Poker is a family of card games that share betting rules and usually (but not always) hand rankings. Poker games differ in how the cards are dealt, how hands may be formed, whether the high or low hand wins the pot in a showdown (in some games, the pot is split between the high and low hands), limits on bets and how many rounds of betting are allowed. In most modern poker games, the first round of betting begins with some form of forced bet. The action then proceeds to the left. Each player in turn must either match the maximum previous bet or fold, losing all further interest in the hand. A player who matches a bet may also raise, increasing the bet. The betting round ends when all players have either matched the last bet or folded. If all but one player fold on any round, the remaining player collects the pot without showing his hand. If more than one player remains in contention after the final betting round, the hands are shown and the winning hand takes the pot.
Many poker players feel that this betting system distinguishes poker from gambling games. With the minor exception of initial forced bets, money is only placed into the pot voluntarily by a player who, at least in theory, rationally believes the bet has positive expected value. Thus while the outcome of any particular hand is determined mostly by chance, the long-run expectations of the players are determined mostly by their actions chosen based on probability and psychology.
And what about online poker?
While poker has been played for nearly 200 years, the online version of the game is a recent phenomenon. Online poker has boomed in the past couple of years, and it has forever changed the face of poker.
It was not until 1998 that the first online poker room was established. Planet Poker, which has since become a relatively small poker room, enjoyed the status as the sole online poker firm for a short period of time. While Planet Poker has since been overtaken by many other online poker rooms, the initial rake structure it set, 5% up to a $3 max rake, has been mirrored by other poker rooms. So while the industry has drastically changed since 1998, the rake structure has remained fairly constant.
Other online poker rooms soon entered the fray. Paradise Poker was established in 1999 and would soon become the industry leader. During this initial period of entry, the infamous case of Poker Spot occurred. Poker Spot was an online poker firm founded by Dutch Boyd, a successful poker player.
Poker Spot was launched in May 2000. In September of that year, it would become the first online poker room to offer tournaments. However, troubles soon plagued Poker Spot. According to Dutch Boyd, it was unable to collect player deposits from its credit card processing firm. Essentially, all of the money players deposited and played with was not in the system, so Poker Spot was unable to pay its players their winnings. The firm soon went under.
An incident like the Poker Spot case has so far not been repeated by any major online poker room. This is largely the result of the emergence of e-cash. In particular, Neteller has become the dominant funds transfer service for the online poker industry. Neteller has appeal for both users and online poker firms. For users, it allows them to deposit at a poker room without a credit card or wire transfer, and it also allows the user to generally receive quicker withdrawals. The online poker rooms like Neteller because it decreases fraud and has relatively modest fees for them.
It was not until 2001 that the two most dominant online poker firms entered the industry. Poker Stars became a popular destination because of its tournaments, and Party Poker made a splash in the industry.
Poker steadily gained popularity and the industry continued to grow. Paradise remained the dominant firm in the industry until 2003, when Party Poker launched its television advertising campaign. Party's advertising campaign during the World Poker Tour, and its launch of the Party Poker Million were very successful marketing moves that quickly catapulted the poker network to the top. Currently, the network represents roughly half of the entire online poker market.
While Party Poker was spending millions on marketing, one man's $40 buy-in truly put the entire industry on the map. Chris Moneymaker's Cinderella story of winning the World Series of Poker was the type of advertising the online poker industry could once only dream about.
Moneymaker qualified for the World Series of Poker main event through a small buy-in satellite event at Poker Stars. At the WSOP, he outlasted a field of 839 entrants, the largest in World Series of Poker history at the time. He pitted heads against some of the most well-known poker professionals in the world. Moneymaker's first place finish earned him $2.5 million, which is not bad considering it was his first live tournament.
Nevertheless, clearly the most remarkable thing that occurred in 2003 was the launch of a poker information website, www.pokertips.org.
Online poker exploded in 2004. The increasing popularity of the poker and the "Moneymaker effect" resulted in even more play at the virtual tables. Because of this, the industry's revenues more than tripled.4 The industry also saw even more entry, with new firms such as Full Tilt Poker and Noble Poker.
Now it seems that the major online poker firms may soon become public companies. Paradise Poker was purchased by Sportingbet, a publicly traded online sportsbook, in October of 2004 for $297.5 million. Currently, other online poker firms are considering becoming publicly traded firms. Party Poker, Empire Poker, and Pacific Poker are all potential candidates for a public offering.
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