more similarities than differences. Most have plenty of games at popular stakes, no poker room has software that is much better than the others', and cashouts are generally quite fast at all poker rooms. The largest difference in my opinion is the ease of the competition at the poker rooms. As explained in the Poker Ecosystems strategy article, poker rooms can make several important changes in the structure of their poker room or their marketing to make the games softer.
If you check the online poker reviews, you'll notice that most of the major poker rooms' overall score falls somewhere between the high 70's and the low 90's, while the scores we give poker books for advice fluctuates wildly from the 30's up to the high 90's. This is because the quality of poker books can be radically different, while the overall experience at the major poker rooms tends to be pretty good. (This is not true if you are playing at a small, fringe room.)
Since poker rooms are fairly similar, they attempt to lower the price to attract players. Just like farmers, if they charge less, people will buy their product more. But instead of lowering the rake, poker rooms offer cash bonuses. Most poker players are not very sensitive to changes in the rake because it is difficult for them to determine how much difference a 3% or a 5% rake will make to them. So instead of dropping the rake from the standard 5% up to $3, a poker room will employ more reload bonuses or nicer signup bonuses.
Several years ago, the types of bonuses offered to players were abysmal. There were fewer poker rooms at the time, so poker rooms were able to differentiate themselves fairly easily without offering nice bonuses. Any poker room offering more than a 20% up to $100 sign up bonus was considered suspect because poker rooms almost never offered a bonus better than this one. Reload bonuses were less common back then than they are today.
When poker rooms compete for the loyalty of their players, the players win. The online poker market is currently quite competitive, and many attractive signup and reload bonuses are currently being offered.
The Weekly Shuffle is our Sunday column with our observations and commentary on the poker world. Have an idea for an article? Leave a suggestion on the feedback page.
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