Analysis: Could PokerStrategy buyout be the nuts for Playtech?

12 July 2013

For Sam Miranda, senior editor at Right Casino Media and a former editor at PokerStrategy, the deal between the poker affiliate and Playtech makes sense as the former’s poker operations were badly affected by Black Friday and the latter needs to beef up its iPoker activity.

Several eyebrows have been raised at the news of Playtech buying out the world’s largest poker affiliate network in a deal worth €38.3m.

Is etruvian Holdings – the parent group behind PokerStrategy – selling out by sacrificing its status as a truly independent poker affiliate?

Maybe, but the decision to hand over the reins to Playtech – who started by making online casino software for slots back in 2000 - is a shrewd one. And it should come as no surprise given the current poker climate.

Founded in 2007 by Oxford mathematics graduate Dominik ‘Korn’ Kofert and real-estate entrepreneur Enrique Guzman, PokerStrategy tapped into the online poker boom by offering free, interactive poker education across several languages.

Its international e-learning platform was complimented by hard-nosed B2B dealings, which saw the company command a percentage of player ‘rake’ for every referral to one of its poker room partners. Active players were rewarded for generating rake by gaining access to advanced educational material within a multi-tiered ‘status’ paradigm.

PokerStrategy’s pandemic growth was down to an ingenious marketing ploy – the ‘free $50’ – which afforded new players a starting capital by passing a poker quiz. It was this viral trademark that helped establish a community of 6 million members, with high profile recipients of the starting capital including 2011 WSOP Main Event winner Pius Heinz.

PokerStrategy turned into a well-oiled, multi-departmental machine comprised of over 200 permanent employees in its Gibraltar headquarters and an army of 550 freelancers worldwide. Its operations in tax-haven Gibraltar were supplemented by its IT sister company ICANS, located in Hamburg.

Despite being more of a totemic figure over the past few years, Dominik’s vision - reflected in etruvian’s mantra of ‘making the world a smarter place’ – remained clear: pedagogy took precedence over poker. His decision to invest in new education verticals and shirk any remaining stigma attached to their gambling operations was compounded by the events of Black Friday.

Black Friday stripped PokerStrategy of one its primary partners – Full Tilt Poker, and a number of redundancies across stagnant country business units ensued.

PokerStars’ acquisition of Full Tilt Poker and increased market dominance damaged the B2B bargaining power of major industry affiliates.

This, coupled with the uncertainty surrounding the future of online poker across several jurisdictions, encouraged the etruvian group to wind down its poker operations. Recently, PokerStrategy decided to abandon its ‘$50 free capital’, citing a drain on fraud prevention services.

In reality, this was a tactical move to subsidise investment in its trading education vertical tradimo, and a €100 starting capital.

The acquisition is being vaunted as a reciprocal partnership, with PokerStrategy set to help Playtech optimise their software to make iPoker rooms more appealing. It’s a clever line from the PokerStrategy PR machine – an attempt to sugar-coat the deal to current members, many of whom play on the iPoker network.

Make no mistake, this deal is about big data. Playtech can now tap into the community framework and direct its marketing efforts exclusively at PokerStrategy’s 6 million members, helping the iPoker network break the PokerStars monopoly. Whether it manages to accomplish that is what everyone will be waiting to see.

Sensing saturation point in the poker market, etruvian have made the business-savvy decision to hand over the reins. It’s a bold move given that PokerStrategy generated €19.5m in pre-tax profits last year, but one they’ve felt is necessary.

Cynics and detractors will condemn the etruvian group for selling out and relinquishing their independent status, but they need to understand it as a corporate masterstroke. The etruvian group will continue to expand its education verticals (the latest being German health portal feelgood), acting as honest middle-men, and creating a win-win situation for their partners and customers.

By Sam Miranda, Senior Editor at Right Casino Media. Sam is a former employee at Pokerstrategy, and works on iGaming information portal