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Lessons learned from a failed poker software business (mattmazur.com)
103 points by matt1 on Nov 18, 2008 | hide | past | favorite | 66 comments

I don't think you had a failed poker software business. You wrote, released, and announced some software. That's simply step one, and the very minimum. Next, you need to iterate, which may include adding features found in other software, creating a web version, and more. I see very few lessons here, and they are on how to fail.

I have a small software business, and I always say that 95% of the business value is not produced in the compiler. Its marketing, support, marketing, SEO, marketing, advertising, marketing, documentation, marketing, etc.

Oh, and there is some software involved, too. But product quality only goes so far if your strategy for marketing is "I put it up on the Internet and eventually people find me". (That _can_ work but you have to have God's own luck AND an amazing product.)

Here's another lesson for you: if people are not buying your software, the answer is NOT to charge less. You can't convince people who aren't at your site to buy by offering them a discount -- they can't see the discount. On the other hand, folks who then see the discounted price as the "normal" price mentally value it to match. And software which only costs $10 is worthless. You are selling me a tool to _make money_ and can't justify a price higher than $10?

(I leave it to your imagination what I think of the "Make it free and try monetizing with ads!" advice you'll find elsewhere in this discussion.)

I sell software which is so trivial that technical types have difficulty believing it sells at all. My customers love me, and are happy to part with $25. And I should really get around to raising that one of these days. Should sell about $20k this year, which isn't quite quit-the-day-job money but on an hourly basis works out to "pretty freaking sweet". Not to crimp the startup style here but, erm, charging people money for value remains a decent business model.

Yep, you're right. As I mentioned in the post, I use the word "business" liberally for lack of a better term. If there had been a future for the product I would have iterated, created a web app, etc, but I decided it wasn't worth the effort. As far as the lessons, figuring out how something fails is strongly tied to figuring out why it succeeds.

"but I decided it wasn't worth the effort."

Good decision. It seems like you have a lot of talent and can make a LOT more money in a vertical other than poker. Also, it will probably be more enjoyable in another domain.

My 2 cents. We tried to a business in the lottery space once because it seemed there were no good tech companies there, there was a ton of money at stake, and lots of innovation to be done. But after a short time it was really demoralizing to be in that type of vertical. Fail fast and move on!

I note that on the website there seems to be no real screenshots of your application in action that give me a good idea of what it does and how it works. In my opinion, this is a huge mistake - I generally won't download /anything/ unless I've seen a screenshot first.

You mean the little dinky gradient grid on the front page isn't enough? Just kidding -- thanks for the feedback.

I think taking down the site was a bad idea, after reading your article, I would have bought it (my pain treshold for random purchases goes somewhere around $20 so if you decide to sell it for under that, please drop a notice).

I'm an entrepreneur myself (We sold our company to a quite big company about 1,5 years ago), I think what really went wrong was not the product, niche or anything like that. It was the marketing/sales. You should never underestimate how hard selling even a good product is.

also, this kind of a product will never "get old", the principles behind it will be the same forever so if it's good and you get enough people who purchase, you will get snowball effect by mouth to mouth marketing.

I think the worst decision you made was to waste your work when you took the site down. I also think your name is awful, it's so generic that it's hard to even find using google so what I would do is to republish the program with catchy name and add a link from your blog.

Also it's not a bad idea to hang in places like digitalpoint forums and hire some indian to submit your tool to X directories, that will cost you about $10-20 and you will get a lot of google goodness.

edit: you are giving it free now? Okay suits me but I would have bought it. How about adding at least a donation button?

Very good post. I have a lot to learn about advertising. While it's nice when your product sells itself, there's clearly a lot of value in a great advertising campaign. I could have done much better following through after I launched.

I liked the name, but the problem was the three words: all+in+expert. There was a time after it launched where the site came up as #1, but now its faded into oblivion. I thought it succinctly captured what the software was about, but as you said, maybe it wasn't catchy enough.

