A new player in town

Words by Julian Rogers

The news that Pala Interactive – the digital arm of California’s Pala Band of Mission Indians – had soft launched a proprietary-built poker site in New Jersey in early June probably raised a few eyebrows across the industry. Here was a four-year-old start-up, which operates in the Garden State through Borgata’s interactive gaming license, laying down the gauntlet to established giants of the online poker world in what is, quite frankly, a fiercely competitive, highly regulated and apparently saturated market. Moreover, PalaPoker.com would stand on its own two feet and fight for liquidity and market share outside the relative comfort of the Borgata network.

One of Pala Interactive’s key targets when the subsidiary was formed in 2013 was to create an online poker product for the potentially lucrative regulated California market. However, the impasse on legislation in the Golden State effectively torpedoed this plan, forcing a rethink. With up to 30 of Pala Interactive’s 50 staff working on the project over the past three years, bosses needed to unleash Pala Poker into the wild, get it licensed and operating successfully somewhere. That somewhere ended up being New Jersey. “We have had a poker product that has been ready for some time sitting in the lab but you don’t perfect a poker product in the lab,” CEO Jim Ryan tells EGR NA from his base in Toronto, Canada.

“It’s got to be socialized, the bugs need to be worked out, the features and functions need to be tuned… we have launched in a beta format and we are welcoming participants to come in, beat it up and tell us how to improve it.”

Built from scratch and leveraging cloud-based technology, Pala Poker is accessible through either a downloadable client or a web browser. This is complemented by iOS and Android apps. Furthermore, the Pala Interactive team has built what Ryan hails as a “state-of-the-art fraud detection system” armed with algorithms to identify suspicious activity such as collusion, chip dumping, bots and peculiar wins and losses. “It’s all with the intention of keeping the bad actors out,” he confirms.

The front page of PalaPoker.com

Besides player liquidity, a poker site lives or dies by its software. If it’s sluggish, buggy or ugly – or worse still, all three – then obviously customers will head for the exit. Ryan says Pala Poker has been stable and performed well during the first few weeks of the open beta testing phase. There haven’t been any major technical issues, which should be applauded where a brand new site is concerned, although he admits there were “a host of minor bugs” that the players have helped identify. “No software product that I have ever released, nor anybody else in this sector, has been perfect at launch. So we are going to spend months tuning the product, enhancing the features and our goal in the first year of operation is to compare our product with the best in the market and from a feature-function perspective to have an offering that is equivalent to, if not better [than the competition].”

In a bid to reduce friction in the customer conversion funnel, the registration process is ‘gamified’ (complete the digital forms within the five-minute countdown and receive a free $5). There are also more customer support agents than is realistically needed for a business of this size, Ryan adds. Besides sign-up bonuses, Pala Poker has been offering $1,700-worth of daily guaranteed tournaments, yet players have encountered over $1,000 of overlay each day from these games. This is a deliberate giveaway to attract new players, and the team has been spreading the message on popular poker forums. Even without above the line marketing, Pala Interactive has seen a spike in new accounts. “Our player acquisition numbers are up about 30% without having spent one dollar on marketing,” Ryan states. And with casino (PalaCasino.com), bingo (PalaBingoUSA.com), and now a PalaPoker.com, Pala Interactive is the only New Jersey brand to offer this triumvirate of gambling verticals.

Crowded house

Following Pala Poker’s arrival, there are now six poker sites on four networks in the state. It’s a congested arena, which could get that little bit more saturated with land-based operator MGM Resorts set to roll out a poker offering towards the end of 2017. In all likelihood, MGM will cannibalize part of the market – as Pala Poker probably will do too. The Garden State is home to almost nine million people and was already over-supplied with poker sites before PokerStars waltzed in 16 months ago and assumed the crown of leading operator in terms of revenue. Brands here are fighting over scraps in a small pond. According to poker traffic tracking site PokerScout.com, PokerStars NJ had a seven-day average of just 95 cash game players at the end of June. Plus, Fertitta-owned Ultimate Poker and Betfair’s inconsequential poker offering have both bitten the dust since the switch was flicked on regulated egaming in November 2013.

