Being introduced to poker at the age of 18 was a curious phenomenon. I played around the Asian circuit for a good five to six years, on and off, but also was introduced to the online side of things. It is a question that often bothers curious laymen as well as potential investors looking to take a plunge into the industry: how does an online poker room generate revenue for the operators (poker room owners) by organizing real money poker games online? And while it is a matter of general knowledge that online poker is a great investment opportunity and a proven ‘money-spinner’, very few outside the industry (and some very experienced players) are privy, beyond vague generalities, to the inner workings of a well-run online poker business. So how does online poker revenue work?
Unlike a casino, which is a “player vs. the house” affair for most of the part, poker is only about the players. The house doesn’t wager against the players; the players do so against each other. In that process, they all contribute an individual amount to a prize pool; you would know this as the ‘pot’. The pot is not only the coveted prize for which poker players, whether online or offline, play for, it is also instrumental in generating the revenue for the house. That is what brings us to the concept of ‘rake’. A simple definition of ‘rake’ is: the percentage of the pot that goes to the house. This is the ‘fee’ that the house charges for facilitating the game, and to ensure the profitability of the business.
The “Rake” is the percentage of the pot that goes to the house. Poker is a player-versus-player game, and the house does not wager against its players. Thus rake constitutes the principal mechanism to generate revenues from ring games. In online poker rake covers the various costs of operation such as support, software, game server hosting cost , payment gateway and cashier costs, website operations costs and personnel to name a few.
The rake isn’t just important from a house perspective. With each raked hand that a player plays in an online poker room, they add to the overall rake contributed by them, which the house computes for them. Over time, a good quantity of generated rake may make them eligible for special offers, or bonuses, as may be the house policy. This also means that there has to be an accurate method for determining just how much rake a player has contributed by playing real money ring games on a particular site.
Methods of Calculating Rake
There are various methods that may be used to compute rake from a given table during a ring game.
The Dealt Rake Method
The Dealt Rake Method calculates rake by dividing the rake with the number of players on the table. All players who are on the table, regardless of whether they have folded pre-flop or seen the showdown, will get an equal share of the rake generated on the table.
What this leads to is that if there are 5 players at a table and let us suppose that all but two of them fold during the proceedings of a particular dealt hand. In the case of dealt rake method, the final rake that is computed would be computed at a predetermined x% of the pot and would be equally divided among the five seated players. This is unfair as the players who had at point of time folded their hand did not make any further contribution to the pot as the betting progressed afterwards.
The Contributed Rake Method / Average Rake Method
The Contributed Rake Method is also called as the Average Rake Method as calculates rake exactly as the name suggests, i.e. If 4 players have contributed to the pot (whether less or more does not matter), all 4 will get 25% (100%/4) of the rake.
Those players who do not contribute any amount to the pot, are not calculated and the rake generated by them is taken as $0. This method ensures that only the players who have made any contribution to the pot would be credited with having generated rake for the house. However, the flip