The Poker Chronicles

« April 2008 | Main | June 2008 »

May 24, 2008

New Project

I think I'm going to elance up a poker project I've had kicking around in my noggin for a couple years now. It's the sort of thing I would have killed for as an online poker player, and I'm pretty sure a lot of people would be interested in it. It's also the sort of project that I think lends itself well to outsourcing, as it's not too complex (though probably time consuming) and easy to split up and verify if all of the pieces are working independently.

But I need your help. What I need is hand histories from the major sites, and you guys still play poker, right? If you'd be so kind as to send me a small sample (to matt@ for this domain, or just click the link top left) from any of the various sites you play at, I would really appreciate it. I'm only interested in Hold'em and Omaha hands for now. You can send me a whole file from a session, or just cut and paste a few individual hands. Either way is great by me.

In return for doing so, other than my undying gratitude, you'll be among the first to get a sneak peak at the new site when it's ready. And if it makes me a billionaire and I write my memoirs, I'll thank you in the acknowledgements. (It likely won't even make me a thousandaire, so don't hold your breath, but consider it a freeroll.)

Mostly, though, you'll get to use a cool new app for poker players for free and before the general public. In fact if I ever decide to charge for it, you'll get at least a few months of free service, and maybe a lifetime if you're extra helpful.

Posted by themaroon at 4:04 AM | Comments ()

May 23, 2008

How To Play Poker, The Bear Stearns Way

I was reading a poker book today, and came across the following quote on the topic of risk management:

Commercial banks make money by managing risk. They solicit deposits in savings and checking accounts. Then they lend these deposits out to others at a higher interest rate and pocket the difference.

You can tell that was written more than a year ago. It's been a while since anyone used banks as an example of good risk management. Nowadays that chapter might continue:

Many of the people to whom they lend those deposits have poor credit histories and/or low incomes. Loans to these risky borrowers, called subprime, are then rolled together into massive portfolios and sliced into tranches which get repaid in descending order from senior to equity. They then package them into shares, called collateralized debt obligations, and trick the credit rating companies (which isn't a very hard task) into rating the top tranches as investment grade.

Because the loans were made as adjustable rate mortgages with an initial discount to people who were already struggling to make their monthly payments, banks and other holders of CDOs leave themselves exposed to massive foreclosures as interest rates rise or the economy slows.

The poker lesson here? Just keep going all-in. Works every time but one.

Posted by themaroon at 2:25 AM | Comments ()

May 20, 2008

Legalization: Players and Sites

Legalization of poker will benefit players immensely. As I mentioned in the first post, it will mean an order of magnitude more players than we've ever seen before. If you think the last poker bubble was big, be prepared for 5 or 10 times that.

The poker community is a giant food chain. Players, for the most part, start out at the bottom and, as they improve, move their way up the pyramid. Maybe they start off playing $1/$2 or $2/$4 online, and then after they perceive they're winning (which is easy to do in poker even if you aren't) or get used to the stakes, they start working their way up the ladder.

The problem in recent years (in fact, to some extent, ever since online poker's inception) is that it has been the bottom of the food chain that the law has succeeded in keeping off of the sites. These are the guys who just want to blow off a little steam and gamble away some money because it's much more fun than saving. They saw poker on TV or played it with their friends and want to give competitive poker a shot. But if it's too much hassle (i.e. their credit cards don't work) they'll just go buy some lottery tickets instead. They don't care that much, they just want to piss away money because they're Americans or Brits and it makes them feel good to know that they can.

So some of them are willing to jump through all of the hoops rather than blowing their money at a casino or on scratch off tickets or betting on the Jets (or Arsenal) with their friendly neighborhood bookie. And some of them start to play regularly and get used to the stakes, and maybe a few even become winners, and a few more get lucky enough for long enough to convince themselves that they did too. And all the while, every guy winning at $2/$4 is eyeing the $3/$6 game, because who wants to win $20 an hour when they can win $30? And the guys playing $3/$6 are eyeing the $5/$10 game, because who wants to win $30 an hour when they can win $50? It may not be their livelihood (though many quickly start considering making it that) but everyone wants to make more than they do if possible. It's the American way.

Poker is not a true food chain because there's nothing stopping a rich guy from starting off at $50/$100, but it's close enough that it functions like one. So the casual players at the lowest limits provide the same service to the rest of the community that algae does to a lake. They feed the small fish, who in turn feed the medium fish, who then feed the pike. And just like a lake, if you cut down on the algae, you end up with fewer pike. It takes a while for each level of the chain to starve in turn, but it happens, and it has happened ever since the UIGEA (though I'm told some recent advances in payment processing have helped a bit lately, but it won't last). You can see it in the numbers and feel it when you talk to the players.

What happened between the beginning of the boom and the start of the bust is that the algae exploded. It was a pain to get money on, but there were still more sites advertising on more television shows and in more magazines, and there were more funding options, so a larger percentage of the casual players heard about it and made their way through the filter. And the small fish population grew along with the algae, and the medium fish along with the small, and so on up the food chain.

