This article was written in March 2016 when I was Head of Poker at Microgaming.
Poker players are gripped in a mass delusion right now. They think that the more rake they pay, the more they are worth – and they couldn’t be more wrong.
OK, that’s a tad dramatic. But there has been a lot of controversy lately about how players should be valued, and whether the talk of ‘poker ecology’ and an ‘unsustainable’ poker environment is just an excuse by poker operators to make unpopular changes. The discussions about this have revealed that the typical poker player doesn’t have any idea about how they are valued by their poker room, and simply thinks that rake paid = their value.
Take these two forum threads for example:
The Current “Unsustainable Poker Environment is a Myth”
The Word and Trend That is Killing the Industry is (Poker Ecology / Economy / Environment)
In those threads, the OPs argue that there is no solid evidence to support the argument that the current environment is unsustainable, that it is a myth and that the real reasons for the decline in game quality have been increased access to training materials (hence, tougher opposition) and increased segregation of players due to regulation (hence, less opposition).
As it happens, I agree that segregation has had a devastating impact (especially on smaller providers). It’s why we don’t operate poker in Italy, Spain, or France anymore. And it is hard to argue that poker education isn’t better now than it was in 2004, when you were lucky if Amazon would deliver a Sklansky book to your country and weak-tight posters on RGP taught you to fold AQo to a button raise. But I also think that the poker ecology is a real, important concept. I hope that in this blog I can show that not only is it real, it is bloody obvious.
When you play an online slot game (like Microgaming’s Fish Party game), the actions that you take affect only one player – you. If you win €100 in a single spin, then no other player loses out. If you lose €200, no other player benefits. If you want to shout about how rigged the game is or how much you want the green fish to get cancer, no other player cares.
That is obviously not the case in poker. In poker, you have a symbiotic relationship with the other players at the table. In fact, almost everything that you do affects the value of other players. This intricate web of relationships between players is what we mean by ‘poker ecology’.
Imagine going to a bar. It’s a cool place, with great-looking people and a nice atmosphere, and it’s playing exactly the kind of music you love (as long as it’s not hip hop). Suddenly, without warning, Satan himself walks in.
Satan takes a seat at a booth, which he has reserved for himself and his twelve slavering bull mastiffs. He calls over the barman and orders a case of the most expensive champagne, two bottles of Louis XIII, and a box of Churchills for afters. Quite a bar tab! He pulls over two horrified women to sit on each of his hellish knees.
The problem is, people are starting to leave. The women are getting tired of being called over to sit on Satan’s knee. The men are getting tired of being bitten by the dogs. Nobody is buying a drink, that’s for sure.
By the time Satan has left and the staff have cleaned up the pools of blood and dog drool, the bar has taken €10,000 for the night. Problem is, the bar would normally make €20,000 on a Saturday. What’s more, the Satan story spreads, and next week, the bar is only half as busy as usual.
The point is, Satan’s presence has directly affected the profitability of the bar even though he himself spent a lot of money. In fact, Satan cost the business money simply by being there. The same principle applies to poker.
The most obvious way to affect another player’s value is to lose money to them. If you lose €100 to an opponent, then you’ve increased that opponent’s spending power, like buying them a drink in our hypothetical bar. They are now able to wager at least €100 more than they were before, and some of that €100 is probably going to turn into rake. You have increased your opponent’s total lifetime value.
The counter to this is that you can affect another player’s value by winning money from them. Now they have less spending power, and there is less opportunity for them to generate rake. You have reduced your opponent’s lifetime value (like accepting a drink at a bar).
MPN’s True Value method for valuing poker players, which has been in operation since June 2012, is invisible to players themselves (who still see the weighted-contributed method). Among other things, it ranks all the players at a given stake level, from biggest winner to biggest loser. It then assigns a player value which is higher for net losers and lower for net winners, reflecting the fact that somebody who is a net loser is actually worth more to the network than their weighted contributed rake would suggest, because by losing they’ve increased the spending power of other players. We use this valuation method to reward operators without impacting players themselves.
A slightly more abstract way to increase value to a poker site is to deposit. By depositing, you increase your own spending power, and the total financial liquidity of the player pool increases. By the very nature of the game of poker, this money flows between players and some of it turns into rake. The more money is available to the player pool as a whole to wager, the better for the poker operator.
On the flip side, you can decrease value to a poker site by cashing out. This has the exact reverse effect, reducing your spending power and reducing overall financial liquidity. You can see clearly that some poker operators are extensively focusing on attracting deposits because of these factors.
Notice that, although I have highlighted that depositors and losers are worth more than you might think if you looked only at their Weighted Contributed rake, I haven’t said that winners or net withdrawing players are actually BAD for a poker ecology. The truth is far, far more complicated and this is where everybody seems to be tripping up.
Your Real Value
It should now be obvious that just because you’ve paid €1,000 in weighted-contributed rake in your time with a poker site, doesn’t mean you are actually worth €1,000. Your real value depends not only on the rake you generate, but also how you impact the value of other players around you.
