Sunday, October 24, 2010

Poker Expertise

What is the most important asset that a poker business has? This is a question that many companies have had to think about as the industry of which we are part continues to streamline and consolidate. But I think that some businesses are missing the point and getting the answer to this fundamental question totally wrong.

You might say that the most important asset a poker business has is the customers. After all, customers are the source of the business’ revenue and keeping them happy is paramount. If a business loses all of its customers, then there is no business left.

In reality a poker business’ customer base is in constant flux as new players sign up and existing players lose their money or get bored and leave. While there are of course customers who play regular long sessions for years on end, such players are the exception rather than the norm and represent only a small portion of the overall player pool.

The fact is, while you should obviously try your best to keep your customers happy, if the business makes an unfortunate mistake which upsets a lot of players, those players aren’t necessarily gone forever. It's possible to win them back, or to gain new customers to replace them. Customers are a very important, but ultimately replaceable asset.

Good staff, however, are not so easy to replace, because good ‘poker guys’ are hard to find. Many of the people who are genuine poker experts don’t want to turn an enjoyable hobby into a full-time job, or perhaps they are making a good living from the game already and don’t like the idea of a ‘nine to five life’. Maybe they don’t want to move to one of the industry’s awkward locations, and would prefer to stay close to their family and friends. The poker lifestyle is an intoxicating one and it’s not easy to convince people to leave it.

But without poker expertise, a poker business cannot possibly reach its full potential. It’s difficult to make the right strategic decisions for the future of the business if you don’t have anyone on the board that understands the game, and can anticipate the kind of things that players will be looking for in the future. It’s impossible to make good poker room management decisions, such as what kind of ring games to spread, or what a tournament’s pay-out structure should be, or even what new promotions to offer, without a strong understanding of basic poker principles.

Consequently, it never fails to distress me when I hear that there are some companies in our industry that discourage their employees from playing poker. I’ve heard of casinos that don’t allow their dealers to play, and online poker providers that don’t allow any of their employees to gamble at all, perhaps because of concerns that this may result in problem gambling or other issues in their workforce.

This is utter madness. If you were a wine producer, you wouldn’t expect your employees to be teetotal, despite the obvious risks to productivity that come with alcohol. How on earth can you actively encourage your staff to be ignorant of your product? If you make decisions without poker expertise, then you will make decisions that are not properly thought out because you don’t have all the information that you need. How can you possibly know how your poker room compares to your competitors’ poker room if your staff are not allowed to actually play poker? The truth is you can’t, and this will show in a shoddy product with weak promotions and sub-standard support, and cause your customers to become upset and lose respect for the business. The end result for a company’s reputation and success will be disastrous. Businesses that discourage their employees from playing poker will never be at the top of the poker industry, it’s that simple.

In 2010, there have been some key instances where having poker expertise has helped businesses to innovate or respond to a problem quickly. Take the issue of short stacking, for example. Towards the end of 2009 it became clear that this practice, once barely known but now widespread, had changed the way No Limit Hold’em ring games were played online. The resulting dissatisfaction among both professional and recreational players was obvious and acute. The companies with the most poker expertise were able to respond quickly by changing the buy-in structures of the games they offered, and by choosing a new structure that addressed the issue effectively. Companies with less knowledge and expertise took longer to react, chose a new structure that didn’t satisfy players, or worse still, didn’t recognise that changes needed to be made.

There is a tendency for poker businesses to undervalue poker experts. It’s easy to see why, as many poker businesses were founded by a small group of enthusiasts who found themselves short on business knowledge as the company grew, and had to hire people with that knowledge in order to keep themselves afloat. However, good businesspeople are much easier to find than poker experts.

A good businessperson can come from any other company. If you’re looking to hire a new head of accounting for example, you simply advertise the position, knowing that the person you recruit doesn’t have to have worked in the poker industry in order to do a good job. You might actively choose somebody who had worked at one of the big accounting firms over somebody who had worked for a poker company. There are lots of people out there that have years of experience in business in general and can do a very good job as long as their role is completely isolated from the poker side of the business.

Poker experts however come from a very small segment of the population. They are geographically disparate and difficult to recruit. A poker expert is like a diamond – rare and difficult to obtain, but extremely valuable. While many poker experts have little to no experience working in a formal corporate environment, they do have a big upside in that you can take a poker expert and teach them to become a businessperson. The typical poker expert is smart enough to learn the skills they need to succeed, either through formal education or on-the-job learning, and might really thrive with a little encouragement and support. It’s much more difficult to do things the other way around and turn a businessperson into a poker expert – you just can’t expect to be able to instil the kind of passion for poker that is needed to become an expert into somebody with no experience of the game.

As a poker business, you should recognise the poker experts within your company, value them as much as they deserve, and provide them with opportunities to develop their career and to grow as businesspeople. After all, it’s easy to turn a bracelet winner into an MBA graduate, but not so easy the other way round. If you don’t provide these opportunities, then you risk losing your expertise, which is the lifeblood of any poker business. A business without that lifeblood has no hope of survival in these times of tough competition. Undervalue your experts at your peril!

