Article - Underlying Flaws of Affiliate Rakeback

[Dominik]

Because the rakeback argument has been rehashed about a thousand times, just on this forum alone. I prefer not to argue too strongly against anyones business model. My main reason for this is it's my opinion that continually pushing operators to do things in house will more quickly get us to what is going to happen anyway, the death of poker affiliate programs (at least as we know them). Anyone who doesn't see this coming is looking at this business through rose colored glasses. This will start at the top with PokerStars, and will trickle down from there with Full Tilt probably quickly following suit. This is a whole another debate in and of itself, but if need be I can point out several reasons for this.

Poker affiliates that ...

1) acquire genuinely new players (and do this more cost-efficiently than the poker sites can do themselves through normal marketing channels)
2) acquire players that would not have come to the poker site if it was not for that particular affiliate
3) generated added value through things that the poker site directly cannot easily do itself

will always do well.

I think poker sites will just have a much more diverse view of affiliates and not throw them all into one bucket.

Now, most successful rakeback businesses are run by extremely smart and capable people. My recommendation would be to try to tick the 3 boxes mentioned above as much as possible, as I think the overall rakeback debate is pretty much decided by now and most networks and poker rooms are already acting or have acted.

Affiliates that don't tick all of the 3 boxes mentioned above will come under a lot of pressure, in particular from the large rooms that have strong brand and advertising. If you are a niche poker room however, you won't really be affected by 1) and 2) so much.

However, as most niche poker rooms are on networks, and 1) and 2) will affect that network negatively, niche poker rooms might get into a lot of trouble due to network regulations as they don't have a proper business model. This is what Karim from RtR and we have pointed out quite some time ago.

[Prenut]

Of course the added value spiel is true in most every business vertical, online gambling included. Added value products and services will almost always be better in the long run. We are going to have to agree to disagree on what is added value. I certainly think PS adds value when the free $50 is removed (as you have community, strategy articles, video, etc,) and also still adds value with a free $50 in revenue share situations.

As far as the always do well part, in a sense that is true. It will probably be true with smaller rooms for longer than it will be with the larger ones. If you think PokerStars has not been actively working at ways to completely eliminate the affiliate program, then you seriously need to reevaluate. Below is a list (albeit incomplete) of obvious signs that Stars would like to do away with the affiliate program, and things that they have done to move in that direction.

1) Increasing qualifying CPA requirements. You can talk about player values and what not all day long, but the simple fact is that this was done to lower their affiliate expense. And yes it is viewed by them as an expense, and probably rightfully so at this point in their business growth.

2) Increasing fee deductions for revenue share affiliates including but not limited to deductions for their general (and not player specific) marketing efforts.

3) Hiring away person(s) from top affiliate sites to work for them. I am only aware of one instance, but there are probably more that I am not aware of.

4) More exenditure on SEO. The poker rooms have been historically inept at this, but PokerStars has taken the initiative to improve.

5) Buying up existing affiliate sites such as PWP, poker-babes, etc. Make no mistake about it, PokerStars wants to dominate search queries that have been historically dominated by affiliates. They think (and again probably rightfully so) that it is more cost effective to do this in house as opposed to outsourcing it to others via an affiliate program.

Do I think PokerStars is moving in the proper direction with this? Absolutely, positively yes. Their business, including brand name, player base, assets, etc has grown to the point where they can in fact do this more cost efficiently in house rather than outsourcing it to affiliates.

What happens when PokerStars cuts off the affiliate program? I don't think anyone knows exactly, but I have my own opinions on what the natural progression may look like. I think it will include PokerStars buying more affiliate portals, creating more affiliate like portals of their own, and buying out smaller rooms that they cannot bludgeon into bankruptcy.

What do other rooms do? Again I don't think anyone knows exactly, and alot may boil down to how Full Tilt decides to respond. Do they cut out their affiliate program also, or do they look at it as an opportunity to increase their market share by working with affiliates even more? I lean strongly towards them cutting out their affiliate program, as they have shown a tendency to follow Stars actions towards affiliates (with the glaring exception being rakeback - but they may go soon as well). I just don't see them having a need for an affiliate program if their largest competitor doesn't have one. I think they will view it as an opportunity to immediately cut expenses, rather than viewing it as an opportunity to further increase revenues.

What about the other poker rooms? Some will inevitably get bought out by the Big 2, others may merge together in an attempt to compete. The remaining ones have less competition from other affiliate programs, as there are just now fewer of them. This will inevitably mean that they can slash their affiliate expenses as well. Why pay high CPA's and revenue share any longer when you are no longer competing with Stars and Full Tilt for players from affiliates? Granted these smaller rooms will still want players from affiliates, but the market will dictate that they can lower what they pay them.

Ok, I have rambled enough about thoughts of the future. End rant.

Poker affiliates that ...

1) acquire genuinely new players (and do this more cost-efficiently than the poker sites can do themselves through normal marketing channels)
2) acquire players that would not have come to the poker site if it was not for that particular affiliate
3) generated added value through things that the poker site directly cannot easily do itself

will always do well.

I think poker sites will just have a much more diverse view of affiliates and not throw them all into one bucket.

Now, most successful rakeback businesses are run by extremely smart and capable people. My recommendation would be to try to tick the 3 boxes mentioned above as much as possible, as I think the overall rakeback debate is pretty much decided by now and most networks and poker rooms are already acting or have acted.

Affiliates that don't tick all of the 3 boxes mentioned above will come under a lot of pressure, in particular from the large rooms that have strong brand and advertising. If you are a niche poker room however, you won't really be affected by 1) and 2) so much.