For example, let’s say you play Heads-Up against one opponent, and generate €10 in rake. Your value in that session is not €10 – it depends on how you impacted your opponent’s value. Perhaps you won money from them really quickly and, to top it off, called them an idiot in the chat box, causing them to quit for the day. Overall, you reduced their lifetime value by €20.
This means that your value is not €10 – it’s MINUS €10. You’ve actually cost the poker site money by playing that session! You are like Satan in our hypothetical bar.
Playing in a six-handed session is more complex. During such a session, you might increase the value of some opponents, and decrease the value of others. Your real value for that session is the sum of:
- Your own direct value (i.e. rake you generated)
- The net amount by which you increased (or decreased) other players’ value
This is so self-evidently true that I don’t think it can reasonably be disputed, but it’s where many players are going wrong. They think they should be treated as one of a site’s most valuable players, when in fact, they might be Satan to that site!
It’s obvious that winning and losing (and, in a more indirect way, depositing and cashing out) impacts your real value during a session. But there are lots of other ways to impact other players value. For example, you can increase an opponent’s value by:
- Being a fun or exciting player to play against
- Chatting and making them feel welcome, thus encouraging them to play longer
- Playing a loose style – i.e. getting involved in big pots with them
- Starting a new table – giving them an opportunity to play when there might not have been otherwise
- Playing quickly
- Doing many other things we haven’t thought of yet
You can decrease an opponent’s value by:
- Abusing them in the chat – causing them to quit or play shorter sessions
- Playing excessively slowly
- Making them feel targeted or predated upon (for example, parasitic tactics like using a seating script to instantly sit with the fish)
- Cheating against them (for example, colluding with a friend)
- Playing an extremely tight style
- Being a dull, unexciting person to play against
- Doing many other things we haven’t thought of yet
To the best of my knowledge, all of the current methods of player valuation ignore these factors, and hence, miss a major part of the picture.
As an example, lets take a professional poker player (continuing our biblical theme, we’ll call him Daniel). Daniel is a winning player overall, and he’s famous. He’s so famous that many people really want to play against him, and they’re prepared to deposit with your poker room for the very first time in order to have the chance.
When Daniel goes to the bar, he is the life of the party. People love to listen to his jokes and stories. He doesn’t spend much money at the bar himself, as he’s constantly accepting drinks from his admirers, who came to the bar just to see him.
When Daniel plays poker, he beats his opponents because he’s the best player. However, he also makes them feel welcome, and spends time to chat with them about poker strategy and the lifestyle of a pro player. He gets involved in pots, he’s fun to play against, and he never cheats or bumhunts. Many of his opponents would never have deposited in the first place if it wasn’t for Daniel.
All of the current valuation models (including our own True Value) would say that Daniel was worth less than his Weighted Contributed rake. He wins money, reducing the spending power of his opponents. He also never has to deposit, he just cashes out his winnings from time to time. But it should be obvious that Daniel is worth far MORE, in fact he is exactly the kind of player that a poker room wants!
In the last ten years we’ve changed the way we value players several times:
- Level 1: Hands or hours played
- Level 2: Dealt rake paid
- Level 3: Weighted Contributed or Winner Take All rake paid
- Level 4: Dual Layer systems like True Value, Essence, and SBR
It’s time for us to move to Level 5, and factor in everything about a player’s impact on the ecosystem. Otherwise, we might reward Satan at the same time as our bouncers are escorting Daniel out of the bar.
The good news is, we already have our data scientists (that’s right, we’ve got data scientists!) working on a quantifiable way to do exactly this. The intended result is to value players correctly, factoring in not only the rake that they generate but also their impact on the lifetime values of everybody they play with. We can then reward players far more intelligently than the industry does now, and in a way that doesn’t penalise winners simply because they are winners, or reward depositors simply for depositing.
There’s another thing that affects a player’s value to a poker site, and that’s how much rake you charge. If you charge 100% rake, then nobody plays and you don’t make any money. If you charge 0% rake, then lots of people play but you still don’t make any money. There is a sweet spot somewhere in the middle, where you maximise the amount of revenue you earn because you’ve set rake at the ideal level – one that allows players to have a positive experience but doesn’t leave money on the table either.
Let’s say for argument’s sake, the relationship looks like this:
It’s no secret that we are searching for that sweet spot, nor is that something we are ashamed of. With the significant rake overhaul we made in October last year (and the similar overhaul we made to Sit & Go fees in February) we moved much closer to that point. We will probably tweak rake further in the future, and this might mean raising it or lowering it, depending on what our research says about what is most sustainable and profitable in the long term.
With that said, I will make you some promises. As long as I am responsible for poker:
- We will not increase rake in 2016, unless forced to do so for legal, regulatory or similar reasons
- We will never increase rake without telling you about it first
- We will never increase rake without giving you reasonable notice of the change
I am really shocked by what some of our competitors have done in this area lately, as it goes directly against what I believe is right for poker. We won’t be making the same mistakes. We are now the cheapest place in the Top 10 to play cash games by a significant margin (and since we’ve been focusing on the poker ecology for nearly 10 years, we also have the juiciest games around). I hope that you’ll share this with your poker-playing friends.