That's why every few months sites were offering bigger limits. When I first started playing online, $10/$20 limit was the max and no-limit didn't even exist yet. But then poker took off and the algae bloomed and the bluegill population did too. The bass population started growing so $15/$30, $20/$40, and $30/$60 games started appearing. The algae kept growing, as did the bluegill and the bass, and so the pike started multiplying too, and suddenly every $30/$60 game was full, and $100/$200 games were going off around the clock. Some sites were offering stakes bordering on ludicrous. Where once $25 tournaments were the maximum, $215 tournaments ran every day. Prize pools went from hundreds to hundreds of thousands.

And when the UIGEA hit it all started to evaporate. There were a few massive shocks, like when Party Poker pulled out of the market. Action didn't increase that much elsewhere and the site, which lost 85% of its customer base, was still in a not too distant 2^nd place. That's how big it was before, and most of that action was completely gone. Then Neteller left the market (locking up a lot of player money for many months) and things started getting even worse.

The effect rippled through the casino world too. Tournaments, which were fed by online qualifiers and people who won big online tournaments, have since experienced a gradual decline in entrants. Even the WSOP had fewer than the year before (almost a third) which hadn't happened in as long as anybody could remember.

But the UIGEA is just a dam, and behind that there's a river full of algae, entirely unmolested, waiting to pour forth. And that will be the immediate consequence of regulation. Every publicly traded gaming corporation, and even some non-gaming ones (like Yahoo, who dabbles in poker overseas) will apply for licensing at the first possible opportunity. Massive advertising budgets will saturate the internet and the airwaves with poker ads. Ad sources like Google and television, which stopped taking online gaming ads after the Discovery Networks debacle, will open back up.

It's debatable what will happen with the credit card situation, but fraud prevention is a lot better than it was 8 years ago when issuing banks first started rejecting gaming-related deposits. At the very worst players will fund accounts with PayPal or something similar. You may even be able to buy prepaid PokerStars cards at BestBuy just like you can for Wii Points or iTunes credits. Why not?

New sites will sprout like weeds, but just like the last boom, the vast majority of them will perish. In fact, if you look at the top few sites today, it's almost the same names that existed in 2001, before anyone outside of the small community had ever even heard of Phil Ivey. Party Poker, Poker Stars, Ultimate Bet. The only exception is Full Tilt, which found a rather unique competitive advantage by licensing pretty much everyone who ever won a televised event.

Full Tilt has a stranglehold on that particular angle, but a few sites will pop up that have their own unique advantages. Harrah's will probably become a major contender, given their current customer base and ownership of the WSOP brand. Yahoo might be a serious contender given their reach. Maybe a few more will pop up along those lines.

But for the most part, it will be the same 5 or 10 sites we all use now. Poker has a very strong network effect, meaning that the value of a poker site increases exponentially as its user base grows. A site with twice as many players is four times as valuable. So the new players will look around and land at the sites that already have the old players. PokerStars will probably still be the biggest, and they deserve it because they're clearly the best in almost every respect. Party Poker will likely make a strong comeback in the U.S., because they're brilliant at marketing and most of us old-timers have some fond memories of juicy $30/$60 games and ridiculously large cashouts there.

Sites will probably go through some growing pains. It's not trivial to scale to 5-10x your current size, especially that quickly. Sites, newly flush with revenues, will become hacker targets and DDoS attacks will flourish once again. While I'm sure they've never stopped, I'm told they've been greatly reduced since 2003, when Party Poker was being knocked out almost every night due to a combination of that and their own poor planning.

Some sites will buckle and take player funds down with them, as has always happened, but most will be reputable, and, at least for a couple years players and sites will be rolling in the green.

 

Posted by themaroon at 6:57 PM | Comments ()

May 18, 2008

WSOP 2008

I was looking at the WSOP schedule and saw this for the main event:

54A
Thursday, July 3, 2008
12 Noon
No-Limit Hold'em World Championship Day 1A
$10,000

54B
Friday, July 4, 2008
12 Noon
Day 1B

54C
Saturday, July 5, 2008
12 Noon
Day 1C

54D
Sunday, July 6, 2008
12 Noon
Day 1D

Monday, July 7, 2008
All Day
Break

Tuesday, July 8, 2008
12 Noon
Day 2A

Wednesday, July 9, 2008
12 Noon
Day 2B

Thursday, July 10, 2008
12 Noon
Day 3

Friday, July 11, 2008
12 Noon
Day 4

Saturday, July 12, 2008
12 Noon
Day 5

Sunday, July 13, 2008
12 Noon
Day 6

Monday, July 14, 2008
12 Noon
Day 7

How does this make any sense at all? You have the 4 Day 1s, then a break. Then the 2 Day 2s with no break, then Day 3. This is retarded.

It should go ABCD for day ones, immediately followed by A+B and then C+D for day 2s. Then a break.

