How Do Online Poker Companies Make $$$?

Hi everybody,

I have just started playing online for the first time and have a question:

How do online companies make money? My guess is that most profits are taken from interest gained on the substantial deposits that are placed with the Cashier.

Have there been any calculations of this anywhere?

Just curious really...thanks.

They get their money (at least predominantly) from the rake.

They take a small rake from pots in ring games and they get the extra fee you pay to enter a tournament. Like a $24+$2 tournament... the $2 goes to them. When you have tens of thousands of players this adds up to a whoooole lot of money.

Thanks combuboom.

Surely they also cream cash from the deposits?

Probably. But it ought to be inconsequential in comparison to the rake.

Yep, rake and tourney entry fees are absolutely the bread and butter. Take a smaller site, with fewer players and fewer tournies and do some simple calculations. It's surprising what they still bring in from rake and entry fees. Now imagine that so many times more on a site like pokerstars. Doh.

the original question's been answered but some spin off points:-

If everyone with money in their account asked to withdraw it all at the same time, most poker companies simply wouldnt have the money to hand (some of them for a long time). Not dissimilar to an Argentine bank . Creative cash-flow management shall we say.

Secondly, it costs them money when you deposit. Banking services are never for free. (hence min deposits).

Welly said:

If everyone with money in their account asked to withdraw it all at the same time, most poker companies simply wouldnt have the money to hand (some of them for a long time). Not dissimilar to an Argentine bank . Creative cash-flow management shall we say.

Click to expand...

... or any bank at all. There's ratio set by central banks (required reserve ratio) which tells retail banks what % of deposits they can lend out. Once they've lent this money, some of this money is then re-deposited in the bank by whoever the borrower has paid. This money can then be used to back further loans... so with a 5% required reserve, banks can theoretically multiply loans by a factor of 20. This is known as fractional reserve banking and is common in all developed countries.

At least the poker sites don't start making loans to players from the cash other people have deposited... although they could make a ton of money that way.

I have also hear that the companies have your money in a bank account that will generate them interest on your money held on the site.