I'm launching a new site in a few weeks which I'm going to do a few things differently with. The digitalpoint idea isn't bad.

No need for a donation, your advice is far more valuable than $20 will ever be.

Thanks for sharing the insight. A few months of work in exchange for some valuable lessons learned - well done.

It sounds as if you didn't try any advertising at all, except for a small announcement in a poker group? I think you should have put a lot more thought into how to get users to find your product. Like, sometimes (often, maybe), people don't even know they could use something and that something they could use exists. You have to educate them.

Good point. I added a bit of clarification to the article since it did read like the one post was the only thing I did.

After it launched I decided that the best way to demonstrate its utility was to search poker forums for problems and then post the ALL IN Expert results. I wound up adding a feature to the software that let people export the results in a forum-friendly format which also linked back to the site. This helped bring some people to the site and if I had continued it for some time it may have brought in a few more registrations. In hindsight maybe I should have done this more. It's hard to say... No matter how much you prod a dead duck it's not gonna move much.

Were you aware of the existing (and immensely popular) free tools when you started programming?

If so, what was going to be your edge?

I assume you're talking about PokerStove, no? I happily used it for a long time, but felt it could use some improvement. For example, you can't weigh the hands in your opponent's range (that is, saying KK is half as likely as AA). Also, PokerStove is great for calculating equity, but not so much for calculating EV. To calculate your EV when you call is pretty easy (EV = equity * new_pot - to_call), but to calculate your shove EV takes a bit of work. My aim with ALL IN expert was to make those things trivially easy to do. Eventually I had planned on doing postflop calculations as well (the first iteration only had preflop), but as I mentioned elsewhere I just didn't see it being worth the investment in time for a project that didn't have much of a future.

Interesting article. I remember reading your announcement on 2p2 at the time. I went to your website and scanned the 2p2 thread.

The main reason I didn't buy it was that from what I read it seemed like anything I could do with your program I could already do with PokerStove or StoxEV. And they're both free.

If you want me to pay for poker software (and I've paid for lots of poker-related software) you have to convince me that it will give me an edge or allow me to do something that I can't already do with existing free software.

I guess the lesson there is that you have to clearly show how spending the money will benefit the customer. I agree, the homepage didn't do it very well. Thanks for the post. What did you think of StoxEV?

I found StoxEv to be quite powerful but also quite complex. It took me a while to figure out how to use it. But once I grokked it, it's a powerful program that can facilitate very detailed analysis of a hand.

Having said that, I don't actually use it that much - for most situations I find PokerStove is good enough.

Yup, pokerstove. I agree that weighted range calculations aren't so easy with pokerstove, but it's pretty easy to make a good estimate. Still, it's definitely useful, and a feature I expected to be in pokerstove the first time I used it.

Still, I don't get why you would focus on preflop calculations. Knowing whether to shove preflop is pretty easy, isn't it? The tough decisions are often when you face an overbet on the turn or river, in my experience.

The calculations are actually still done the same.

Preflop is easier to build an interface around, which is why I chose to focus on it for the first iteration. PokerStove's postflop range selection tool worked, but I felt it could have been done a lot better. For example, how would you select the range "A2s-ATs of hearts and clubs" using PokerStove? Making a clean way to select that would have been the next step for ALL IN Expert.

Was it just for cash games, or did you offer ICM calcs too?

$cEV = $EV; no ICM calcs.

Not saying that it would have been successful, hard to say.

But reading "Advertising is a tax for being unremarkable” seems a bit harsh. In some businesses, there simply is no other way. For example recently I heard from some online dating services that they really boil down to the hard calculation of "how expensive is it to convert a user we bought with advertising". Like if they raise their conversion rates, they can afford more advertising, and so on. Sure, maybe sometimes there will be a "hit dating service" that spreads through word of mouth, but the others seem to do OK, too.

