Sunday, November 16, 2014

What happens when you give marketing guys too much money (Part 3)

The 2006 WSOP was the year of the most conspicuous marketing excess in online poker. Every online site had a huge presence during the Main Event. PokerStars had a monstrously large presence with 1,624 players, but we were far from alone - collectively, PokerStars, PartyPoker, UltimateBet and Full Tilt Poker were responsible for over 40% of the prize pool that year - a staggering $32 million.

And with that came massive spending surrounding the WSOP. PokerStars was the biggest player on an unimaginably big stage, and we weren't going to let any opportunity pass us by if it meant more exposure.

The first example is small in relative terms, but it's a good example. I've talked before about Rich Korbin, my marketing director and overall superhero. When we realized in March 2006 just how big our WSOP presence would be, Rich set out to provide PokerStars players with the most outrageous experience possible. 

One of Rich's responsibilities was the player swag bag, something we started doing in 2003 that became increasingly elaborate in subsequent years. For the 2006 WSOP, Rich went far beyond anything he had come up with before. He had a roller bag designed with the PokerStars logo, and had each bag individually embroidered with the player's name (I still have mine). In the bag was a mind-boggling assortment of PokerStars gear, including baseball jerseys, football jerseys, hockey jerseys, hats, golf shirts, t-shirts, even headphones. And he had one-ounce silver commemorative coins minted for each player as card cappers. 

When Rich came to me with his plan, I did a quick calculation based on our projected number of players (which in March 2006 we thought would be around 1,400). He was talking about spending $700,000 on swag. I got it - he wanted to do two things: (1) ensure that the PokerStars logo was visible any time an ESPN camera was running, and (2) dazzle players so completely that they'd proselytize PokerStars even more than they already did.

The only problem here was budget. While PokerStars grew explosively from 2003-2006, it wasn't until late 2005 that we brought someone in to put financial controls in place. It's not that we didn't do budgets - we did - but budgets were quite fluid in the early days. I had done my 2006 budget in the fall of 2005, and it now looked like I had underestimated our WSOP presence significantly. I needed money.

I went to Isai Scheinberg (PokerStars CEO, my boss) with Rich's proposal. We were talking about spending $500 on each player, and even in these excessive times, Isai thought this was over the top. I had asked Rich to send a sample bag to the Isle of Man offices, and I started our discussion by heaving the 25 pound bag onto his desk.

Isai went through the items one by one. Isai pulled out a commemorative baseball Rich had made, encased in a Lucite box. "Do we really need this?" he asked. I didn't say anything.

He then pulled out one of the hockey jerseys. These were truly works of art - they were made by the same company that makes jerseys for the NHL, with the PokerStars logo on the front and the players' names embroidered on the back, with the number "06." He held it up, then laid it on his desk and examined it more closely.

"These are really nice. How much are we paying?" I told him, fully expecting him to veto it right there - the jerseys were about $60. Rather than trying to get any of the 20-odd items in the bag cheaper, Isai surprised me by asking, "Can we get the total cost down to $450?"

We could, and we did. In the end, we spent over $730,000 on gear for players that year. And it's a source of pride to me when I see players still wearing the hockey jerseys, which happened as recently as a month ago.


By April 2006, I had gotten used to being approached with outrageous marketing opportunities for PokerStars. We came very close to sponsoring a Bon Jovi tour. We talked about (and eventually passed on) being a name sponsor of the Bonnaroo Festival. We spent millions producing amazing TV spots and much more getting them on the air. But the proposal that came to me that April surpassed anything we had even considered in the past.

I got a call from a representative of the William Morris Agency - I'll call him Bill, as I don't recall his name and don't have it in any of my notes. He had been hired by Harrah's to sell what is arguably the single best marketing property in all of poker: the WSOP table felt. 

There is considerable value in the table felt just as a marketing tool for players - every player in the WSOP sees the felt for many hours each day, and I would guess that there were about 75,000 unique players in WSOP events that year. But the real value of the table felt was ESPN's TV coverage - every shot on every table would display the logo.

I pumped Bill for as much information as I could get, and he was surprisingly forthcoming. The other major sites, PartyPoker, Full Tilt Poker and UltimateBet, were all being approached. They were all interested. And two other non-poker properties were planning to make offers. Harrah's was accepting a single, sealed bid from each interested party.

Oh, and the floor was $3 million.

