Party On or Party Over? Inside PartyPoker’s Q3 Results

A statement with initial Q3 numbers from bwin.party paints a mixed (but unsurprising) picture for the online gaming power.  Reaction from the markets seems mildly positive so far, but I’m just interested in what the report has to say about Party Poker.

That looks like it hurts

Here are the quick numbers for PartyPoker from July 2012 through September 2012:

Ouch.

Party says that “trading since the period end has seen a marked improvement”, but traffic data from PokerScout suggests those gains have been a bit spottier than Party might like.

All of the numbers look pretty disastrous, but the headline has to be the 59% year-over-year drop in real-money sign ups.  In their half-year report, Party basically blamed the drop on having “amended our contractual relationship in February 2012 with certain of our larger affiliates that had been driving large numbers of marginally profitable players to our sites.”

The fact that the drop subsided from Q2 to Q3 supports this explanation, but doesn’t address the underlying problems:

• Party let affiliates account for over half of their RMP acquisition.  That speaks to a failure of marketing and imagination on Party’s end.
• Despite dropping said affiliates over 6 months ago, Party continues to see a decline in real money sign-ups.  Where’s the plan to replace the sacrificed traffic?

The only apparent upside of this report: Party looks to have hit something like a bottom.

A couple of interesting tidbits from the statement

Party says they plan the “launch of PartyPoker on mobile” for the first half of 2013.  That’s a bumped-up timetable from August, when Party was predicting an Android poker client for Q3 2013.  No word on whether “on mobile” means just Android or broader suite of apps.

The long-promised overhaul of Party’s software platform, originally billed with a Q1 launch date, has been (subtly) pushed back.  The statement now promises a “complete repositioning and relaunch of PartyPoker in the first half of 2013.”

Dotcom poker network integration (bwin players coming over to Party) is still on track for 2012.

How’s the four-point plan going?

Back in August of 2012, Party released a plan to “return poker to growth” that included four core elements.  A quarter later, how is Party progressing on each?

• Improved poker ecology – Party cut high stakes games in July.  The proposed partnership with Zynga should also help, but it’s not clear to what extent.  Those two steps aside, I’m not seeing a grander plan from Party to improve their ecology (at least not one advanced during the last quarter).
• Launch of FastFoward Poker – It launched, but Party is keeping the stakes limited compared to the competition.  As a result, the ratio of fast-fold players to total players (only considering NLHE players, based on PokerScout data) is far worse at Party (8:1) than at iPoker (4.5:1) or PokerStars (3.5-1).
• Integrate poker liquidity – Still on track for 2012, but there are questions about how big an impact integration will have.
• Repositioning of Party Poker – If there’s one thing Party is in desperate need of, it’s a software upgrade (see here and here).  Unfortunately, as noted above, it appears that the relaunch timeline has been pushed back.  If end-of-year results suggest an additional extension, Party’s plan is likely in trouble.

To put the whole thing quickly: The plan could probably use a few more points.

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