Like most people I’m tempted to see the dawn of 2009 as a good time to take stock of different aspects of my life. The desire to shed a stone and a half in weight is now so relentlessly tedious that I can’t help but see it as a New Year’s Pipe Dream rather than some sort of resolution. However, in my personal world of poker there has been a significant development as I’ve committed myself to the promising world of a new gaming site. The standard of opposition I face will remain broadly the same but the move is important because of the often ignored factors of ‘rake’ and ‘rakeback’ that are now vital in the world of online poker.
I’m embarrassed to say that there was a time – not so long ago – when I analysed poker success purely in terms of the turn of the card. By this I mean I saw profit and loss in their most basic forms, with scant regard for the issue of rake. The ‘rake’ is essentially a fee taken by the house every time one of us enters a tournament or plays a hand in a cash game. To put things in my familiar SNG context if I enter a $55 tournament, only $50 of that contributes to the prize pool. So if there are 10 players then we all create a total prize pool of $500. The remaining $5 of my entry fee is classified as rake and claimed by the house or website simply for providing the software and forum to bring players together. Taking this 10% fee is standard practice and it isn’t hard to see how the business of hosting online poker has become so lucrative.
If we look at the consequence of this situation more closely then we’ll see that it’s not enough to be as good as your opponents to just break even. For example, what would happen at the $55 SNG level if 10 players were identically matched in terms of skill and luck? In this hypothetical scenario it would be logical to conclude that every player would have an equal opportunity of finishing in every position between 1st and 10th. We could assume that these clones would simply take turns finishing in the different spots as they can’t be distinguished by behaviour or fortune. Therefore, every player would have one 1st, one 2nd, one 3rd and the rest outside of the money positions (4th to 10th) over the course of 10 games. The money recouped would be $250 (1st), $150 (2nd) and $100 (3rd), totalling $500. But the cost of entering these 10 games with the rake is $550, resulting in an overall loss of $50 for every single person. The House is the only winner.
If we assume that in the longest possible term that all luck is equal then you would need to be significantly better than your opponents to beat the rake and start making net profit. This point can be illustrated clearly by looking at the example of a high-volume SNG player who enters 800 tournaments (all $55 entries) in the course of a month. The total cost of these entries will be $44,000 with a whopping $4000 of that as rake. In the previous example we demonstrated how if all things were equal then every player would ‘get in the money’ 30% of the time with an equal dispersion between 1st, 2nd and 3rd. This time let’s say that our player is better than average and this leads to better than average results.
Out of 800 games he finishes 1st 10% of the time, winning $20,000. (80 games x $250 = $20,000)
Out of 800 games he finishes 2nd 12% of the time, winning $14,400. (96 games x $150 = $14,400.)
Out of 800 games he finishes 3rd 12% of the time, winning $9,600. (96 games x $100 = $9,600.
So here we see that our high-volume player has achieved more profitable results by finishing 2nd and 3rd more frequently than an average player. He has ‘made the money’ a reasonable 34% of the time over 800 games. But how much has he won from that initial $44,000 investment? $20,000 + $14,400 + $9,600 = $44,000. That’s right; once the rake is accounted for he has broken even. It hardly seems fair does it? Well the good news is that almost all sites offer rakeback deals now that can make all the difference.
Rakeback deals offer you a percentage of the money back that you have spent on fees. Last year I was claiming 25% back, meaning that in the above example I would be $1000 in profit, rather than breaking even. Now I have discovered an even more enticing deal that could be in the region of 50%. In the above example that would suddenly make my profit in the region of $2000, so the importance of this issue shouldn’t be understated. It could even be the difference between winning money and losing money at poker. The irony is that even though you’re just getting a share of your own money back it feels like a hard-earned bonus!
Simon Ballou writes for Oddschecker Poker