HOW TO MAKE MONEY WITH VOLUME? RAKEBACK EXPLAINED!

Thursday, 05 May 2016

One of the most important things to understand about the way poker rooms make money - is rakeback. Let’s try an easy way of explaining this. What actually happens is that every time you play poker, the company that provides the service (the poker site) takes a certain percentage of every pot in order to gain revenue and stay in business. This percentage usually slides around 5% depending on the site and each one has their own rules and regulations regarding this matter.

The same thing goes for Tournament Players. SNG and MTT Tournaments usually have a buy-in and rake policy that looks like this: 10$+1$, 2$+0.2$. This structure actually generates a lot of income for the company and it is one of the main reasons why only 10-15% of top players are able to make a profit from their investment.

Here is a simple example to explain this: Imagine a scenario where you and your friends each buy a bag of candy and dump it all in the middle of and owners table. The game starts and all of you start grabbing as many pieces as you can while trying to hold on to your own.  At the same time, by using the table, you agree to the owner steadily taking one candy every minute. Given enough time, the disappearance of all the candy from the table is inevitable.

WEIGHTED CONTRIBUTED RAKE

At this point, you are probably asking yourself - how much money is the poker site actually taking from me? While the answer to this might have been a lot more complicated just a few years ago, now it is quite simple. It is called "Weighted Contributed rake method" and it basically means that every player in the game is being "charged" individually based on the percentage of their own money contribution to the pot. 

Here is a quick example:

Three players are left on a 6-max table. After the flop, one of them folds (betting only 2$ to see the flop). The other player goes all in with 7$ and the last one calls making the entire pot worth 15$. The poker site that takes a 5% rake would then “charge” a total of 0.75$ (5% of a total amount of 15$) dividing the rake based on individual players money contributions to the pot. In this example, the two players betting 7$ each would be “charged” with 45% of the total rake amount (0.3375$) while the player that only bet 2$ to see the flop would only be charged with the remaining 10% (0.0750).

RAKEBACK - HOW DOES RAKEBACK WORK?

Now that we explained what "rake" is, let's look at the term "rakeback". Rakeback means that some of the poker sites actually offer to give back some of the money they collect for using their services. The term used to describe this is - rakeback.

The precise method the poker sites use to calculate the amount of rakeback can vary greatly depending on the site. There are percentage rakebacks, flat rakebacks etc. and the value that each of these deals has to a player needs to be evaluated in detail in order to make a good decision.

In the earlier days, percentage based rakeback was the most popular method used to lure professional players. This type of rakeback can actually be quite tricky if you do not understand the full details of the deal.

RAKEBACK AS A PART OF YOUR STRATEGY - STRATEGY OF HOW TO WIN WITH RAKEBACK

As some of these things can get quite confusing, we advise caution. Here are several things to keep in mind when considering different rakeback strategies:

• Percentage rakeback can be a tricky thing to judge so pay close attention and try to evaluate as many factors as you can. For example, depending on how much (money) rake the company takes, 50% rakeback doesn't necessarily have to be better than a 30% rakeback. It gets even more complicated if you account for some additional factors such as poker room traffic and the quality of games.
• Many professional players often use their rakeback as a paycheck thus leaving their poker balance intact. This allows them to use more funds for playing of softening the effects of downswing while also minimizing the risk of dropping to lower limit games. While potentially profitable, playing mostly for rakeback can also be a risky long-term strategy. The amount of knowledge you need to acquire and the amount of work you need to put in to make it worth is often misjudged. Also, this strategy makes it quite difficult to move up in limits which is a huge turnoff to most micro and small stakes players.
• Going for extremes often leads to trouble so the best conclusion about strategy in this case can be summed up in a word - balance. So, properly judge the deals you are offered and use your knowledge to make any advantage you can get!