Three Business Lessons Learned from the Poker Industry
THE WEEKLY SHUFFLE, 2013-10-06, by TwoGunWith PokerTips being over 10 years old now, we've witnessed an online poker industry go through a lot of changes. Here are some business tips we've learned during the past ten years:
1. It's not just size that counts.
PokerStars seems insurmountable because of its size. Most likely, it is. Even though I wrote a shuffle about How PokerStars Can Be Challenged, the conclusion of the article was that PokerStars was likely to safely continue as top dog for years.
While PokerStars is currently the industry leader, this is not always the case. Before that, Party Poker was the largest poker room. However, due to the UIGEA and Party no longer accepting Americans (whereas PokerStars continued to operate in the US for awhile) as well as better management in general at PokerStars, Party was quickly overtaken as the #1 poker room by PokerStars. In fact, Party continued to fall over the years, and is now the #4 online poker room.
Before Party, Paradise Poker was the largest poker room (Para-what most of you are probably thinking). However, during the poker boom, Paradise did not market itself enough, and Party Poker was able to quickly dominate through TV and affiliate marketing.
So yes, being the biggest helps you stay the biggest. However, when the industry goes through a major change, whether it's the UIGEA or a boom phase, whoever capitalizes on it and is well managed will eventually come out on top.
Poker isn't the only industry where the size of a company counts. In the US, the burgeoning daily fantasy sports industry is following a similar path. The biggest site, Fanduel has the edge since it was the first and is the largest. However, the growth of the industry will allow other sites to challenge Fanduel eventually as industry leader.
2. Scandals won't ruin the industry as much as you'd expect.
The online poker world has had its fair share of scandals. On the low end was the multi-accounting Grandma Dilemma incident. On the the higher end was the Ultimate Bet Superuser Scandall and of course Americans getting stiffed (at least for awhile) by Full Tilt Poker and totally stiffed by Ultimate Bet after Black Friday.
You would think people, especially casual players, would lose all faith in the industry, but they didn't. Even after the Superuser scandal at Ultimate Bet, people STILL played at Ultimate Bet (and look what happened). Even though US players were stiffed by Full Tilt Poker, non-US players STILL played at Full Tilt, until Full Tilt was exposed for not keeping player funds secure by Alderney. Luckily for FTP players, Full Tilt was bailed out by PokerStars. Non-US players were made whole soon after this and US players seem on track to receive their money within the year.
Long story short, scandals won't ruin an industry. People forget or think it won't at least happen to them. You would think a scandal at least would ruin a company, but it often doesn't (Ultimate Bet still had players on it til the UIGEA hit). If a scandal won't even ruin a company, it certainly won't ruin the industry as a whole. That's why oil companies can have major oil spoils. No one cares 6 months later.
3. It's all about attracting money.
Money talks, BS walks. So true. In poker, a successful poker room needs both investor capital at the beginning to advertise and build a user base. Long-term, a poker room needs to attract fresh money from recreational players to keep its poker ecosystem going. A poker room isn't going to survive on sharks battling each other; the sharks won't deposit a lot of money long-term (they just expect to cash out).
In short, it's all about attracting money. At first, you need the investors to give you the money to expand. Later, you need to constantly attract new, depositing players to keep the business going. I'm pretty sure this lesson can be attributed to just about any business out there.
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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