Perfect strategy: Dominik Kofert

b>Magazine Highlight: Originally published in the Jan/Feb 2013 edition of Gambling Insider

Mike O'Donnell meets Dominik Kofert, CEO of PokerStrategy, a man described by some as the most powerful man in poker. From humble beginnings his site has become a gaming industry giant. So how did he do it and what's next for this most mighty of super-affiliates?

Having been set up in 2007, PokerStrategy has grown exponentially and is now able to boast a six-million-strong membership who are served by more than 700 full-time and freelance staff.

Based on the island of Malta, the full-time staff operate the site in 18 different languages while poker pros and coaches are on hand across the world to provide localised advice. The company is now so big that they have the ability to provide instant success for new poker rooms by sending them just a small percentage of their traffic.

Just as PokerStars dominate the poker operators market, PokerStrategy are streets ahead of their competitors in the affiliate sector. But their visibility within the industry has drawn extra scrutiny with criticism having been levelled in the past about their negative impact on the online poker industry as a whole.

Founder and CEO Dominik Kofert first set up PokerStrategy from his bedroom while at university and, despite the site’s growth, has remained very much a hands-on CEO who is involved in almost all areas of the business. Here he discusses his thoughts on the past, present and future of the poker industry as well as PokerStrategy’s business model and why he isn’t too interested in the US.

GI: In five years PokerStrategy has grown an exceptional amount. Did you have plans for such rapid expansion?

DK: Probably not. PokerStrategy was really created out of my personal passion for poker and for teaching which I've always had; I'm not a business man by training. I got into poker at university and got really excited about the mathematical challenge of the game, so I started playing it myself but I already had the passion for teaching.

PokerStrategy was born to teach people how to play poker based on scientific principles. At the beginning it wasn’t intended to become a proper business like it is now with lots of employees and more than six million customers. That really happened almost by accident.

Initially we didn't really plan for any expansion but once we saw the concept worked then we thought about expanding and it seemed the next logical step.

Do you think it would still be possible for a new poker site to emulate PokerStrategy’s success in a new poker niche?

At the end of the day, PokerStrategy is based on education and community but the education is to help people become successful at poker. This isn't just for beginners but also for people who are already at intermediate and professional level to make them better. Education can also be used in a more light-hearted and entertaining way to help with conversion, for example, from play-money poker to real-money poker.

We think that this more light-hearted form of poker education is still a niche which remains to be exploited. It’s going to become more important over the next few months and years as the crossover from social gaming to real gaming becomes more important. There are also US sites that offer play-money platforms that would have to convert players into real-money players. That's a task that remains to be done properly; there have been attempts by operators themselves but so far they've been of questionable execution and questionable quality.

As a poker room, what do you have to do to be featured on the PokerStrategy site?

We always try to only work with reputable and established poker companies. We don't work with the minor skin that has a licence in a second-tier jurisdiction; we try to dodge all of those poker rooms and so far we have been very successful.

There have probably been twenty or thirty poker rooms that went out of business in the last two or three years and we haven't worked with any of them, with the exception of Full Tilt. We try to make sure that the operators we work with are well established, are well capitalised, have proper operations and proper offices and are secure from a customer’s point of view.

What sort of deals to you tend to demand from the operators that you do work with and how have these changed as the site has grown in size and influence?

In principle we are quite agnostic because we treat customers the same way. So whether someone's on a CPA deal or a revenue share deal, the customer won't notice the difference. From a business point of view, when we analyse the conversion merits of a deal, the quality of the partner is a key component; we analyse it but we don't have a specific preference between the two.

We always try to work for the longer term anyway, so even if you have a CPA deal we always try and make sure that there's strong value in those players. The poker industry is small so we want to make sure that long term we have a good reputation within the industry.

The growth of influence that you mention is not really much to do with us, it's more to do with the competitive landscape in the poker industry. You can see that the distance in product quality and liquidity between the top operators like PokerStars and everybody else is very big. This means that other poker companies are really desperate to generate more traffic so very often we’re used by them as the easy way to get a lot of traffic and liquidity in the short term without much effort. As a result of that, our commissions have increased but it's not because of our status as our position hasn't changed that much in the last few years. Rather, it's the polarisation of the poker markets that drives those kind of deal structures.

Are you not tempted to use your six-million-strong membership to create a poker room of your own?

This is a question that we're asked every couple of weeks and the answer is actually no. Our strength is in building a poker community and educating people about poker and how to play poker.

Becoming an operator is a huge operational hurdle that would drastically change our business model. We work on a non-exclusive basis with multiple poker rooms and we provide choice to customers.

On top of that, I think that now in the current market environment launching your own operator is not the wisest thing to do. Given our size we could probably make it work but I still don't consider it an option at this stage. Potentially it would only be a strategy of last resort, if the B2B landscape changed and we needed to be our own operator or something like that but I consider it to be very unlikely.

How did Black Friday affect you and how important is legalised US poker for your business?

We lost a lot of money as a result of the Full Tilt closure and it came as a total shock to us but we’ve never accepted US customers. I have always been very sceptical of US real-money poker becoming a reality any time soon.

We purely see the US as an option value, if it does happen then it’s nice but it's not something that we base our strategy around and I also think in hindsight that every company who based their strategy around US re-entry made a big mistake. They've probably wasted a lot of money and time focusing on that and as a result they lost their competitiveness on their product and on the marketing side of things.

Where we could be very interested in the US market is through helping companies build their own poker school on a white-label basis. From a technology point of view we’re ready for it and we’ve developed our own content management system which allows us to set up education communities really quickly.

If the market does become regulated then we hope that it will be done on a federal level. Everybody that isn't already in the US or a state as a part of the historical gambling landscape would probably prefer federal. Especially from an online point of view state-by-state legislation would be a disaster. That's not how the internet works and you can also see with the recent European regulation that the segregation of markets and liquidity pools is just a huge hurdle. The results that were delivered from state-by-state regulation, in France and Spain for example, are performing far below expectations. Of course, you can operate in a separated liquidity pool but there aren’t many companies that can do it, maybe just the top two or so.

Where do you think the mobile poker market is in terms of its development and what are the biggest challenges in it?

There is a big market for mobile poker and we do feature it on PokerStrategy but we don't have a dedicated mobile section because on a modern smartphone you can browse desktop sites quite well. I also think that mobile and desktop sites are going to converge which is why we just don’t have a mobile PokerStrategy.

The differentiator is going to be the screen size so of course mobile is going to become dominant in a couple of years’ time. The question of what you call 'mobile' is then subject to debate because a laptop isn't considered mobile by the industry but I think it is.

Creating a good mobile product has two main challenges. First you have the screen size of the phone and then the difference of using a touch screen. In general, the standard poker clients that are on the PC are still pretty much the same as they were in 2004. The good thing is that if you at some stage want to have a unified client that runs on a PC, a mobile and a tablet then you're almost forced into a few of the paradigms that can't be applied to all PC poker clients.

Ultimately I see a lot of convergence there and I see a lot of room for improvement and innovation there. Innovation on PC poker clients might actually be driven by mobile devices.