Is it Time for Caesars to Merge Their NJ Online Poker Rooms?
Rumors abound in Nevada that WSOP.com will be joining the All American Poker Network, but in New jersey Caesars has kept their two poker products separate, letting WSOP.com keep its independence, while US.888Poker.com operates as the sole room on the All American Poker Network in NJ.
Even with this separation, collectively, Caesars two online poker sites have nearly pulled even with the Borgata / partypoker online poker network in terms of traffic and revenue.
That being said, even with their current upward trend, Caesars decision to separate WSOP.com from 888 and the AAPN may have stunted their growth in the market, and it may still be holding them back because in online poker there is one word that every operator should have in their mission statement: Liquidity.
Liquidity is king
To explain liquidity I’ll use a poker analogy.
In tournament poker we have ICM (the Independent Chip Model) to explain the worth of tournament chips since the denomination of a tournament chip is not worth the equivalent amount of money.
We need something similar to explain the worth of each player to an online poker room.
Similar to ICM, the fewer players you have the more value each additional player brings to a site. Simply put, the more players you have the more each player adds to your site’s appeal to other players, what I’ll call its Liquidity Value.
However, unlike ICM, where each additional chip loses some of its value (it’s worth less than the chip before it), when it comes to liquidity each additional player has at least a 1:1 value.
Caesars currently has two separate online poker rooms in New Jersey, WSOP.com and US.888Poker.com, yet they do not combine their player pools. According to PokerScout.com, WSOP.com boasts average cash game traffic of 130 players while US.888Poker.com boasts average cash game traffic of 70 players.
Combining the two player pools would not increase WSOP.com’s Liquidity Value by 70 though, it would likely be much more than this.
Liquidity Tipping Point
The reason WSOP.com would gain more than 70 players is that as your liquidity improves so does your appeal to other players.
Adding 70 players to WSOP.com would likely attract another 10 players from other sites, or simply new players who were unhappy with the site’s traffic numbers.
Combining the two sites would likely increase WSOP.com’s traffic to 210-240 players in my estimation.
There is also a point you can reach as an online poker site where each additional player has an increasing value; I’ll call this the Liquidity Tipping Point.
The Liquidity Tipping Point is essentially when a poker site does the equivalent of a YouTube video going viral. The site becomes so popular that it is no longer even regarded in the same breath with its competitors due to its traffic (its popularity) being so dominant.
If a site can hit the Liquidity Tipping Point it will then start luring away players from other sites at a faster rate, and the larger the discrepancy becomes the faster the migration becomes.
In order to maintain what we would call a competitive market no site can reach a Liquidity Tipping Point. That being said, it’s not necessarily a bad thing for a site to dominate the market.
For example, if we removed half of PokerStars players in the current global market and erased their memory of anything to do with online poker, PokerStars would still have an average of 10,000 cash game players, while their closest competitors have around 2,000 according to pokerscout.com.
If we then randomly assigned these players to the multitude of poker sites available (careful to keep PokerStars at its 5/1 edge) one would think this added liquidity would benefit all of the sites and many of the players would stay put at their new homes.
My feeling is that if we checked back in six months we would see the same exact traffic numbers we see today with PokerStars boasting a 10/1 edge in average cash game traffic. The reason I feel this way is because PokerStars would still possess an extreme liquidity edge even at half its current level; they would be at the Liquidity Tipping Point.
So where is the Liquidity Tipping Point? That probably depends on the market, but we do know it needs to be higher than a 2/1 advantage over their competitors thanks to the long-running battle between Full Tilt Poker and PokerStars from 2007-Black Friday.
My guess is that the Liquidity Tipping point for online poker rooms in large markets is somewhere around 3/1, while in smaller markets, such as New Jersey or Nevada, its closer to 2/1.
If Caesars combined their liquidity
If Caesars decided to combine WSOP.com and 888’s player pools they would jump up to an average of 200 players, and even if we use a low end figure, that they would attract another 10 players from partypoker / Borgata they would suddenly have a 210 to 130 advantage in average cash game traffic.
Very close to my best estimate for a Liquidity Tipping Point in a small market.
It’s my firm belief that if this were to happen we would see the AAPN (WSOP.com and 888) with average cash game traffic over 250 players and partypoker/Borgata slipping to 100. At that point, if partypoker/Borgata doesn’t do something to stop the bleeding it would only get worse.