This article was published in InsidePokerBusiness, Jan-Feb 2011

Security Alliance

All reputable online poker companies employ security staff, both to protect the company’s interests by preventing fraud, and to protect the players’ interests by preventing collusion, multi-accounting and bot use in the games. Good security can save you money, boost player satisfaction and trust, and safeguard your reputation.

However, there is a major problem with the current status quo. Say your security team has a major breakthrough, and catches a ring of colluders. It’s a huge case that has taken hundreds, maybe even thousands of man hours to reach a conclusion. As a company, you’ve spent a fortune on developing tools to catch collusion rings like this one and training expert staff to use them. So you confiscate the colluders’ money, and return it to the players. Perhaps you chip in some of your own money to meet any shortfall in the compensation.

That’s great. Unfortunately, the colluders don’t go to court to be sentenced. Instead, they simply learn from their mistakes, and move on to one of the many other sites, equipped with a more advanced strategy for avoiding detection. They continue to cause harm to players and to the industry – the only difference is that they are doing it somewhere else.

When you go to a shop to buy a DVD, you don’t buy two copies of the same movie. When you go to get your hair cut, you don’t get it done twice by two different hairdressers. When you pay an affiliate commission for sending you a new player, you don’t do it twice. It’s one of the most obvious rules in business – you don’t pay for the same thing more than once. And yet this is what happens in the online poker industry every single day, because you are paying to catch cheats and fraudsters that have already been caught and barred by other operators.

In the brick and mortar casino industry, information on cheats and other undesirables is shared amongst operators, either through lists of unwelcome players supplied by the local regulator, or through a commercial service such as that provided by Griffin Investigations (Las Vegas’ famous ‘black book’). It may be that a particular cheat or fraudster has never set foot in your casino before, but using this shared information, you can identify and catch them before they are able to cause any harm.

In policing, information on known criminals is shared between different police forces, through organisations such as Interpol. If a criminal commits fraud in the United Kingdom, they can’t simply run to Brazil or Mexico and start over with a clean slate. They’re arrested by the Brazilian or Mexican police as they enter the country and are made to face the music. Over the years, 188 countries have come to realise that they are better off working together in this way.

I strongly believe that, like the world’s police forces, we are stronger together, and that we should put aside our differences on security issues. If we share information about known cheats and fraudsters – such as user IDs, IP and MAC addresses, hardware identifiers, suspicious VPNs and colocation servers, geographical trends, as well as the actual cheating techniques used – then we, like casinos in Las Vegas, can catch undesirables before they cause any harm.

I am not suggesting that we should build another bureaucracy, but I do feel that an independent security alliance, comprising of expert members from each of the operators that wishes to participate, is the best way to accomplish this goal. The authority can disperse information on new detection techniques, best practice, and information about trends in fraud and other security issues between its members, and can run as a not-for-profit organisation. An independent authority can also provide an escalation point for high profile cases where players feel that they have been treated unfairly, and provide a greater scope for peer review of complex fraud, collusion or bot use scenarios.

It’s easy to fall into the trap of seeing security as a competitive advantage. After all, if your security is stronger than your competitor’s, then they will tend to lose a greater proportion of their revenue to fraudsters and cheats, which has knock-on effects in how much money they can devote to competing in other areas such as new acquisitions and player retention. Also, a site with poor security doesn’t do its reputation any favours and may lose some more discerning customers as a result.

You might also think that because there are so many operators, each with very different numbers of players, that the bigger sites would contribute a disproportionately large amount of information to the security alliance compared to smaller operators. That may be true, however, the amount of quality, useful information is what really counts. Site A may have ten times as many players as Site B, but it would certainly not have ten times as many fraudsters because fraudsters are much more likely to play on multiple sites compared to a typical player. So the information contributed by Site A would not be ten times as useful to the security alliance. Further to this, whatever fraudsters were caught by Site B would be very likely to also target Site A, or have targeted it in the past, simply due to its size. So a healthy compromise is reached, with a single piece of Site A’s information of a lower quality than Site B’s, but Site A providing more information than Site B to redress the balance.

I think it’s important to recognise that we are all interconnected and that our actions have a ripple effect throughout the industry. Every poker operator depends on others for a certain amount of its success. When one operator breaks into a brand new market in a previously untapped area of the world, every other operator benefits (though perhaps not as much) from the new surge of interest in that region.  Conversely, when there is a huge scandal in the industry, every operator is damaged, regardless of their involvement. I think we can agree that all poker operators were harmed significantly when the ‘superuser’ scandals affecting the UltimateBet and Absolute Poker brands were publicised.

Improving our trustworthiness and each player’s feeling of security is of paramount importance to attracting new players and retaining existing ones. By launching a security alliance, we would send a strong message to cheats and fraudsters that their time was up, and companies that took part would enjoy a significant boost both in PR and in player trust.

This wouldn’t be the first time that we’ve worked together as an industry. We’ve worked together on Responsible Gaming issues, through organisations such as GamCare. We’ve worked together on the US legal situation, and on defining regulatory frameworks in emerging markets such as Italy, France and Estonia. So why not work together on security also? We are an industry that deals with colossal amounts of cash, so you never know when it might save you a million dollars or two. 

This article was published in InsidePokerBusiness, November-December 2010