Especially in Poker it seems advertising is huge?

It's harsh, but I think there is merit to it. You can definitely succeed with a strong advertising campaign, but if your product is remarkable you'll be able to focus on it a lot less.

You're right that the poker industry does depend heavily on advertising. I imagine a big part of PokerStars and FullTilt's userbase discovered online poker after seeing a commercial during a rerun of the World Poker Tour.

I'm not sure how that translates into marketing a poker tool, but you (and the other posters) are right to say I could have done more.

> In some businesses, there simply is no other way. For example recently I heard from some online dating services

I don't think advertising is necessary for an online dating service. For example, quite a few of my friends are on OK Cupid, and as far as I know they don't do much advertising.

"Advertising is a tax for being unremarkable" is a really succinct way of putting it.

Even if you can be successful without advertising, it seems a bit silly to be against it. If you know that by investing 100000$ in advertising, you can earn another 1000000$ in revenue, why would you not do it? Just because it loses you points in the indie scene?

I used to be all negative about advertising, but I changed my attitude since I realized that nature itself relies heavily on advertising. A beautiful flower is advertising, too. Even a flower has to announce "I am here" with colors and odors. Maybe in some cases a "social recommendation mechanism" is also at work (like the bees who inform other bees about food sources), but without such a mechanism, how are your clients going to discover you?

One example answer is that if your gross margin is anything under 10%, you shouldn't spend $100m in advertising for $1mm in marginal revenue.

Doesn't happen often in software, of course.

I admit you have lost me here - why should one not make that investment?

Let's say your gross margin is 9%.

You spend $100K in advertising. You get an additional $1000K in revenue, on which you make a 9% profit. You bank $90K profit from this.

You're $10K worse off for having done that advertising.

OK - not so used to terms like "gross margin" ;-)

I'm not against advertising.

OK Cupid is free and freemium, isn't it?

I think a free product or service is in trouble if it has to advertise.

Perhaps the quote should read: "Advertising is a tax for being unremarkable, and/or not free."

If they're spending that much money on advertising doesn't that imply that they are unremarkable?

Advertising isn't a bad thing, but if your only differentiator is advertising you're probably screwed.

"Early to bed, early to rise, work like hell and advertise."

- Ted Turner

Unremarkable or not, they do make a lot of money.

Right, but remarkable and unremarkable have nothing to do with making money, but I don't really want to turn this into an argument about semantics. A similar quote that I prefer on this subject is "Be so good they can't ignore you".

I think the message is simply you're better off focusing on making a great product than making a really great ad campaign for a product.

The only reason I argue against this is that I think it would be a shame if a great product fails because of a wanting advertising strategy. I think not even Apple would be where it is now without advertising.

Sure, it would be nice to be "so great they can't ignore you", but how likely is it to be like that? Is it more effective to keep trying to create that super product, or maybe invest more to make your normal, really good product sell?

I'm guessing your problem is a miscalculation in target market.

People will be either

1: Very good at poker. In which case they can go through this mental, odds-calculating process in their head without the need for software. or

2: Not very good at poker. In which case your software is immensely confusing. They need to be able to put opponents on a range of hands (how does a novice guess what an opponent most likely has? half-likely has?) in less than 20 seconds (the time online poker software gives to each player per turn).

I play poker pretty often, and can tell you that odds calculation is never a fixed thing (so it's hard to replicate with software), and even considering my poker background, the screenshots of your program still confused me.

1) Wrong. Complex odds can't be calculated in your head. Even the math PhDs who do well at poker calculate EVs against a range of holdings with a computer.

For instance, if you can calculate your equity with T9s against a range of (AA-22, Ak-AT, A9s, KQ-KT, K9s, QJ-QTs)in your head, consider yourself a genius.

The type of software he built is very popular among people who are good at poker or trying to become so.

Does "estimating your opponent's hands" have any value? If you could do that with any certainty you probably don't need a calculator.

