In every network there is at least one Cannibal Poker Room. It sounds scary, and that’s what it is. It’s the poker room in the network that does not market their room to players in general but to players in the other sites in the network. By targeting high rollers on the other sites in the network they manage to get players that will spend a lot of money without spending lots in marketing themselves.
As players tend to fell better about moving within the network than moving to a completely new one this is a stratey that works, and it works cheaply. The most common way of doing this is offering rakeback or really big bonuses for high rollers. If you compare this to advertising in TV and Magazines it becomes obvious. A magazine ad will bring a lot of new players to your room. Most of them are not very good players but a few of them will become good players in the future. A good player is much more profitable than a bad player so you can see the ad as a long term investment. You attract the players by paying a lot of money in advertising and hope that they will stay at your poker room long enough to become profitable.
If a site in te network starts offering rakeback and the word spreads what will happen is that players, when they reach a certain skill level, will find out. For the good amateurs Rakeback is the supreme bonus and moving to a poker room that offers rakeback will increase their profit a lot. This means that when players reach a certain level of skill they will move to the smaller room that offers rakeback. The big rooms doing a lot of advertising will attract the players to the network and then lose them as they start being profitable. The players have been cannibalized.
Rakeback is even nastier than this because it removes profit in general from the poker network. If you calculate the total revenue of the whole network (all rooms in the network) it is; The Rake – The percentage you pay to the network – The bonuses. Ok it’s rough but we don’t need anything more accurate. By offering Rakeback the Bonus part increases greatly without actually increasing the rake, it’s still the same players that play in the network as rakeback only rarely attract players from other networks. The Cannibal site destroyes a lot of the possible profit in the market to make a much smaller profit themselves.
What does this do for the players then? At the first look it seems as the winners in all this are the players. Well, to start with of course, it decreases the cost to play but in long term the bigger poker rooms that do the advertising actually need to make more money to stay profitable. The result of this can only be high rake. Rakeback increases the rake, maybe not for the players that have it but for players in general.