A 10 year look back at the history of online poker

Part 1

The early years
You probably have trainers that are older than the online poker industry. Most of the big online rooms that you consider part of the furniture now were just a twinkle in their owners’ eyes back in 2000. And if it wasn’t for a flurry of activity led by a fat man and a bald man, they may never have existed in the first place. So how did we get to the highly developed and hugely popular online market of today, and who led the way?

In January 1998, Planet Poker became the first online poker room but, to be honest, nobody really cared that much. You could only play $3/$6 limit, and just a handful of players could be found sitting in at any one time. Remember, this was in the days before the World Poker Tour had popularised the game via our TV sets and limit Hold’em was still the game of choice for most US casinos.

But by 1999, Planet Poker had expanded its spread of games, now offering $5/$10 and $10/$20 limit, and it was still the only real poker room of note.

There were others in the picture, such as Delta Casino that used the same software, but Planet – and its spokesman Mike Caro – ruled the roost. That was until late 1999 when the first real giant of the online poker world was born.

Over in Costa Rica, a group of Canadian college friends, who to this day remain nameless, started up Paradise Poker. The site offered Omaha and Seven-Card Stud as well as Texas Hold’em. The graphics were slick and ran a lot faster than the sluggish Planet Poker, and the site quickly proved a hit.

Its success was aided, in no small part, by Planet Poker shooting itself in the foot. An investigation by software company Reliable Software Technologies (RST) found that the random number generator used by Planet Poker, as well as a number of other poker rooms, could be cracked.

As RST said: ‘By synchronising our program with the system clock on the server generating the pseudo-random number, we are able to reduce the number of possible combinations down to a number in the order of 200,000 possibilities. After that, the system is ours.’

The forums went crazy and Planet Poker never really recovered, even though the random number generator was altered. It left the way clear for Paradise Poker to dominate the market as 2000 drew to a close, although other rooms, such as Dragon Inn Poker and Pure Poker managed to grab small bits of the market.

There was also the infamous PokerSpot. com, which was promoted by US pro Dutch Boyd. It was the first site to offer no-limit freezeout tournaments (strictly as freerolls at first), but when it failed to pay out thousands of players a huge scandal ensued and it soon bit the dust.

Missed opportunity
What is surprising, in retrospect, is that none of the existing online gambling firms such as 888, Ladbrokes and William Hill were interested in entering the poker market at this point. At the time they thought it looked like a lot of work for not a huge amount of reward. Most sites had just a few hundred players on them at any one time and the software and support was far more complex than for a casino. And so Paradise was able to slowly build its business with relatively little competition.

At the end of 2000 the next of the big names made its debut. UltimateBet was set up jointly by software firm ieLogic (founded by tech geeks Greg Pierson and Jon Karl) and some secretive high stakes poker players (believed to include a former WSOP Main Event winner). Russ Hamilton was employed as a consultant in the early stages and set about recruiting some big players to promote his site. His choice of Phil Hellmuth marked the first time the player sponsorship model came into effect.

But although UB started to gain some ground, the market was still dominated by Paradise. By the end of 2000 it had introduced no-limit Hold’em cash games and features we now take for granted, such as allowing the average pot size to be seen in the lobby. Gradually, the online poker world as we know it started to be defined. But developments in the real world were about to turn everything upside down…

Part 2

The gold rush
It’s hard to imagine a world before the previously mentioned bald man (WPT founder Steve Lipscomb), and fat one (2003 WSOP champ Chris Moneymaker) revolutionised the way poker was thought about in the US. Prior to 2001, tournament poker just wasn’t all that interesting to your average online punter. Paradise Poker’s 50,000 players were mostly grinding it out at the limit Hold’em tables, and while a few other sites were running sit-and- gos and occasional freezeout tournaments, online poker was a cash game world.

But some newcomers on the scene had other ideas. PartyPoker in particular saw the marketing value of online tournaments. What better way to launch yourself onto the scene than by running a huge series of tournaments that culminates in a $1m main event on a cruise ship? Sound familiar? It sure as hell wasn’t back in 2001 when PartyPoker came up with the PartyPoker.com Million. And its success is the reason other sites still try to replicate it today.

The site was the brainchild of the daughter of a US online porn baron and two Indian IT gurus. It launched with a blaze of publicity in the US in the summer of 2001 with its host, and the firm’s poker consultant, Mike Sexton, proudly proclaiming: ‘The poker world is entering a new age and the PartyPoker.com Million is the first step. It’s the first $1,000,000 guaranteed tournament by any online poker site.’

Just a few months later another online poker site made its first tentative steps into the online world. PokerStars.com launched in October 2001 with the intention of becoming the home of online tournament play. Its first big promotion was a $50,000 guaranteed tournament with a $215 buy-in (another very familiar concept). However, there was a third component that took it to a new level.

The big bang
In 2002 the World Poker Tour made its screen debut on the Travel Channel in the US. It not only created huge interest in tournament poker, but also gave poker sites a platform on which to advertise. As a result, those sites offering big-money tournaments started to see a huge uplift in player numbers, which is when the poker boom really started.

There was one clear winner in the early skirmishes. PartyPoker went from nowhere to become the largest online poker room in just two years. By the summer of 2003, when Chris Moneymaker had persuaded the poker world that absolutely anyone could win big, it had more players than the rest of the big online poker rooms combined.