EDIT: I realize that estimating your opponent's hands is important. Basic poker there. I'm talking about "estimating your opponent's hands" which is featured in one of the calculator's screens. That seems like an iffy thing to feed into a computer. It's a garbage-in-garbage-out situation.

Being able to figure out what kind of hand your opponent has is the difference between winning and losing poker. You usually make a guess based on previous behavior, how much aggression your opponent has shown so far, the position your opponent is in (acting first is a huge disadvantage) and so on.

If you make no estimate what kind of hand your opponent has you can only reason in three ways:

a) you assume he always has the best hand. So you throw away your hand.

b) you assume he always has the worst hand. So you put your chips in.

c) you bet big if you have good cards, and you throw your cards away when your cards are lousy.

Clearly (a) and (b) are bad strategies.

The last strategy is not as bad as the other two, but still terrible. More often than not your cards are bad. So your opponent will figure out you're not willing to make large bets with lousy cards, so every time you don't bet, he will, and every time you bet, he won't. You're going to lose your chips that way. Basic game theory.

So you need to figure out what cards he could have been dealt so that his actions make sense. Then, from that range of plausible cards, figure out how often he has a better hand than you do. If you like your odds, you put your chips in. Otherwise, you throw your cards away.

It's a lot more complex than this, of course. But the point is that "estimating your opponent's hands", as difficult as it may be, is absolutely crucial if you want to win.

I suspect that the best long term stable strategie is to randomly assign a personal value for this hand. Something like .75 to 2x the actual value of your hand before the bet to reduce the amount of signal your sending out. If your both doing this and playing perfect poker then nobody wins.

Finding what the best random function might be would be an interesting test of machine learning. But in the real world few players are going to do something like this so finding out what their approach is is going to be a better approach.

Great post

Different players think of different levels.

A beginner will primarily focus on what his own cards are. An intermediate will focus on what his opponent's cards are. A more advanced player will focus on what his opponent thinks his cards are and so on. The best players in the world are experts at figuring out which level you're thinking on so they can think one level beyond you.

Once you estimate your opponent's range based on his style, the cards, his previous actions, etc, you need to know what to do with that information. ALL IN Expert was designed to help with the second part.

Estimating your opponent's hands I assume means guessing what range of holdings he would play that way. For instance, if I tight player raises under the gun, you can narrow down his hands to just a few.

It has immense value, in fact, it's the hardest part of the game. Figuring out what to do once you've estimated someone's hand is (with a little practice and the help of a good computer program) pretty easy.

The entire game is one big war to see who can estimate his opponents' hands the best, while preventing his opponents from doing the same to him.

Perhaps you can make an online free version and put some ads?

Given the small target audience, I don't think it would be worth it to convert it into a free web app. Anyone that wants to toy with it is welcomed to download the desktop app now anyway.

I was mentioning it because there may be people interested in a web version of the poker calculators. As far as I know the known names (pokerstove etc) are all Windows-based and only Ed Miller has an online equity calculator in his page.

There may be more poker players like me who doesn't use Windows at home and I could see the value of having a re-sized small web window while playing with just three boxes (pot, my stack, opponent's stack) plus a small pre-selection of opponents ranges (ex: top 10%, top 40%, any two) so it can be used in real time.

I don't think that's true at all. It depends on how much use you really can drive. With an online app, with no app install, and purely organic growth and a whole ton of community evangelism, I could see it be a really successful web app.

Aren't online gambling sites some of the biggest spenders on online ad sales? With revenue of $6+ billion per year, I think a good chunk of that must go to lead generation.

Poker players are pretty used to installing GUIs, so I don't think web-based would help. Every poker client is a GUI (and for good reason), as is Poker Tracker, Poker Stove, SNGWizard, etc.

I don't know if you're doing ICM calcs or what, but anything beyond a simple odds calculator should be a native app.