“Our player acquisition numbers are up about 30% without having spent one dollar on marketing” – Jim Ryan

Boutique research firm Eilers & Krejcik Gaming is skeptical about Pala Poker making inroads, noting in its latest US iGaming Tracker report that it will be “difficult for the site to gain meaningful traction.” Yet Pala hasn’t burst into the market all guns blazing in an audacious bid to usurp the incumbents. And that’s deliberate. “Our objective isn’t to spend millions of dollars to be as big as the other participants – to lose money like the rest of them,” Ryan explains. “Our objective is to get the product out there, expose it, have the consumer enjoy it. And when more enjoy it, more will come.” He adds: “I suspect we will be the smallest player, and that’s fine. Having said that, we are not going to be a lame duck in New Jersey.” Nevertheless, the site will be up against three industry powerhouses. PokerStars, which has been around since 2001, is widely considered to have the best software in the business, while partypoker and 888 boast over three decades of experience between them when it comes to building and iterating poker products.

Perhaps the ace up Pala Interactive’s sleeve is its executive management team.

Ryan, who joined the newly formed Pala Interactive four years ago, was previously co-CEO of bwin.party, and prior to that CEO of PartyGaming. Pala Poker is the fifth poker network he has been involved with during his career.

His number two, COO Michael O’Malley, has worked in live and online poker since the early 2000s, having managed World Poker Tour and World Series of Poker events as well as being instrumental in PartyPoker’s launch and subsequent rise to global number one prior to UIGEA. Meanwhile, CMO Jeremy Clemons was the marketing and product development lead responsible for the creation of what became the largest legal online wagering service in the US, TwinSpires.com. The trio’s experience and know-how could be key.

Pala Interactive CEO Jim Ryan

Losing ground

You can’t fail to notice that the poker segment continues to struggle in New Jersey. PokerStars NJ’s launch briefly provided the industry with a much-needed boost as total revenue rose to around $2.5m a month. Since then, however, figures released by the Division of Gaming Enforcement reveal earnings have been flatlining around the $2m mark. The last 12 months poker revenue has averaged $2.19m a month with little deviation from this figure. The latest results for the month of May show revenue was $2.12m, which is a far cry from early 2014 when the vertical breached the $3m mark three months in a row. Poker’s performance is overshadowed by casino gaming, which now consistently accounts for about 90% of the sector.

Back in the early days of regulated online gambling in New Jersey, poker cornered about 20 to 30% of the market. This erosion of poker’s share has as much to do with the game’s decline as it has casino’s striking ascent. “Poker has a lot more competition than it did in 2003 to 2006 when it was the new thing,” Ryan notes. “It’s glory days are in its past. But it, like casino games, will be there forever and a day. It’s still part of the entertainment culture of the country.” Poker’s lackluster performance in New Jersey could be instantly remedied by compacting with another state, and Ryan could envisage New Jersey one day compacting with a state like neighboring Pennsylvania with its population of 12.8 million. “Then you have probably taken the liquidity pool up by 100 to 150%. It becomes a more dynamic environment.”

If and when other states come online, Pala Interactive will be eyeing up B2B and B2C opportunities, provided there is sufficient liquidity and the right licensing conditions in place. In fact, the B2B route will become a priority. “So if a bill passes in Pennsylvania that is one brand per licensee and it is only land-based operators, Pala will not be a B2C operator in that marketplace. But we want to make sure we are positioned to provide our software on a B2B basis there.” By building a credible, fully licensed B2C poker product for the New Jersey market, Pala Interactive is effectively putting its platform in the B2B store window. “If New York is going to regulate and if we didn’t have a poker product operating in New Jersey, no one would take us seriously in terms of licensing our product on a B2B basis,” Ryan explains.

“We went to New Jersey not because we want to be B2C; the God’s honest truth is we felt that if we didn’t go to New Jersey we would not be relevant in any other US state. Now that we are B2C there, we are in a position where we can easily entertain B2B operators – and our product has been architected to do that.” For now, though, the focus is on acquiring users and iterating the product and the technology. “If the system is falling over or if it’s frustrating and you can’t register or can’t get money in or can’t get it out quickly, you’re dead. I take a look at some of the gaming companies that have turned themselves around over the years and how they did it. They focused on the basics. So we wanted to make sure we got that right straight out of the gate and then we will get sexy with some features and functions.” To borrow poker terminology, Pala Poker would appear to be playing a tight, rock-like style – for now. Yet when conditions are right, it looks set to loosen up with some creative moves, possibly becoming a dangerous opponent. “We are going to crawl, then we’ll walk, and then we’ll run,” Ryan smiles.