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Performance Marketing vs Online Poker - Bankroll Management (1)

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For the introduction to the topic of AM vs Online Poker, please refer to this thread
Part 2: Variance and Standard Deviation part of AM vs Online Poker

The question of how much money is required to get into AM has been asked countless of times. What people tend to forget is that it’s not just about the amount of money you have to begin with, but it’s VERY MUCH about how you manage your budget, or in a term more familiar to poker players, your bankroll.

Successful poker players have to understand the concept of risk of ruin, and adjust it based on their skill and mental state, so that they can keep a clear head and make rational decisions without worrying about potential losses. Let’s define 3 poker player types:

1. Solid winning player, who has a winrate of 4bb/100 hands and a standard deviation of 80bb/100 hands.
2. Marginal winning player, who has a winrate of 2bb/100 hands and a standard deviation of 100bb/100 hands.
3. The “pro”, who has a winrate of 8bb/100 hands and a standard deviation of 60bb/100 hands.

bb = big blinds
bb/100 hands = typical way of measuring winrate in poker.

For typical 6 handed online cash games, with 100bb buy-in (BI), the risks of ruin with certain number of buy-ins in their bankroll would look like this:


Though the vast majority of poker players don’t exactly calculate their risk of ruin, they do understand that having too little bankroll for stakes where they don’t have a big edge greatly increases the possibility of going broke. That is why you will see players go up and down to other stakes, depending on their bankroll and their estimated winrate. In other words, they gather data on their winrate and then apply proper bankroll management.

How does this relate to AM?

In AM you generally buy traffic with the goal of optimizing the campaign to achieve a positive ROI. Without knowing your initial skill you need to make sure you can buy enough traffic to judge that skill (or offer of quality, landing page, etc.). You need to buy enough traffic to gather statistically significant data. In poker, you have to play without exactly knowing your skill compared to the others but slowly estimate it better and better until you can make a decision.

Say you achieve a positive ROI after $1,000 spent, and now your total bankroll remains $500. Your risk of ruin is high, even if you have an edge now. It would be the equivalent of being a pro in poker but playing with 5BIs, maybe less. That means, 10% or more of the time YOU WILL GO BROKE!!! It doesn’t matter how good your edge is, the variance makes it too likely that you won’t succeed. This is without accounting for the extra mental stress.

This is why I always tell people to think both of their testing budgets and their scaling budgets. You can limit your loss with a test budget (take a shot at a higher limit where you don’t know your skill level/winrate/ROI), but once you see you can have a positive return, you need to make sure you have enough in the back to continue running campaigns (or play those stakes that provide you higher money returns). Otherwise, your initial losses are not a positive investment, or at least not as positive as it could be.

Many people in AM are reluctant to scale down if the financial situation asks for this. They don’t want to go back, especially in lifestyle, they consider it a failure, so they take the gamble and many times end up in an even worse situation. The same is true for many poker players, and the successful ones that have been around for many years have sucked it up and went down in stakes when their bankroll and skill level dictated to do so.

Managing your bankroll in both poker and AM can weather the storms and keep you in business for a longer time. Though you won’t have a rags to riches in 6 months story usually, the experience will pay dividends over the years, when many of those who made riches go back to rags. Those using proper bankroll management will still be around after tough times.

Part 4: Performance Marketing vs Online Poker - Masterminds and Study Groups
Open Q&A

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