The Growth of Online Poker

Over the past 6 months internet poker has grown substantially. During this time Party Poker, now the world’s largest poker room, has seen membership rates skyrocket by nearly 1000 per cent. The site during peak times has nearly 20,000 members playing poker online, up from 2,000 just 6 months ago. Other online poker rooms too have seen similar growth during this period. We have also seen numerous poker company start-ups, the most recent from Prima Poker and their subsidiaries and in recent times I cannot remember the demise of a single card room.

Two questions that quickly come to mind are:

1) What is driving this explosion in online poker?; and
2) Can this level of growth be sustained?

This paper seeks to discuss these issues, with a view to determining some of the factors that have sparked this growth in online poker as well as analysing whether this phenomenal growth can be maintained.

Factors driving the growth

Growth in Gambling Generally

The growth of online gambling generally has had flow on effects to online poker.

“The increasing numbers of people who use the internet and the growing consumer confidence in conducting on-line financial transactions have led to a greater number of people who are willing to engage in internet gambling ”. Very few reliable online gambling statistics are available. In 1997, it was estimated that about 50 sites, mostly in the Caribbean, were estimated to handle less than $100 million a year. Four years later, there were about 1,400 sites raking in about $3.1 billion a year. This figure is expected to be around $6.2 billion by the end of 2003 , with nearly 2000 sites providing a gambling service.

Undoubtedly the growth in online gambling generally has had flow on effects to online poker. However, the growth in online poker has superseded that of general online gambling, indicating that other factors maybe driving this growth.

The Popularity of poker around the world

Undoubtedly, one of the major contributing factors to the growth of online poker is the popularity of bricks and mortar (B&M) poker. Poker, along with blackjack, is one of the most popular forms of card games played around the world. The game is particularly popular in the US and Europe, where poker has thieved for many years. It is no surprise that the game has flourished on the internet as more and more people gain access to the net everyday.

I firmly believe that the popularity of these games revolves around the fact that they are generally perceived as games of skill. True 99 per cent of blackjack players are not card counters and therefore do not play the game skilfully and nearly the same percentage of poker players may never have read a poker book, but the average gambler has a perception that he or she can win at these games. This perception, particularly for poker, will continue to grow as more and more people are exposed to the game as its popularity increases on the internet. Blackjack is somewhat limited in this respect, because card counting is not a viable option over the internet as the deck is shuffled each round.

An infant Industry - Poker

Online poker, relative to other online forms of gambling, is in its infant stage. Poker.com and a hand full of other online poker rooms started operations in the late 1990’s. As such, poker played on the internet is experiencing a tremendous growth in recent times, because it is still growing from a very low base. I still consider this base to be relatively low, but at some point of time in the future the growth rates will slow down as a saturation point nears.

WSOP

There is little doubt that Chris Moneymaker (yes that his correct name) winning the World Series of Poker had a positive effect on online poker. Rumour has it that Chris had never played a B&M game in his life before the event, learning his trade, and gaining his entry into the tournament, while playing poker online. In fact, many online poker rooms now have connections to the World Series and other large tournaments, such as the Aussie Millions, where online poker players can win entry into these events. Chris, and other online poker players, have unwittingly increased the profile of online poker by proving that it is every bit as good as the real thing and you can become a skilled poker player by playing online. I personally noticed that this website had a significant increase in traffic after the world series of poker and I put it down to Chris (although he will not be receiving any royalties).

Can the growth be sustained?

New poker playing countries

An interesting question is whether the growth in online poker can be maintained. My view is that we are likely to see an increased growth level over the next 10 years, to predict any further beyond this would be difficult.

The principle reason for my prediction is that many, what I define as “emerging poker countries”, will be gaining access to the internet over the next 10 years. To present a numerical example, nearly 80 per cent of visitors to this site are poker players from the US. Less than 1 per cent of players come from “emerging poker countries”. In this category I would definitely put most of Asia, South America, and Africa. Can you imagine the growth of online poker if countries such as China and India start playing in large numbers?

Possible hurdles to growth

One factor that may limit the growth of online poker is gambling laws and regulations. It seems politically popular, if not socially beneficial, to prohibit or limit online gambling. It is difficult for laws to prohibit and individual from gambling, so most of the laws thus far have been aimed at the gambling sites themselves at credit processing companies. We have already seen PayPal, one of the largest online credit processing companies, ordered to refuse to process gambling transactions in the US and Visa and MasterCard have been under similar pressure. Other countries, such as Australia, have implemented legislation to prevent certain types of gambling advertising over the internet as well as new gambling sites starting up. Also, it is illegal for an overseas company to provide an interactive gambling service to an Australian citizen. While this legislation may not extend to poker, it is possible it may in the future and other countries may take a similar stance.

One of the reasons countries are loathed to let their citizens gamble online, is that most of the profits made go to gambling companies located overseas and the profits are therefore not taxable by the domestic country. As these companies are generally located outside of a gamblers domestic country, online gambling companies generally form very weak lobby groups and are a weak influence for domestic policy makers.

The growth in online poker maybe curbed due to international laws. However, one of the problems with internet law is that each country has a different standard. I hate to draw parallels to internet porn, but its continued growth is mainly due to internet porn companies operating in countries where pornography laws are relaxed. This may dampen any attempts by domestic governments to reduce incidents of internet gambling as well.

Conclusions

The growth of online poker in my view can be put down to the growth of online gambling in general, the popularity of poker relative to other forms of gambling, the infant state of the online poker industry and the success by Chris Moneymaker, an online poker player, in the world series of poker.

It is likely that this tremendous growth in online poker will continue over the next decade as, what I define as, “emerging poker countries” become connected to the internet. A possible nullifying factor to this growth maybe international gambling laws aimed at curbing gambling on the internet.