Return of the stack: Is poker relevant again?

The fact it’s been nearly four years since the topic of online poker appeared on the front cover of this magazine probably tells its own story. Back in 2014, EGR looked at what was then the growing trend of poker-only operators moving into new verticals to boost growth. The consensus in the industry at the time was pretty damning: poker was in terminal decline.

Traffic from the online poker market was down double-digits worldwide, while operators such as Unibet, bwin.party, William Hill and Ladbrokes were all reporting similar trends. It seems a lot can change in four years. Fast forward to 2018 and while poker may not be the beast it was in the mid-noughties, there are signs it is finally beginning to have a much-needed resurgence. And with competition heating up in the market, which in turn is leading to more innovation, there are even whispers of a challenge being made to PokerStars’ dominance for the first time in years.

Meanwhile, there have also been substantial movements in terms of liquidity sharing throughout Europe and the US. Unsurprisingly, the poker industry has overwhelmingly welcomed such a development. “This is perhaps the single biggest issue holding poker back worldwide, and finally things seem to be moving in the right direction,” Adam Small, co-founder of affiliate site PocketFives.com and CEO of DGS Media, claims. “While there is some real global decline in interest in playing online poker, structural issues seem to be improving.”

Coupled with more favourable regulatory conditions and greater innovation, is what appears to be a greater appetite for the game itself, opening up poker to a new audience. Recent data from SEO consultancy firm Stickyeyes shows the online poker market has experienced fairly substantial growth in search volume over the course of the last 12 months. According to Stickyeyes, overall non-brand search volume has increased by 50.8% year-on-year.

In response, there seems to be a buzz among the operators too, with the heads of poker at Kindred, 888 and partypoker respectively describing today’s market as being “more sustainable”, “healthy” or “on the brink of growth”. So just how big could this resurgence in online poker actually be? And what are the driving forces behind it?

Comeback kid?

The buzz surrounding poker today is clearly for a myriad of reasons, but one key area is the growing popularity of live poker, both online and offline. The World Series of Poker (WSOP), currently sponsored by 888, was particularly strong this year. Over at The Stars Group (TSG), meanwhile, its PokerStars brand won plaudits for its Platinum Pass promotion which led to a total giveaway of $10m and has helped get people talking about poker in a positive light once again. There was also more televised and streamed events, with the WSOP on the likes of BT Sport, ESPN and PokerGO.

Meanwhile, GVC’s poker business, having previously worked with the World Poker Tour (WPT), built its partypoker LIVE from scratch in January 2017. This required a substantial amount of investment for a company which openly admits to having let its poker arm fall by the wayside in favour of other areas of the company it believed offered far greater opportunities for growth. By the end of the year, partypoker had $20m guaranteed online, making it one of the biggest online poker tournaments in history. And Tom Waters, head of GVC’s partypoker brand, believes this goes some way to explaining poker’s renewed vigour.

“People are showing a bit more interest in live poker in general, a lot of which I personally think is actually down to partypoker LIVE,” he says. “I was recently in Las Vegas for a couple of weeks and I had a lot of comments from players who said they’ve got used to partypoker LIVE events now and when they go to others they don’t like them as much. So we must be doing something right. Partypoker LIVE has got so big and the guarantees so huge that it has become a talking point for players and is generating a lot of media interest.”

Another major shift in poker in recent months has been a general increase in competition between the biggest brands, which consequentially is driving new innovation and ideas. A key reason for this has been a shift in the last couple of years towards attracting more recreational players and seeking to balance the ecosystem. Most poker sites today seem to have accepted that the old way of doing things could no longer continue, particularly when it comes to controversial areas such as HUDs, seating scripts and bots.

But there is not one-size-fits-all approach. As a result, there are no longer any two sites that have exactly the same strategy and it feels like every company is trying to do something a little bit different to stand out from the crowd. This shift to create a more sustainable player ecosystem can also be seen at forum sites like Two Plus Two which has witnessed its number of users and posts dwindle in recent months. This is hardly surprising. Now that many of the benefits professional players had a few years ago and used to rely on to make a living aren’t there anymore, many of them seem to have cashed in their chips and stopped playing.

