Wednesday, February 14, 2007

Anatomy of a Cybersquatter, Part V: One for All and All for One

Federico Schiavio did indeed have ideas for making some money off the "WSOP" name, but he'd need a little help. Sometime in late 2004 or early 2005, Schiavio cemented a deal with Paul Barnes, an Irish businessman who had spent several years as a sales-and-marketing executive for Access Gaming Systems Europe, Ltd., whose clients included Binion's Horseshoe Casino back in the Becky Years.

Whose idea it was for the shape of the new room was remains unclear, as is whether Schiavio had a piece of this new room himself or was simply one of the top three affiliates, as some sources indicate. Whatever the nature of the agreement, Schiavio committed his conduit to that long-promised poker concept, the All In Poker online room, which turned out to be a new "skin" or network member site on the Prima Poker Network (later Microgaming). The room had an official live date of November 15, 2005, though it was open and operational in an unofficial beta mode for a lengthy prior period.

All In Poker was pitched to poker players with a new twist; it was set up as the first online room where "rakeback" was distributed via a multi-level-marketing [MLM] scheme, rather than through standard affiliate channels. Rake, that portion of each pot that is withheld by the house to cover expenses and generate the profit, has always been much lower in percentage terms among online rooms than with their real-life, "brick-and-mortar" counterparts. Slicing the potential profit margin thinner, many sites often distribute a portion of the rake that they collect back to the players as a further incentive to join and play. It can be done through freerolls and other special promotions, or it can be done through a direct rebate of part of the rake, commonly called rakeback.

All In Poker's marketing hook was to return up to 51% of the rake generated to the players, through the MLM's "downlines," a pyramided network of recruited players that was nested seven levels deep. As existing players recruited others, their own monthly rake paybacks would build, as would those for the affiliates at the top of the pyramid. Should any top-level participant somehow manage to completely fill up the seven-level pyramid that he headed (with a "waterfall" effect designed to trickle extra players down the pyramid to plug in holes) then these top-level participants could collect a small, rake-based commission from up to 97,655 other players, the maximum allowed under the program.

Besides, the "Three Musketeers"-inspired visuals were cute, too. All for one and one for all, just a batch of poker buddies helping each other to make more money....

Schiavio was an integral part of the operation from day one, whether or not he was one of the site's three top-level affiliates or a silent partner. By January of 2005, fully ten months before All In Poker's official launch date, Schiavio's touted the unique poker/marketing proposition that was in the works:

The lengthy delay in the room's launch spanned much of 2005 and was likely due to the need to secure additional investors to handle startup and early operation costs, not the least of which was the need to join one of the existing online poker networks. Paul Barnes finally secured that part of the deal by signing on with the Prima Poker Network (now Microgaming). All In Poker joined the Prima network as one of its bottom-tier, basic-service skins. This still meant an outlay of about $100,000 for what was essentially bare-bones connectivity and service. (Prima, one of the largest online networks in terms of the number of interconnected rooms/skins it supports, offers several levels of connectivity and support, at costs that could, for its most lavish package, exceed a million dollars.)

If nothing else, the delay gave Schiavio plenty of time to establish and promote his own downlines, playing as much as possible to casual visitors who stumblesurfed their way to the site. 

What cannot be underestimated is how important the perceived WSOP gravy train was, for all involved. All In Poker's web page to this day features a Flash "Emovie" fully five minutes long, as does Schiavio's site (in a manner of speaking), though the version on Schiavio's site has gone through a couple of cosmetic changes and at least one attempt to hide from Harrah's prying corporate eyes. 

Regardless, the All In Poker and versions were all but identical, except the All In Poker home-page version doesn't mention "WSOP", while Schiavio's version continually offered references to "WSOP's All In Poker." If the phrase can't be taken as a sign of ownership, it was certainly crafted to create a sense of endorsement or sponsorship by [the] WSOP. These screen grabs compare like moments from the All In Poker version to both early and more recent scenes from the site:

Obviously, the same person created all of the movies, but whether that person was Schiavio, one of his employees, or someone within Barnes' Dublin-based All In Poker operation, remains an unknown.

What we do know for certain is that Schiavio spent much of 2005 recruiting players for his downlines, but once the All In Poker room went live and was fully exposed as perhaps the 70th in a large family of Prima skins, the rate of enrollment through Schiavio's site may have decreased rather than increased. With the poker room in full view, knowledgeable poker people could then recognize it for the play on the World Series of Poker's brand-related goodwill that it was. Some thought it was still a decent concept (and signed up), while others thought it was a cheap hustle and said so.

