One of the most controversial issues in the industry
Rakeback has been a controversial topic for the top online poker rooms for the past decade but it has gone through major changes over the years. For those that are not familiar with the concept, rake is the percentage from real money ring game pots or tournament buy-ins that is taken by the online poker room. This allows the site to operate and accounts for its revenue, while rakeback has become a common way to reward the users based on how much they play. A percentage of the rake is given back to the players in order to encourage them to play more and also attract new customers.
It first started appearing for certain users as rakeback deals were mostly made via email or private forum messages. By the time 2004 was almost over, the potential that rakeback brought to online poker was realized by some networks and the idea quickly exploded over the internet.
Determining the perfect balance
One of the main problems of offering rakeback to online players was determining that perfect balance that would reward the players accordingly without cutting in too much in the profits for the poker site. Discussions lead to a rakeback cap amongst affiliates and those that went over the agreed cap in order to attract more customers would be at risk of getting shut out from the network.
Affiliates paid most of the rakeback deals in the early days and it was easy for them to go over the cap given the many payments they made. The problem eventually became big enough that poker networks had to take matters into their own hands and release an automatic rakeback model that would pay the customers directly in their account.
Networks ban rakeback
Since it seemed that rakeback was becoming a problem, some major networks started to ban it. Party Poker was the first to take this step in 2005 and this forced some of the other skins on the network to either sell to Party Poker or move to other networks. Other poker rooms then followed and most of the major ones stopped offering rakeback.
There are some sites that continue to offer rakeback and they show good results but a big rakeback percentage hasn’t always worked out. Quite a few operators have tried using this business model and failed to attract enough customers to keep it going.
Replaced by VIP programs
Nowadays, looking at the top online poker rooms, the most common way of rewarding regular players is through VIP programs. There are some similarities with the rakeback programs used in the early days of the poker boom but they offer a fair reward system directly on the poker site.
Real money players are given special points depending on the rakeback formula. The most common way to calculate these points is based on the percentage of the pot contributed by the player and the total amount of rake taken from the pot. Some sites, like the first US online poker room Ultimate Poker, use a winner-takes-all formula. These points can then be used to buy tournament tickets, merchandise and real money but they also determine the level within the VIP program.
A higher level means more benefits but players also need to keep the number of points earned constant since each level is based on an average of points earned across a set number of days.
The points are also used as a way to clear the bonuses offered by some online poker rooms. When you first join and make a deposit, the online poker room will usually offer a bonus. This will be normally released in increments when a certain number of points are earned as you play with the amount initially deposited.