“As a player and someone who works for a poker site I feel a lot more optimistic about it [the poker market], and I have for the last 18 months or so,” says former pro player and head of poker at Kindred Group, David Pomroy. “From a Kindred perspective, in the past new players could come in and suffer quite heavy losses at the hand of pros, particularly in games where there used to be five pros against one new player. That just doesn’t exist anymore. It’s now more like three or four new players against one or two pros, which is a lot more sustainable.

“I’d be surprised in five years’ if you are still able to use seating scripts and HUDs properly on any site because I don’t think they would be sustainable. Those on the poker forums are those who have already gone a bit further down the rabbit hole. In five years’ time it’s mainly going to people on mobile, and not desktop players, that sites are trying to appeal to.”

Small echoes Pomroy’s sentiments: “I think PokerStars and others have recognised, correctly, that they don’t have to make it easy for pros, and particularly that they shouldn’t incentivise the ‘break even, collect rakeback’ style of play. Sites will continue experimenting, but the focus will be on how to make the games more popular and more fun for the players who bring the money to the table.”

Leading the way

A number of familiar brands continue to win plaudits for the way they have adapted to a shifting marketplace and new demands. Returning to Kindred, back in 2014 the Unibet owner was one of the first companies to take what was then a bold approach of addressing these player ecology measures all at once, rather than trying one thing at a time like many of its rival brands have done since.

For the Stockholm-listed operator this meant outlawing HUDs in any form, removing the seating lobby where you could choose which seat to take at a certain cash table, allowing players to change identities every day and being one of the first to have a quick seat lobby. When Kindred made those changes four years ago it initially lost money after frightening off the grinders – however, it conversely also acquired a high number of active users immediately.

“Back in 2014, poker brands were arguably in a race to the bottom – this was a time when you could get 80%, and sometimes even up to 100%, rakeback,” Pomroy reminisces. “It was the perfect time for us because we’d reached the point where poker wasn’t viable anymore and it wasn’t profitable for us to acquire players because they were just dying off so quickly. So it wasn’t much of a risk to take such a big risk.”

And it appears to have paid dividends. In 2016, Kindred reported consistent strong growth in online poker, ending the 12-month period up 64% year-on-year. These figures continued into 2017 too after posting 22% year-on-year growth. For other sites starting at bigger bases, many took a wait-and-see approach and started to implement one measure at a time, with the general consensus now being that there needs to be a focus on sustainability.

But as Michael Josem, a communications consultant and former PokerStars PR man, explains, not everyone is necessarily following the Kindred model to the letter and many brands are experiencing their own success. “The different strategies of the biggest operators are remarkable, with significant differentiation across the industry,” he says. “PokerStars has strengthened its financial position by reducing spending on high-volume players and staff, Winamax is offering a poker-only experience, partypoker is allowing affiliates to offer bigger rakeback again, and Kindred is building a strong and responsible brand focused on their niche. In that sense, this is a wonderful time to be a poker player, with a whole variety of different options.”

Partypoker is one operator in particular that is going great guns. The brand, which was the global runaway leader prior to UIGEA in 2006, had little investment for approximately eight years through until 2015. Indeed, GVC CEO Kenny Alexander has gone on the record as saying partypoker had previously been “very, very poorly managed” and that its previous owner was “letting it die”.

But after upping its investment in the brand’s live poker operations, marketing and product, partypoker saw net revenue climb 42% year-on-year in 2017, while first-time depositors grew by 25%. A recent major software overhaul has drawn praise from players. And although you will have to whisper it very, very quietly, many people in the industry claim partypoker is making a solid challenge to PokerStars’ dominance.

“Players have also been asking for a long time for someone to challenge and take on PokerStars but nobody was either in a position or prepared to do it,” partypoker’s Waters says. “We are trying to do that now and it has been well received so far as I think players want an alternative site to play on that is of a similar quality to PokerStars. Unfortunately, we get a lot of feedback from players who think we are the same size as them now – our brand perception is massive but we are only at the very start of our journey and we can only take so many risks and push so hard. So it’s actually a difficult position for us. We perhaps have overachieved, so it’s about managing those expectations now.”

