Online Poker

Online poker is a very exciting game played by millions of people around the world. Although its roots started in the United States market, online poker is now very much a global game. Poker.com estimates that over five million players are actively playing for real money each quarter, and well over three million are playing in tournament format. This includes Sit N Go single table tournaments as well as MTT or multi-table tournaments.

The most common online poker game is Texas Hold’em where each player shares five community cards in the middle and each uses their two hole cards to combine with the community cards (or not) in order to win the pot. During the 1990s when online poker launched for real money, Texas Hold’em or Hold’em was played mostly in fixed limit format (scheduled betting amounts for each round), with $10/20 stakes being the highest. In addition, 7 card stud, Omaha eight or better (Hi/Lo), and 7 card eight or better were originally the games of choice along with fixed limit Hold’em. In the early 2000s No Limit Hold’em became more popular, most likely since it was the game played at the World Series of Poker which played a significant role in launching the poker boom and especially when Chris Moneymaker won the event in 2003.

Today, No Limit Hold’em continues to be the most popular online poker format, however Pot Limit Omaha has seen strong growth during the last few years. PLO has been played in European cardrooms for years, but has finally shown its appeal to a global audience. The game is well known for its action pots as usually no single player has a huge edge over his opponents. Some alternative online poker games have shown limited interest like HORSE, Pineapple, 5 Card Draw, Razz, Chinese Face Up Poker, and currently in Asia short deck poker has growing interest.

Another major trend relates to the speed of play. In 2010 Full Tilt Poker launched a fast fold product called Rush Poker which allows players to quickly shuttle to another table if they don’t like their hand. Most poker rooms copied this format and it remains one of the most popular forms of cash game today. Another innovation relating to speed of play was by Poker Stars called Spin N Go, which is a lottery version of a Sit N Go single table tournament. These hyper turbo format tournaments give players a lottery feature whereby they could be playing for much more money once they are seated, and the structure of the blinds is very fast so the average game is short. This format is ideal for people who have limited time, and on mobile devices.

Online Poker has grown considerably since the first real money hand was dealt in January, 1998 at Planet Poker during a time when most players originated from the United States, and in fact, Las Vegas. Today, Poker.com estimates global net revenue generated from online poker to be $2.4 billion per year. France is the largest poker market in the world with annual net revenue of $260 million, and Russia in second spot at $240 million. Italy and UK are the next most significant poker markets with the largest markets including France, Russia, Italy, and United Kingdom. There are estimates that currently in Asia alone up to $2 billion per year could be generated in online poker revenue through various social apps like PPPoker and Poker Master but details have not been made public.

Top Global Online Poker Markets ($ Net Revenue per year)
1. France – $260 million
2. Russia – $240 million
3. Italy – $180 million
4. United Kingdom – $170 million
5. United States – $150 million
6. Germany – $120 million
7. Spain – $120 million
8. Canada – $100 million
9. Brazil – $100 million
10. Sweden – $80 million

In the United States, other alternatives to classic online poker have had some success. The most successful is poker by Zynga which became the most popular poker option on Facebook. Players can’t win money, but instead buy and accumulate tokens. This form of ‘social’ poker generates Zynga an estimated $150 million per year. Although Zynga like to report large user numbers spending micro amounts this is not really the case and inconsistent with reporting standards in the gaming industry which only counts active players involved in real money play. When considering the small percentage of players that are converted by Zynga (about 2%) their business is not very different than traditional online poker operators, except for the fact that their players make deposits and can’t win real money.

Another form of online poker in U.S., but less popular, is based on a monthly subscription fee (usually $20-30 per month).  Subscription poker uses a sweepstakes legal framework, which allows players to play online poker and even win cash and prizes that are offered as sweepstakes prizes like Publishers Clearing House for example.  It can be quite cumbersome for winning players to claim their prizes, however, as claiming sweepstakes prizes involves some paperwork.

Online Poker is usually played on desktop, or on mobile or tablet devices.  Although some poker brands provide web based games, it is more common for users to download the client software or obtain an app on their phone.  Once launched, the client software then communicates with a central server where the games are played.  Upon log in, the user typically arrives at the online poker room lobby which is the area that displays all of the different poker formats, and is similar to a spreadsheet with filtering and search features.  Here, one will find various tournament formats, cash games of different stake levels, freerolls & bonus events, and satellites where a player can quality into a large buy-in tournament like the World Series of Poker for example.

The online poker site earns revenue by charging a commission or rake depending on various factors. The rake schedules vary from one site to the other, but can reach up to 5% of the pot value.  An important restriction on rake is whether the community cards are dealt or not, also called the flop.  Often termed the ‘no flop, no drop’ policy, rake is not collected if the winning hand is decided pre-flop, which would arise after a series of bets and a single player forces the opponents to fold. Once a flop occurs, the poker site will rake the pot after each round of betting depending on the pot size. A maximum rake or cap is set for each hand depending on the game format, stakes, and number of players at table.

Online Poker Business Model
Quarterly player net revenue yields average US$115, with some of the regulated markets nearing US$100 depending on the level of aggressiveness on bonus & cashback offers (the more generous the poker site with cashback the less they earn from the player).  In France, bonus costs of over 20% are reported. As expected, higher yields of $150 are typically seen in the Nordics. Player yields have always been strong in U.S., and this can be seen with New Jersey yields estimated at $130 per player. Generally, we expect some of the global yields to be high if the customers are coming to European sites organically, and considerably lower once more mass marketing strategies are employed. In other words, the relative purchasing power of many global countries is not usually apparent until the active numbers become substantial and marketing budgets are enhanced.

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