As it stands, anyone in the second day 2 is at a serious disadvantage. I don't know how they are determining it, but if it's based on when you played the first day, and you have a choice of that, it's very much to your advantage to aim for the earlier one.

In my last WSOP, my first day was so long and so grueling that I went straight home and fell asleep in the shower. Day 2 was better, since they had overshot day 1 and cut it down. But I still relished the day off afterward.

Not that you shouldn't be prepared to play multiple long days in a row if you buy into the WSOP Main Event. But you shouldn't have to do this if half of your opponents don't. I don't think there's a big difference between having one day off or two, but there is a huge difference between zero and one.

Also, and this may come as a shocker to many people who read this blog, people have jobs. I mean, getting away for two weeks is hard. My guess is most of the entrants in that tournament take one week off and figure that if they make it to the second, they've earned enough cash to risk pissing off their boss.

Either way, it's an inconvenience to them, so let them play day 2, since they're on average something like 85% likely to have been eliminated by the end of it. Then have the day off.

The way its structured, someone can make it through day 5 without risking missing a second work week. Day 6 is a Sunday, so if you've made it to that point, you're canceling your return ticket.  You're probably also in the six figure prize pool, so you don't mind the change fee.

I also don't think I care for the 4 month delay before the final table. I understand the intent and all. But if they're going to delay it that much for television, why not at least broadcast it live and make a huge spectacle out of it. If they can live cast a golf tournament, I don't know why they couldn't do so for poker. Put it on a Thursday so it doesn't compete with football and you might have yourself some ratings.

Posted by themaroon at 12:48 AM | Comments ()

May 7, 2008

Legalization

I've been thinking about the future of online poker a decent amount lately. There's a pretty big push for making it legal, and there's even a bill in the house that would work toward that. I don't know if it will pass or not, but the poker sites finally have the lobbying arm they should have years ago. I even suggested that to Party Poker on one of their cruises long, long ago and Vikrant Barghava said they didn't need to because the US would "just ignore online poker forever." Their share price tells me he was wrong.

Between the PPA, the World Trade Organization, where the Europeans may soon follow Antigua's lead in claiming that our policies are unfair and a violation of the treaty (which has been deemed true), and the lack of banking regulations which were called for by the UIGEA and should have been in place months ago, it seems like there's a good chance that it will become regulated.

So what will it mean for poker if it does? Quite a bit actually.

It's sort of an axiom in the startup world that every hoop you make a user jump through in order to use your site reduces the amount of people who actually do so by some percentage. This should be pretty obvious. The exact percentage depends on the hurdle. Sites like Digg have millions of readers, tens of thousands of commenters, and thousands of submitters, because each step requires more effort than the previous (with just signing up an account being the largest). I vaguely remember reading that in the early days of PayPal they discovered that each new step they introduced caused 30% of people to give up. That's enormous. To put that another way, eliminating one step would grow their signup rate by nearly 50%.

Online poker, almost since its inception, has been besieged with hurdles preventing a new player from playing. To play at a site you have to do the following things:

1. Go to the website and download the software. (There are web based versions, but not many, and they suck.)
2. Install.
3. Create your account. Input user name, password, email address.
4. Verify your email address.
5. Input all necessary information for a real money account. Address, phone number, etc., some of which may have to be verified by a phone call or a code in the mail.
6. Input checking account and routing number.
7. Wait a few days for the site to EFT a small deposit into your account.
8. Check your bank statement to see what the deposits were.
9. Input them into the poker site.
10. Fund poker account.
11. Wait a few days for the e-check to clear.

And that's all assuming you knew right away that they wouldn't accept your credit card. Step number 6 for most people is to try the credit card functionality in the cashier and get rejected.

It's been that way for a very long time. Back in 2000, when I first started playing online, the high chargeback rate had already caused almost every credit card issuer to stop accepting online gaming transactions. There's been a cat and mouse game over that for the last 8 years, with payment processors tricking the banks, who found out and cut them off, at which point they closed down and opened a new corporation and did it again. It goes on and on, but the banks have always had the upper hand and 95% of the time your credit card was getting rejected.

Also, that was just the procedure for one site. Most people added an extra step in and went with Neteller so they could then play at any site. Back when I started playing PayPal was the method of choice, but that changed around the time of the eBay acquisition.

There's also the legal hurdle. A lot of people think playing online poker is illegal, even though in most states it is not. I've met a number of people who were deterred by that. That should almost be a step in the above chain.

So if the UIGEA becomes legal, and steps 6-11 (plus the two pseudo-steps) get replaced by one credit card or PayPal transaction, I think we're going to see an order of magnitude more players than ever before.

Over my next few posts, I'm going to examine how I think this will affect the poker economy. I'll talk about the following groups:

1. Sites (current and future)
2. Players
3. Ancillary Services Providers (like myself)
4. Live poker and events

Stay tuned.

Posted by themaroon at 12:42 AM | Comments ()