Friday, Jan 8, 2010 Bodog Network's Solution to the "Rakeback Problem"
The poker industry suffers from a rakeback problem that's slowly suffocating the business. Bodog Network proposes a new solution to the rakeback problem. Let's have a look at it.
Some poker networks penalize operators that bring in too many winning players to the network. Winning players take money out of the network's bank account and decreases its profit margins, as we've described in another article.
Lately there's been a heated debate about players being blocked from their operators in the iPoker network for being winning players.
It's like a blackjack syndrome in online poker: "if you win you we throw you out." This way of dealing with the rakeback problem has caused havoc among players, and rightfully so.
The new solution to the rakeback problem
Meanwhile, over at Bodog Network they're working on a new solution to the rakeback problem. One that all actors will profit from - the network, the operators, and the players, according to Jonas Ödman, vice president of Bodog Network.
In Ödman's model, there are only three ways for money to move in and out of the "poker ecosystem", deposits, withdrawals, and rake:
The more withdrawals that are made, the less money is left for the rake. With this picture in mind, it's easy to see that winning players are a burden to the network.
How operators earn their money
Bodog Network's solution is all about how the rake is split among the operators. Up until now, operators have been rewarded according to the number of hands that their players played on the network's server.
Pros and semi-pro grinders put in massive amounts of hands, and so it's been good business for the skins to attract these players, even if it meant giving them a big share of the rake back.
Contrary to this, in Ödman's view, when splitting the total rake in the network between the operators, each operator's revenue should reflect the value of the players that the operator has brought into the network.
With the new solution, the value of each player will be based on his or her net deposits to the site, that is, deposits minus withdrawals. Players who deposit more than they withdraw are "net depositors", or simply losing players.
An operator that brings in a lot of losing players will get a larger share of the total rake accumulated in the network. (However, the value of a player can never be below zero. In Bodog's model, operators will not be penalized for bringing in winning players.)
When losing players increase in value, this is an incitement for the operators to use their marketing budgets to attract casual players rather than spending them on feeding semi-professional rakeback players.
No changes for players - except some of them
The way the rake is taken out from individual pots will not change, so this solution does not bring any changes for the players. Except players with good rakeback deals, obviously. There will not be any good rakeback deals left, if Ödman gets his will.
However, according to his vision even the winning players will gain from this new solution. It will create a healthy ecosystem for them to go fishing in. When more casual players come into the online poker network, the good players will increase their profits.
If Ödman is right, this win-win situation could be a boost for the poker economy. The verdict of the grinders is still to be heard, though.