PARTYGAMING

I have been following this thread for a while but not posted before.

First of all about the Q3numbers, I dont think they are any good at all.

They report a 4% quarter to quarter growth in absolute numbers. That is not impressive at all since we know that Q2 is traditionally a slow quarter based on pokerpulse numbers from 2003 and 2004 (ref the newsletter from PokerPulse at the bottom of this post). This Q2 has been exceptionally bad not only was the traffic flat from March to April, it did not pick up in May/June as it did in 2003 and 2004. Pokerpulse explains this with the fact that WSOP TV coverage is driving the online poker business and that this TV coverage came 6 weeks later than normal starting from mid July this year. If this is correct Q3 should be a smashing quarter with full effect from TV coverage and easily beat an exceptional slow Q2.

If we adjusted the Q-to-Q growth rates for seasonality Im sure that an absolute growth rate of 4% from Q2 to Q3 in 2005 is in fact implying an underlying NEGATIVE growth rate.

Second, I have seen it posted that shutting the skins out was a mastermove by the management. Well, another way to say it is that the skin strategy has been a disaster for PartyPoker and that managment have been stupid not to realize this earlier. I'll tell you why, it has to do with something really important for PartyPokers hard core, most rake generating customers - Rakeback.

By letting the skins offer rakeback (typically 20-25%) to its players there has been a huge movement of players during the last year. Partys highest yield players (winning professionals) have moved from Party and over to the skins. The low yield players (recreational and losing players) dont care so much about rakeback and they stay with Party. Just to state how important that is for Partys average yield I can say that the high yield players easily generate rake 20-50 times the amount of an recreational player. That is beacause the recreational players are likely to be broke many days of the month not being able to play and also they dont have as much time to play since they have day jobs. The professionals play every day for 8 hours+ and often many tables at the same time.

I am convinced this is one of the main causes of PartyPoker's declining yield.

Now what is good for Party is that they finally put an end to this disastrous practice. This new move will make Party take back a lot of its high yield players from the skins since the skins can not compete with Partys liqiduity of games/players.

This will boost PartyPokers KPIs/results for the coming quarters and can easily make the share price rise. It will only be a temporary effect though since the underlying growth rate of the online gaming market will be the core determinant of the stock's value in the long run.

PS Cbrown - I read your post about estimating real money vs. play money players. I saw that you counted the seats used for real money and found out that there were almost 6000 seats occupied. But many of the seats are occupied by the same players so 6000 seats is not the same as 6000 active players. I dont know how many seats the average player plays but maybe it is somewhere between 1,3 and 1,7? if we use 1,5 as an estimate 6000 seats would imply 4000 active players. I agree that the rate of real money vs play money players is probably constant during the day.

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Finally the PokerPulse newsletter reference:

Another ‘April Effect’ in 2005. Our 2005 numbers reveal what we now refer to as the 'April effect' once again this year. Traffic is again down / flat for March / April as it was in 2004 and 2003. It may be due to a number of factors, including:

Final Exams. Many students worldwide are either writing or preparing to write final exams in April, a fact which coincides with the Ladbrokes Poker II report indicating males aged 18 to 30 as the largest group playing poker online;


Income Tax. The number of high stakes games was down considerably in mid-April at several sites, including PartyPoker, compared to stats at the start of April as well as those of previous months. Could tax time be cutting into poker time? The U.S. filing deadline was April 15th.

So why hasn't traffic picked up in May / June of 2005 as it did in previous years? Probably because a lot of online activity is generated by WSOP TV coverage and WSOP 2005 isn't wrapping up until July 15th, nearly six weeks later than last year.

link to a PokerPulse monthly traffic numbers graph:


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