Thanks for posting. I'm finding myself in a similar situation, but I've adopted a different strategy. I'm writing a second, semi-related app that I hope will help build the brand equity. There are a lot of insightful comments in this thread.

My marketing and advertising are weak.

You would have generated the target 40K in profit if you'd have simply taken the time you spent on developing the odds application, and put it into building a poker bot and playing limit hold'em instead.

Why don't you give it away for free to people who sign up using your affiliate link for a poker room?

Hard to make any money that way. Most people who want this type of program already have accounts at the one or two sites worth playing at.

I was thinking of this program, which is distributed that way. http://www.calculatem.com/ There are a lot of casual users who would definitely be interested in something to give them an edge, but I guess the problem is they don't know such programs exist.

And sure, most people probably already have accounts at their preferred sites, but it doesn't hurt to have it as an option. It's easy enough to open a new poker account (well, it was when I was playing before Bush messed things up) and getting the typical bonus + software could be enough to play for a week at a second tier site.

Those calculatem people are constantly emailing me asking if I'll link to them.

Looks like that strategy is working for them. http://www.google.com/search?q=poker+calculator

Yeah, not bad at all. It's labor-intensive, but does appear to pay off.

$10 (or $40) isn't enough for me to take you serious. Would you make a move on $10 stock advice?

I would buy a $10 program that aided me in making stock picks if it were simply doing mathematical computations for me. This is more the equivalent of a program that computes PE and dividend ratios than one that says "Buy AAPL at $95". Except that dividend ratios can be computed trivially in your head, while equity against a range of holdings given certain chip stacks cannot.

Point taken. I didn't read the details. Sounds more like it truly is worth $0.

Yeah I'm not sure exactly what it does that some of the free ones don't.

How can this be a Fail? Give it for free if that what it takes then adapt it to make money.

"Give it for free if that what it takes then adapt it to make money." -- I laughed.

With a lot of work it might one day make some decent change, but again, it's not worth it at this point.

I wouldn't consider this a failure. Guessing that you don't want to run into legally shady territory (assuming you're in the US) and start an online gambling site, it's hard as hell to make money in anything related to games, especially public-domain card games. For example, I'd doubt that the designers of card games like FreeCell and Ambition ever made a cent off their inventions.

I'll point this out, though: games do well when the economy tanks, so I wouldn't give it up just yet. (Monopoly was invented, in its modern form, during the Great Depression.)

You have no idea how wrong you are. There's a tremendous market for poker-related apps. It's an industry that rakes in at least hundreds of millions annually.

If I told you what I made off of this sort of thing in the pre-UIGEA days (and especially before Party spun off its skins sites) you'd shit your pants.

Top rakeback providers made 6 or maybe even low 7 figures per month at the pinnacle. The Poker Tracker guys have sold many thousands of copies at $50 a pop.

Games in general are the only thing monetizing well right now on Facebook and MySpace platforms too, and the #1 most profitable is almost certainly Zynga's Texas Hold'em.

I looked into it a little bit. You're completely right. I was wrong.

I remember looking at the casual games business in 2006 and realizing that there was almost no money in it at the time, but that changed, and Texas Hold 'em is, anyway, it's own beast.

I'm very surprised, though, that the Texas Hold 'em blip is still sustaining. It's a fine game, but you'd think people would get sick of playing the same game after a while, and look into something more adventurous.

Well, poker has been popular for over a century. Hold'em has a lot more cachet due to having relatively (for poker) low variance, yet still enough that any clown can win. It's got faster action than anything but a craps table. It takes only a few minutes to learn and can never truly be mastered. It's still got that kinda seedy feel to it. High school kids think a top poker pro is on level with a rock star or pro athlete (I know because I was one for a while and my wife is a teacher).

I think TV ratings have come down a bit, but I'm pretty sure it'll be around for a while. I wish other games like pot limit omaha and badugi were more camera friendly, as they're a lot more skill intensive.

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