Ever wonder what online poker companies think of you, the consumer?
Well, on the heels of our piece in this week’s Voice about James Giordano and Internet gambling, someone forwarded us an investment bank’s analysis of an online poker company named PartyGaming.
Advocates of online poker like Rep. Barney Frank, who is sponsoring a bill to legalize it, and former senator-turned-lobbyist Alphonse D’Amato, paint internet poker as just a fun way to win money at home or as a matter of personal freedom.
But the 2006 analysis by the Swiss-American investment bank UBS strips away the spin and looks only at the business model. The result is a less than flattering portrayal.
Check out this sentence: “Attracting poor players — the fish — to feed the good ones — the sharks — is the only way the online poker model works,” the analysis says…
Ten percent of players, the sharks, generate almost 80 percent of the revenue, the anaysis says. That means there are a relative handful of professional poker players that are sucking money off of the casual players, who are known as “fish, donkeys or donators,” the analysis says.
If you are one of those, you basically don’t have a chance to win. Your typical shark plays multiple tables, and uses databases to track player history. They aren’t playing for fun. UBS’ analysts argue that PartyGaming seems to have been set up to favor the sharks.
Think about that, the next time you sit down for an online hand.
In order for online poker sites to succeed, they desperately need a steady flow of new fish, the analysis says. “Finding new fish to feed the sharks is the most important requirement for PartyGaming to succeed,” the analysis says. “Without these fish, the model falls apart.”
Eventually, UBS concludes, if an online poker site can’t keep attracting new customers to be the fish, profits will inevitably drop.
The analogy is that if each shark eats two fish a day, and those fish aren’t replaced, then eventually, the number of fish will decrease and the ocean will be filled with sharks. Those sharks will then starve because there aren’t enough fish to eat.
“In the world of profiteering, we believe that sharks who were once winning comfortably will leave the site and look for greener pastures because they are not winning enough to justify their time,” UBS says.
After the U.S. banned online poker for money, PartyGaming avoided losing money by attracting more players in Europe, the analysis says. Eventually, that bump will fade. “We cannot see how poker can recover to its highs because the player pool will become shark infested,” UBS analysts write.
Keep that in mind next time you’re tempted to ante up, sucker fish.