No borders

Partypoker, Unibet and others may well be leading the charge, but arguably the biggest shake up to the online poker market in recent years has been out of their hands. Operators had long called for the opportunity to launch combined player pools across different regulated markets, and their prayers came true in the last 12 months after France, Spain, Italy and Portugal all signed up to a poker liquidity-sharing agreement. This year PokerStars became one of the first to go live after combining player pools in France and Spain.

TSG said in its recent financial results that it had seen a big increase in rake in Spain since merging player pools, while partypoker, which describes the regulatory movements as a “game changer” for the sector, has witnesses a big surge in traffic from its dot.eu platform since going live in June. With the poker might of the European countries combined, there is now access to a gigantic player pool and effectively double the guarantees. It also makes things just that bit easier for operators that only have one platform to manage with one set of guarantees, one set of risks and one player pool.

But Guy Cohen, head of 888’s B2C division, is clearly buoyant about the rewards poker operators may accrue from pooling liquidity in Europe. “Shared liquidity is essential for online poker, so this is great news for players and operators in both Europe and the US,” he tells EGR Intel. “We have already seen great results in both regions as a result of the launch of shared liquidity. The growth in poker revenues in Spain in Q1 2018, as published by the regulator, is a good example of this.”

Indeed, revenues posted by the DGOJ (Dirección General de Ordenación del Juego) provide a good indication as to what the impact might be. In June, the Spanish regulator revealed that poker revenues in the first three months of 2018 climbed 42% year-on-year to €21.5m following the launch of shared liquidity pools in France. Meanwhile, the addition of New Jersey agreeing to share liquidity with Nevada and Delaware is also a welcome boost for 888 on the other side of the pond as it is the only operator with a presence in all three regulated egaming states. Although until one of the big states, like California or New York regulate, this is unlikely to be as significant as it is in Europe.

“I’ve long felt that the industry would eventually take this trajectory, even as ring-fencing became the norm for a while,” Small adds. “Poker just doesn’t make sense when segmented off into small populations. People need to understand, though, that Delaware and Nevada are both small states. Combined, the two of them are still less than half the population of New Jersey. Adding big states like Pennsylvania and New York will be where we really start to see the needle move.” Meanwhile, Pomroy says: “It is such a slow burner in the US, and what is going on with New Jersey, Delaware and Nevada seems like the bare minimum that needs to be done to keep it viable.”

Err on the side of caution

Despite signs of a resurgence, poker operators will no doubt want to refrain from getting too ahead of themselves. In fact, the overwhelming majority of operators, with a few notable exceptions, over the last 12 to 18 months have witnessed muted poker growth or flat or falling revenues. There is also little indication the industry is anywhere near to getting back to its heights in the mid-noughties, and with few successful poker start-ups entering the market in recent years, people are hardly clamouring to get a slice of the action.
There is also concern that the aggressive pursuit of casual and recreational players, and as a result the increasing alienation of the pros, has actually done its own damage to poker in many ways. After all, every poker liquidity pool needs a well-balanced portfolio of casual, recreational and professional players, and the players at the top play a vital role in being on the sites for prolonged periods of time and always starting tables. Even Kindred’s Pomroy admits that it is possible to go “too far the other way” and the whole industry agrees on the importance of having a balanced ecosystem – it’s just not exactly sure yet what that actually means yet.

However, while the debate will rumble on regarding the player ecology of poker and operators wait to see whether more territories open up their borders to shared liquidity, there is no doubting that the optimism in poker is stronger than it has been in many years. Whether that amounts to a resurgence remains to be seen, but it seems at least like poker has laid the foundations for a more vibrant future.

“There has probably been a greater focus on the player than ever before, which has generated significantly more interest,” Waters concludes. “So is there a buzz? Yes. Has there been a major resurgence? Not yet, but it has turned a corner and we have seen the bottom. We should start seeing more growth over the next few years.”