Like most players, when I first started playing online poker several years ago I knew nothing about rakeback. I saw an ad for a poker room, clicked the link, liked what I saw and signed up. Several months later I stumble across an article on rakeback and found out that I was missing out on hundreds of dollars each month. As you can imagine, I wasn’t too happy.
So why didn’t my poker room tell me about rakeback? The simple reason is profit. Paying rakeback reduces the profit margin of the house. With that being the case, you might ask why they bother offering rakeback at all, especially if they aren’t going to be upfront about it? It’s because rakeback is a marketing tool.
You see, poker rooms get their members from two main sources. The first is direct referrals. These members find the site by word of mouth, through merchandising material or via marketing campaigns created by the poker room itself. This is how the majority of people first find a poker site, the unfortunate masses who eventually learn about rakeback the hard way after many months of playing.
Alternatively, members can be generated by affiliates of the poker room. Affiliates are people the site has enlisted to send internet traffic to them. Affiliates for their part, come in two flavours. There are affiliates who simply send traffic to the site without offering any out-of-pocket incentives to get people to join. They simply promote whatever the room itself may offer. Then there are affiliates who provide prospective members with extra benefits for signing up through their account. These benefits can include free tournaments, merchandise, free bankrolls and/or rakeback. All of these incentive are paid for directly by the affiliate.
Poker rooms in turn compensate affiliates by paying them a commission for each new player they send. This commission is either a straight money value payment for the each new member joining the site or an ongoing percentage of the rake generated by the player. This of course reduces the profit margin of the room and as such they would greatly prefer it if every player came directly to their site.
So basically, rakeback is a marketing tool that the more generous affiliates employ to generate players for the poker room. These affiliates make less as paying rakeback reduces their profit significantly, the same way that paying an affiliate reduces the pokerroom’s profit. But it does make for happy poker players and the smarter affiliates know that people who receive rakeback generally play more often and are more profitable, which in turn benefits the affiliate in the long run.
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