One indirect measure of the rate of increase is to measure new signups to the forums area, which has of late fallen into a den of bulletin-board bot postings hawking pseudo-Canadian pharms, cheap mortgages, and ubiquitous links to porn. Aside from at least two blatant spammers who signed up over and over again, one always tagging his new entries with a "Mongolia" address, here's how signups for the forums area have progressed for the last twenty months:

02/05: 2 (not including three of Schiavio's admin accounts)
03/05: 1
04/05: 7
05/05: 24
06/05: 19
07/05: 70
08/05: 60
09/05: 13
10/05: 18
11/05: 12
12:05: 7
01/06: 4
02/06: 4
03/06: 10
04/06: 7
05/06: 18
06/06: 16
07/06: 5
08/06: 9
09/06: 23
10/06: 6
11/06: 4

Two things are immediately obvious. First, the biggest months for new sign-ups into the forums area came while the 2005 World Series of Poker was in progress in mid-summer, indicating referred interest from that poker event. Second, there was a marked dropoff after the November debut of the All In Poker online room itself.

It's not fair to assume that the above is a direct correlation of new signups to All In Poker as a whole, nor even of all new signups through Schiavio's portal alone; these forums were increasingly overrun by spammers -- likely as attracted by the letters "WSOP" as anyone else -- and they are all but abandoned today. They were relatively unimportant. Schiavio kept right on signing up new people and adding them to his downline; it's not inconceivable that he had multiple downlines. He had special recruiting interests in poker discussion forums, podcasts, and other poker-community groups, believing, as all good MLM-ers do, that word-of-mouth is the best way to spread a neat, new concept.

How big did Schiavio's own downline(s) become? One well-placed source indicated that as 2006 matured toward summer, Schiavio had a few thousand players signed into his downlines, through his own efforts and those of players beneath him, and he was collecting rake-based commissions of several thousand dollars a month. The guy at the top of the pyramid always does well. The problem, though, was that the rate of growth had dropped off, only partly because it was now public knowledge that "WSOP's All In Poker" was just another online poker site, albeit it one with a unique marketing scheme.

Federico Schiavio might have been an aggressive angle-shooter, but his overseas partner, Paul Barnes, was claimed by the same source referenced above to be a smooth-talking free spender who hid the fact that revenues weren't coming up to expectations, and that the start-up seed money was running out. And according to that source, even Schiavio was caught by surprise by what happened next.

Barnes had quickly built up All In Poker's Dublin-based support staff to 30 workers or more and spent money that a site giving back up to 51% of the rake it had generated probably would have been better off reinvesting. Barnes thought nothing of attending several business conferences on All In Poker's dime, or, reportedly, of traveling to the 2006 World Series of Poker in "support" of a player who had won a seat to the WSOP Main Event through a Microgaming (Prima) qualifying event. Meanwhile, the network itself was suffering connectivity issues, crashing repeatedly over the early summer months with little or no explanation (or in some cases, refunds) coming through from All In Poker support.

Then came the moment of truth that seems to always happen with pyramid schemes crashing back to earth. In early summer of 2006, participating players suddenly found that their downline-generated payments had been slashed by up to 90%; many stopped receiving payments entirely. Even Schiavio's payments were withheld under Barnes' say-so, dropping from something approaching $10,000 a month to a figure said to be under one grand. One of the major investors in the site had pulled out, the mandatory payments to Microgaming needed to be made (which may explain some of the connectivity problems at that) and the rakeback funds earmarked for downline redistribution were simply never sent as promised.

Even people with direct e-mail access to Paul Barnes received no reply to their inquires, no explanation of what was going on with the site. Finally, at the end of August, 2006, e-mails went out to players notifying them that as of September 22, 2006, All In Poker would cease operations. "Unfortunately," went the missive, "our multi-level-marketing model has not been taken up by enough members to make the business sustainable." Deposits were no longer accepted, players had until September 22 to withdraw their remaining online bankrolls, and All In Poker was scheduled for its terminal trip to the trash heap.

End of the tale? Of course not.

Next -- Part VI, Not Quite Coda

© 2007, Haley L. Hintze. All Rights Reserved. Creative Commons Rights Superceded on this Material.

Link to Introduction
Link to Part 1
Link to Part 2
Link to Part 3
Link to Part 4
Link to Part 5
Link to Part 6

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