However, as most niche poker rooms are on networks, and 1) and 2) will affect that network negatively, niche poker rooms might get into a lot of trouble due to network regulations as they don't have a proper business model. This is what Karim from RtR and we have pointed out quite some time ago.

[321]

Oh, so they can't be called that, but they can go around calling people with a perfectly legitimate, low margin and player rewarding business parasites and cannibals in every single post they did in this thread? In a business where everybody is a huge parasite living on people's gambling problems in the first place (and even stimulating them).

The first sentence, they have defined those terms, and they aren't calling people that, they are calling the business models that. In contrast "socialist propoganda" doesn't define "socialist" in this context and "propoganda" is just a silly word. If someone wants to say why what they are saying is socialistic, with an explanation and definition of socialist, fine. But just hurling negativity isn't helpful.

As for the second sentence, I'd suggest you get yourself into another business if you feel that way, and also consider that saying everybody here is a parasite is not going to win you allies.

[321]

If you think PokerStars has not been actively working at ways to completely eliminate the affiliate program, then you seriously need to reevaluate.

I'd say the reverse to you. if you think the steps you mentioned are aimed at *eliminating* affiliates, you should reevaluate. Some of the steps you mentioned are merely them doing better at things they do. On the other hand, those same steps encourage affiliates to pursue areas that they do not. Any business like Amazon prefers people come straight to Amazon.com, but that doesn't mean they don't want affiliates to send traffic too.

Before now and right now there are a lot of ways affiliates make money that don't make much sense. cardrooms have eliminated some of these like prohibiting affiliates from putting up duplicate sites of the cardrooms and advertising on adwords as the "official site". Nobody thinks that it is unreasonable for them to do that, and it is not an example of wanting to eliminate affiliates.

Personally I think cardrooms should completely eliminate bonus and marketing codes. There is nothing that misdirects payments away from value-added productivity than these codes. Getting rid of them would redirect wealth from one type of affiliate to another -- but it would not be an "eliminate affiliates" action any more than creating bonus codes was a "encourage affiliates" action.

There will always be a place for affiliates, but the whole point of affiliates is to market in valuable ways different than the parent company, not piggyback on top of the parent company (as prtending to be their official website and bidding against them on adwords for their brand name would be).

[Poker Affiliate Solutions]

321,

you seem to have a real deep understanding of the industry. i am just curious what role you play in the poker world? Affiliate, player, operator, affiliate manager...etc....Where and whom to do work?

tks
Chris

[BreezeBG]

The first sentence, they have defined those terms, and they aren't calling people that, they are calling the business models that. In contrast "socialist propoganda" doesn't define "socialist" in this context and "propoganda" is just a silly word. If someone wants to say why what they are saying is socialistic, with an explanation and definition of socialist, fine. But just hurling negativity isn't helpful.

As for the second sentence, I'd suggest you get yourself into another business if you feel that way, and also consider that saying everybody here is a parasite is not going to win you allies.

If I politely define your business model as "asshole" because of some analogies (no pun intended) and call it that all the time, aren't you going to be offended?

I really don't think there is something humane about bringing new players to gambling, and that's why I think it's hypocrisy to call other affiliates parasites. Just explaining my thought process... In fact I would have preferred it if pokerstrategy guys didn't use this type of wording in the first place, I definitely agree with you that such words harm the discussion. Other than that it's a great tread, nice to see all those large posts by RakeTheRake and PokerStrategy, I should shut my mouth and just read and enjoy it

[Lutz]

@321 Ok, we see things very differently, and i am not going into a long disscussion with you


I just wanted to tell my views hoping that all the AM´s/rooms don´t eat everything presented in this beast of a propaganda article.

If the truth - and subsequent actions taken from unveiling it - hurts your business model, I can understand very well that you want to talk affiliate managers into believing that our view is wrong.

PokerStrategy.com and PokerListings.com are NOT the only affiliates in the whole world contributing possitively to the poker industry, lol please...

True - most small affiliates who have blogs or some other model and a lot of bigger sites such as content providers, news sites etc. are positive. They generate and increase interest in poker and they convert genuine new players.

All these smaller and bigger affiliates essentially lose money because some big rakeback affiliates talk the industry into believing that they will add a lot of value if they are allowed to outprice all the small affiliates and the poker room marketing itself.

The effect is that no high-value player - even though initially generated by small affiliates or poker room marketing itself - will play through them. They will all wander off to the rakeback affiliates to get some more rakeback or bonuses.

Guys, it is so obvious that this is a business model that does not add value to the industry. But of course the winners of these parastic business models will never admit that and try to postpone the inevitable changes that will come.

My thesis: poker networks that ignore the situation and continue to believe in the value added by parastic skins and affiliates will continue to shrink and go out of business in 1-3 years.

[RakeTheRake]

321,

you seem to have a real deep understanding of the industry.

LMFAO!

And they said Americans didn't do sarcasm.

[Beanie]

LMFAO!

And they said Americans didn't do sarcasm.

I thought they said that the English don't do World Cup. I must have missed something, my bad

[RakeTheRake]

I thought they said that the English do World Cups. I must have missed something, my bad

FYP
Now it works


Not only were they played off the park that day, but they are a bunch of overpaid individuals who are too focussed on their sponsorships and distracted by their thick plastic WAGs. Maradona kisses all his players when he takes them off...and they kiss each other...that's a team. I'm not saying we need man on man action to win the World Cup, but we need passion...some passion...any passion!

The only good thing to come out of the game was the fact that it made that imbecile Sepp Blatter admit he’s got to re-open the Goal line technology debate.
Then he should take a boat far out to sea, attach a weight to a rope and tie it to his waste. Then throw in the weight and see out the rest of his days as a buoy.