Paradise Poker meanwhile, which still wasn’t offering multi-table tournaments on its site, saw its market position drop like a stone. In stark contrast, PokerStars was growing fast, thanks to a business model based heavily on tournaments. Where PartyPoker used tournaments as a way of attracting people to its site and getting them to play cash games, PokerStars viewed tournaments as an end in themselves. It was by now clear that for any poker site to succeed it had to offer big multi-table tournaments.

Euro vision
It was at this point, with the ‘American’ sites showing incredible growth, that Europe sat up and took notice. Ladbrokes launched its online poker site in 2002. It didn’t accept US players, and concentrated on growing the business in the UK and Scandinavian markets. It proved surprisingly popular and soon many other European sports betting companies jumped on the bandwagon.

Over in the US though, where more than 80 percent of the online poker market was, PartyPoker was comprehensively winning the battle. The bigger the site got, the more it advertised on TV and the more players signed up. Pretty soon it had tens of thousands of simultaneous players, which, a few years earlier, had seemed like a totally implausible concept. As a result, Party was hauling in the cash. By 2004 the site was making over $1m profit a day. A DAY!

This wasn’t lost on the rest of the online gaming world. Suddenly every man and his dog was launching a poker room through the network model. The network model allowed the big firms to get into the poker business far more quickly than they ever could by developing their own software. It meant firms like William Hill could grow very large, very quickly. But there were also a few start-up sites which, despite starting late, would make a big impression.

The biggest of these was Full Tilt Poker, which didn’t even exist before 2004. It was fronted by some of the biggest names in poker, including Chris Ferguson and Howard Lederer, who were also involved in the software development from the outset.

If this is all sounding a bit familiar, it’s because they basically copied what UltimateBet had done four years earlier. In fact, at every stage of online poker’s development – from Mike Caro endorsing Planet Poker, to the pros involved at the start of the UltimateBet site, to Mike Sexton acting as a consultant to PartyPoker, to Marc Goodwin advising on the development of the iPoker network – poker pros have played a big role in the industry.

But Full Tilt really made the pro-led strategy its own. Pretty soon the site had most of the biggest names in poker appearing on TV ads telling Americans to try their hand at Full Tilt Poker. And in a surprisingly short period of time, Full Tilt became a real player.

By the end of 2004 then, the online poker world as we know it had taken shape. The tournament sites and the cash game sites had stolen the best bits from each other and there was a real sense of homogeny in the poker world. All was well… for now.

Part 3

Black Friday
By 2005 the buzz around online poker was at its peak. Hundreds of thousands of players were logging on each day and some obscene profits were being made. The wider public woke up sharply to this truth when the poker firms started to go public and sell their shares on the London Stock Exchange.

When PartyGaming (parent company of PartyPoker) became one of the largest companies in the UK overnight, the poker world’s secret was out. Everyone realised how much money there was to be made and firms such as Yahoo! started expressing an interest. But by now the horse had bolted. The online poker rooms that had been there since the poker boom began were too far ahead.

UltimateBet followed PartyPoker onto the London Stock Exchange, and PokerStars began making preparations to follow. It seemed like the whole poker world was obsessed with cashing out and going public. And with the money PartyPoker gained by selling shares in its operations to investment banks, it (and the other big sites) started to buy up some of the smaller poker rooms, too.

By 2006 it was no exaggeration to say that PartyPoker ruled the world. It was a FTSE 100 company and, according to the stock exchange, was worth more than British Airways. It had by far the most cash game players, and with its new $5m Monster tournament series it was about to take on PokerStars’ dominance of the tournament world. And then the sky fell in.

Friday 13th
Poker’s Black Friday came on October 13, 2006. And it was a total blindside. To give some background, for almost 10 years a changing group of US politicians had been trying to ban online gambling. It was seen by a small group of conservatives as a surefire vote-winner to clamp down on what they considered to be an evil empire. And so they tried each year to introduce bills that banned it, and each year they failed.

Slowly the online gambling industry got used to this annual moment of panic as a new piece of legislation came up for a vote, with the worry getting less and less urgent each year. So when on that fateful day in 2006 the Unlawful Internet Gambling Enforcement Act was passed, making funding or accepting funding from an online gambling site illegal, everything went into chaos. No matter what anyone says now, the sites were simply not ready for this revelation at the time.

PartyPoker was the first company to react. It realised that as a public company, with shareholders to protect, it could not expose itself to this huge risk to its business. So it cut off all US players at a stroke, wiping out over 80 percent of its customers and sending share prices plummeting. Several of the other listed poker rooms (Paradise, the iPoker and Cryptologic networks) swiftly followed suit. UltimateBet sold up to a private Maltese company and remained open in the US market, but most of the poker rooms shipped out of the US.

What this meant was that anyone willing to continue taking US business stood to make a killing. If you were a private company and the only people you were putting at risk were yourselves, then why not? PokerStars and Full Tilt have always been private companies – they remained open to the US and reaped the rewards. PokerStars in particular blazed past PartyPoker to quickly become the world’s largest poker room.

What next?
So now we have the curious situation of a handful of huge US-facing poker rooms, and literally hundreds of European-focused poker rooms, ranging from the huge standalones such as PartyPoker to tiny networked rooms. But how long will this new world order last?

To date the US government has shown no indication of cracking down on the poker rooms that remain open to US players, and there is an increasing political will to class poker as a game of skill in the US. But don’t be surprised if at some point a fresh war on online poker begins in the US, with the current big guns replaced by the European- focused rooms.

One thing is for certain – the online poker world is too big and too global to disappear forever now, no matter what the US government does. And who would have thought that as little as six years ago?

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