My first reaction to this number wasn't shock. In fact, I thought $3 million was a bargain. I then started thinking about how we could weave this into our marketing, and perhaps how we could use it to extend our WSOP presence. I called Bill back and asked if we could include other WSOP properties in our bid, particularly the WSOP scoreboard. Bill told me that Harrah's was open to whatever we proposed as part of our bid.

I gave this considerable thought before I took it to Isai and his son Mark, who ran and essentially owned PokerStars. I knew that $3 million was far from the final number, but I was having trouble working out just how far. I tried applying typical marketing principles to this calculation, but it was just too hard to quantify. Whatever we did was going to be a guess.

I decided that this was going to require a different approach. I was used to going to Isai and Mark with some hare-brained idea more or less ad hoc. But this was a lot of money, and had far-reaching implications for us. So I did something I only did once at PokerStars - I put a PowerPoint deck together to pitch them.

The deck consisted of only four slides. On the last slide, I revealed what I thought would be the winning bid: $8 million. I brought my laptop into Isai's office, made my presentation and watched for a reaction.

Neither of them were shocked, although they were as surprised as I that Harrah's, who clearly didn't like us much, was interested in our name on their felt. We talked logistics. We talked about how many actual impressions we'd get. We bounced around the many things a huge check might buy us (cosponsoring the WSOP? allowing players to register on-site with PokerStars money?). Isai and Mark then decided that they wanted to talk about it, so I went back to my office.

My phone rang about ten minutes later - they were ready to talk again. I returned to Isai's office.

"Put in a bid for $10 million." As he had so many times in the past, Isai wanted to come in proactively high, attempting to cut off any chance of being outbid.

We had tossed around large sums in the past, but I can honestly say that this staggered me. It was a gigantic risk, and we had little, if any, way to measure its success. But I thought the upside was potentially huge. I was in.

I submitted our bid via DHL the following day. Things went quiet for quite a while - I didn't hear anything more from Bill for almost two weeks. Finally, the first week in May 2006, he called. 

"Is this your absolutely top number?" he asked. We had discussed this possibility, and had decided that $10 million was probably more than the felt was worth. We weren't going any higher.

"Yes," I said, "You asked for a single bid, and told us there wouldn't be an auction."

"There's no auction," Bill replied. "But I can tell you that one of your competitors has put in a bid that we are inclined to take."

"Is it more than $10 million?" I asked. I assumed that Full Tilt or PartyPoker might have come up with some sort of package deal that included other exposure (like wrapping the outside of the Rio, for example, something Harrah's had pitched us before for $1 million).

"I can't say, but I can tell you that their proposal nets Harrah's more money." 

I went back to Isai and Mark. I was concerned that we were already too exposed, and couldn't see offering any more. They agreed. Isai suggested that we could consider going back to them with a multi-year offer, but that it should either be for less money, or give us some option to get out, since no one had any clue about the impact.

The following week, PartyPoker got the felt deal. I spoke with Bill several times after this, and finally cajoled him into telling me what they paid. It was $19 million, but for a two-year guaranteed deal. Isai had been on the right track.

As it turns out, I'm vastly relieved that we didn't get this one. First, I'm not convinced of the value, although that's more in hindsight. Second, since the UIGEA passed a few months later, I don't know what would have happened with the second year payment - since PartyPoker withdrew from the US, they were able to continue as a sponsor in 2007. And lastly, Harrah's and ESPN ended up in a lawsuit with Everest Poker a few years later when they took over the felt sponsorship, in which Everest complained that Harrah's replaced the Everest logo with Full Tilt's in international markets. I could easily have seen us in their place given the contentious relationship between Harrah's and PokerStars.

There was a valuable lesson in this for me. While I was initially hesitant about this, I got swept up in the massive potential of the deal, and I think I paid a price in perspective. Almost any time I brought some huge proposal to Isai, he asked the same question: "What if we just gave that money to our players?" For some reason, he didn't ask it this time, and I wish he had. While the deal would have gotten us great exposure on ESPN, giving $10 million to players would have, too.


3 comments:

  1. Rather than trying to get any of the 20-odd items in the bag cheaper, Isai surprised me by asking, "Can we get the total cost down to $450?"

    And that, right there, is authority without micromanagement. Get the price down; I don't care how you do it.

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  2. So many key points here, very refreshing to read. I'm going to quote/site some of this soon connect some points I have been making also.

    Thank-you, I look forward to reading more.

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