The History of Online Poker post-2006

In Part 1 of this series I detailed the early days of online poker, and how the industry evolved from an Internet group of play-money poker players to one of the fastest growing industries on the Internet. In this part I will look at the online poker industry from the passage of UIGEA legislation, to where we stand now, nearly a year after Black Friday.

By 2006 the world of online poker was basically a super-saturated market, where any online poker player who knew the rudimentary basics of the game could make $50,000 a year by bonus-whoring and finding a few good rakeback deals. But all of that changed late in 2006, when the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed at the 11^th hour as an amendment to the 2006 Safe Ports Act.

The First Exodus

The first true exodus from the US online poker market came mere days after UIGEA legislation passed and was signed into law by then President George W. Bush. Virtually overnight players found the largest online poker site in the world, Party Poker, leaving the US market, along with any other online poker room traded on a public market. Many poker rooms closed up shop entirely in the next few years, while others like Party Poker would go on to rebrand themselves as a European poker room.

Initially not much changed for US online poker players other than having to decide between PokerStars, Ultimate Bet, or Full Tilt Poker (which at the time was a fairly new online poker site) in lieu of Party Poker and the then-popular Cryptologic Poker sites. However, as the months and years wore on, US poker players found the market drying up as UIGEA legislation caused payment processing to slow down, which saw the casual players the industry had relied on to dry up almost completely, as more and more players grew frustrated and anxious over the state of the industry.

What was left when the casual players stopped returning to the online poker tables was a sea full of sharks, and with very few fish to feast on they started turning on each other. In true Darwinian fashion, only the best poker players survived this cannibalism, and any new players coming up through the ranks were well versed and ready to learn the game –basically the only type of players who would jump through the hoops necessary to deposit and withdraw from online poker rooms were serious poker players.

New Ways to Make Money

As the games dried-up, players that at one time were dominating the $10/$20 NLHE games found themselves barely breaking even at the $3/$6 NLHE games, relying on rakeback and the newly introduced loyalty rewards programs the sites had introduced to turn a profit.

Because of this many of the best online poker players started turning to poker coaching, online poker training sites, and writing books to supplement their income. This trend further improved the overall skills of the online poker community as a whole. So, even though they were cashing-in with their new endeavors, they were, at the same time, making their earnings prospects at the online poker tables far more difficult going forward.

How the Online Poker Sites Adjusted

We also saw the online poker sites change the way they marketed their product, and to whom they marketed. First, with new players from the US market virtually cut-off, the online poker sites started marketing themselves to the high-volume, winning players; players who would start games and keep them going, playing thousands of hands per day. This model is still in place today, with a few sites like Bodog and the MicroGaming Network trying to bring back the casual player model from the early 2000’s.

This new model gave rise to not only the previously mentioned Loyalty Programs, like PokerStars VIP Rewards Program, but it also led to an odd arms-race between the biggest online poker sites to sign as many recognizable (and some not so recognizable) poker players, to increase their brand and presence on televised poker shows and tournaments. Virtually all marketing dollars were spent signing pros and sponsoring televised poker programs.

The final shift came when the sites decided that the US market (under the current laws) was all but exhausted, and they began turning their attention to the growing markets in Europe, Central and South America, and the completely untapped Asian market.

Scandals!

During this time the online poker industry also suffered through a number of poker scandals, most notably the Super-User scandals at Ultimate Bet and Absolute Poker. While these scandals have had little impact on potential legislation, the bad press almost assuredly worked against the US online poker market, giving casual players yet another reason to stay away from online poker –along with slow payment processing and the legal gray area the industry resided in.

The Tightening grip of the UIGEA

As the years dragged on after UIGEA passed in 2006, the online poker market in the US saw a tightening grip and by 2010 the Department of Justice was formally going after some of the payment processors, which would eventually lead to the industry being shut-down on Black Friday.

At this same time sites like PokerStars, Party Poker, and poker networks like the iPoker Network were building up markets in now legalized countries across Europe, South America, and Asia. The shift left US-facing poker rooms that were heavily invested in the US market dealing with restrictions by the DOJ after UIGEA officially went into effect in June 2010.

At this point funds were being seized, and payment processing had come to a near grinding halt. Forced to take more desperate measures to fund US players’ accounts, the US-facing poker rooms pushed the envelope, eventually going too far…

Black Friday

On April 15, 2011 the entire online poker world was thrown into turmoil when the US Department of Justice shut down the three largest US-facing online poker sites, two of which have seen dramatic shortfalls and have been unable to pay back not only their US players but their players from around the world: Full Tilt Poker and Absolute Poker. Only PokerStars was able to overcome the Black Friday fiasco, thanks to the sites policy of segregating player funds, as well as their movement into new markets in previous years.

It’s still unclear where the online poker market is heading: Will it remained fractured and regionalized? Will the land-based mega-casino groups take the reins? Will the current online poker industry have any type of future in the future market? It’s these questions, and others, that have even the most knowledgeable poker insiders scratching their heads.