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TonyG

How Much is a Rakeback Customer Worth?

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13 Comments
by
TonyG
on 07-17-2009 at 06:09 PM (1805 Views)
We are often asked some version of the question:

How much is a rakeback customer worth?

The number is, of course, a crucial one. Based on this number, a rakeback provider can determine how much can be spent to acquire a rakeback customer.

The short answer is $520.31*.

Now, it is important to know everything there is to know about this number.
• It is lifetime value.
• It is commission, after paying the player, not MGR.
• It is before promotions are paid.
• It only includes players who generate greater than $0 MGR.
• The 80/20 Rule applies.
• The sample size is substantial.

Lifetime value of a customer includes what they will be generating 2 years or more from now. Therefore, if you go out and spend $150 to acquire a revenue-generating customer, expect to be under water on that customer for some period of time.

This number is an average, and because of the 80/20 rule, many customers will never generate anywhere near $520.31 in commissions to you. In addition, the number $520.31 only includes customers who actually made some money for the rakeback provider. People who created rakeback site accounts, or even created poker client accounts, but generated no gross revenue are not included in this average.

For example, of all accounts that came via a player-to-player referral, only 40.79% ever generated dollar one of gross revenue. Therefore, when considering performance numbers, always make sure active trackers is your reference point.

The lifetime value of a rakeback customer who came in via referral is $223.73. (This number includes everything bulleted above plus the payout to the referrer.) While still a very high number, it’s not nearly as high as $520.31. This 57% haircut is relevant. It tells you that your player value will vary widely depending on where your customer comes from.

These days you can’t find a place where sharks without rakeback exist. But you’d be well advised to find that source where baby sharks swim. It will drive your average player value up. And while we encourage sharing as much as possible at PAS, if you find that spot, don’t tell a soul.

In my post next week, I will elaborate a little bit and talk about time to generate $X and how that plays into your marketing decisions. I will also talk about a little bit about where these high value players came from.

*Past results not indicative of future performance. Then again, some PAS Publishers do go substantially higher. Can you?

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Comments

  1. Ridge's Avatar
    Very nice work dude! I don;t have a big enough sample size to get an accurate number but we know you guys do. Very cool man!

    I hope some big MGR guys Roger/Hollis etc maybe could give us a revshare number to compare, but I'm 100% confident the rakeback players earn more. I can see that form my thousands of players, but sitll not a big enough sample size.
  2. Unknown Webmaster's Avatar
    Wow, I haven't seen anyone sharing data like this before. Thanks a lot for doing that.
  3. ianw's Avatar
    Great post Tony -I think the more people that share this kind of information the better this group of individuals/ companies will grow.
    I have no issue sharing as much data as possible with my affiliates, the more they understand about the value /player types they are sending through the more they are able to tailor their pages/creatives / messages to the players.
    I have never understood why many rooms simply refuse to share any data with their partners. I think the word partners is the key word here. Tony and the guys are building a very reputable business and are a good example of how you can still be innovative within a segment that is already, some would say, saturated. The fact that Pokerlistings, RTR, PSO/P5's to name a few, have/are all copied what they have done despite them having a few years head start on them, shows you they are doing something right.
  4. TonyS's Avatar
    How are you defining a referral for the $223 value?
  5. leporello's Avatar
    [Rubs hands together in anticipation of the next installment]
  6. Nexton's Avatar
    I love it when you speak numbers.
  7. TonyG's Avatar
    Quote Originally Posted by TonyS
    How are you defining a referral for the $223 value?
    A player who comes in via our Refer A Friend program. We give the referring player a percent of our margin (2-4%). AT FTP, the most popular rakeback room, our margin (before costs) is 8%. Hence the lower lifetime player $.

    We look at RAF players as players who we wouldn't have converted anyways down the road. Affiliate marketing at it's core.
  8. TonyG's Avatar
    Randy - I would LOVE to hear from the Rev Share guys as well.

    Unknown - I think if you ask, more programs would share their numbers. And they should. As an affiliate, programs shouldn't consider you competition (although some do and they are making a huge mistake long term). Like Ian said, "the word partners is the key word here"


    Ian - Thank you for the kind words mate. The more we can inform our Publishers/partners the better they are off as affiliates and partners of PAS. Opening the "books" and sharing our knowledge of the rakeback industry (SEO, ad spending, player value, etc) is +ev for us as well. After all, we are invested in their success.

    We like to think we provide affiliates with more than just software, support, and promotions

    Leo - Me too! Byron (PAS President) wrote this piece and is the resident numbers guy.

    Nexton - Numbers get my blood boiling too!
  9. Tea Flow's Avatar
    Tony,

    I take some issue with the statement that Full Tilts lifetime player value is lower than other sites with higher rates.

    Full Tilts player retention is second only to PokerStars.

    Given the choice I would much rather have a player signup to FullTilt while I earn 8% than a smaller room where I am getting 15%+.
  10. TonyG's Avatar
    Alan,

    I totally agree with you. I was referring to the referral player value figure Tony S was asking about. Giving a referring player 2 percent for a full tilt player they refer to us is major factor why that figure is so low. And yes, I would much rather lose margin at full tilt on a player because like you said, ftp is great at rettion and our average player value is so high there (although they have the lowest margins of any rakeback room).

    Tony
  11. Beanie's Avatar
    I don't know why but somehow I have it in my head that people are thinking "how can I get that down to $5 and still make money".
  12. pokerextras's Avatar
    I'll post this one in the rakeback forum as well, but with the amount of stats you have available you could come up with a fairly accurate answer. What is the average rake per month for a rakeback player?
  13. Strider1973's Avatar
    Nice post, thank you!
    So this means that an average customer is generating 21.7$ (520.31 / 24 months) per month?

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