General Betting
There is currently 1 person viewing this thread.
I can't think of any other company that has such an inefficient pricing system to its customers.
Companies have two goals - growth and profit (and in isolated cases, altruism). Betfair has a scarce resource from which to make its profit - losing punters. The losing punters pay for Betfair's profit, and winners' winnings.
In every other industry not in their infancy, their pricing mechanism is geared towards extracting the maximum possible revenue from different customers. No pricing system is perfect, but there is the clear differential between say student discounts on air flights, and business travellers.
It just seems to me that Betfair, 35m profit this year, which has its profits dwarfed by the Big 3 bookmakers, is sitting on its own pot of gold. Winners take money out of the system, whereas non-winners shuffled money between themselves at an attritional rate.
Once Betfair's growth declines (which it inevitably will), just how long will it be until non-profitable winning accounts are either restricted or shut down? I can see it happening within a year or two of floatation, possibly even before.
I know this has been raised before, but if I was Mr Miaggi, and I'd just put 400 million into Betfair, it just seems an obvious way to at a stroke make profits leap from 35m.
Companies have two goals - growth and profit (and in isolated cases, altruism). Betfair has a scarce resource from which to make its profit - losing punters. The losing punters pay for Betfair's profit, and winners' winnings.
In every other industry not in their infancy, their pricing mechanism is geared towards extracting the maximum possible revenue from different customers. No pricing system is perfect, but there is the clear differential between say student discounts on air flights, and business travellers.
It just seems to me that Betfair, 35m profit this year, which has its profits dwarfed by the Big 3 bookmakers, is sitting on its own pot of gold. Winners take money out of the system, whereas non-winners shuffled money between themselves at an attritional rate.
Once Betfair's growth declines (which it inevitably will), just how long will it be until non-profitable winning accounts are either restricted or shut down? I can see it happening within a year or two of floatation, possibly even before.
I know this has been raised before, but if I was Mr Miaggi, and I'd just put 400 million into Betfair, it just seems an obvious way to at a stroke make profits leap from 35m.
sort by:
Show
per page
Replies: 507
|
By:
*an efficient pricing system is one where prices are set to each customer in a ratio relative to their inverse elasticity of demand for each product. when I say Betfair's pricing mechanism is inefficient, that means that people who gain the most value from using the product pay very little for it, but people who extract the least, pay a much higher price for it.
|
|
By:
Or to put the question a different way, Betfair defend the right for its customers to bet without limit into its betting pools.
People who bet knowing the results of races (or at least that certain horses or dogs will not win) or of reality tv events, take the money straight out of the system. Their presence reduces the amount of funds churned backwards and forwards between the vast majority of genuine punters. Sure you can say that betting knowing the result of a phone vote is completely legal (it is), but if there are Betfair users doing it, who bet once, take the free money, then withdraw it, how much damage is that doing to Betfair's overall profit level? The money would otherwise have been shuttled backwards and forwards between different genuine customers. How much higher would Betfair's 35 million have been had they decided to start restricting phone vote insiders and suspicious racing accounts? |
|
By:
OK, so you close the winning accounts down and lose the large commission they generate, and your profits increase..? I'm missing something here..?
|
|
By:
They don't generate any commission. The losing accounts pay the commission to betfair.
|
|
By:
write a book on it dj
|
|
By:
Commission is only paid on winning bets.
|
|
By:
that's a rather naive opinion, in my opinion.
|
|
By:
Player A v Player B bet 100 at evens against each other
Player A wins. 95 goes from Player B's bank to Player A, and 5 goes from Player B's bank to Betfair. Player A pays no commission. |
|
By:
I did try to get all the Ryder Cup bettors together in Trafalgar Square, but unfortunately they just couldn't be arsed.
|
|
By:
Dj why do you insist on having a pop at the establishment that pays your wages(be it indirectly). It's like me going into work and kicking my boss right in the F A N N Y.
|
|
By:
we were going to give the commission to charity (less ex's of course)
|
|
By:
*****is quite an acceptable word here in England :)
|
|
By:
oh, perhaps not.
|
|
By:
I'm not having a pop Bridgey. I can see huge financial logic in restricting/banning accounts for Betfair, and I'm asking two questions
(1) If it does make overwhelming sense for them to start restricting/banning accounts, is there not a fair chance that this might be realised and (2) If you have phone vote insiders in particular hoovering up bets on known results, after the voting lines have closed, how much more profit could Betfair make if it restricted or closed down the people who hoovered, as that money instead of being taken out of the system, would then be shuffled around the vast majority of genuine punters instead, resulting in more commission for Betfair. I have also acknowledged that betting using a phone vote is completely legal. I think both are fair questions. |
|
By:
Apparently, a large portion of betfairs liquidity is provided by a very small % of accounts. If they banned these people (effectively the market makers who provide the liquidity for small punters to bet into) then the whole stack of cards would collapse.
|
|
By:
If player A has 60000 commission points he wins 97.50 because he only pays 2.50 commission.
|
|
By:
All joking aside though, it could be a genuine threat. Killing off the cash cow for all you big players if it happened what could you do to continue trading lose a % on purpose to avoid being closed down?
|
|
By:
gray309> I agree with you that the vast majority of liquidity comes from a very small number of accounts. However, I think most of the accounts with very high turnover are large winning ones. They wouldn't need to be banned, but in the future I can see the base rate going from say 2% to 3%. Its a way of extracting revenue from the people who would pay the highest price to use the product.
|
|
By:
Gray a fair point made.
|
|
By:
DJ - please stop using the term "hoover" - the generic term is "vacuum"
you know, the one that nature abhors. |
|
By:
Yep, raising the bottom commission rate from 2 to 3 would be the sensible thing to do dj but dont lets go giving them any ideas :)
|
|
By:
DJ I think you are right Betdac put there's up to 5% across the board a very bad move just increasing B F monopoly
|
|
By:
and isn't BF a business of some sort ? it might confuse the japs but surely not yourself ?
|
|
By:
Bridgey> they don't need to close any accounts down, but I can see in the future that they may change their pricing mechanism to extract more money from winning accounts.
The problem here is that some sports rely on symbiotic relationships with other markets (Betfair cricket had its rules changed to fall into line with Asian markets), and you'd have to structure commission charges differently according to the independence of each event on Betfair from other markets. |
|
By:
''OK, so you close the winning accounts down and lose the large commission they generate, and your profits increase..? I'm missing something here..?''
That's only one way of looking at it - you could just as easily say that the commission is charged on the losses the losing punter pays to the winning punter. Some may feel the biggest winners here are Betfair's most valuable customers, but I'd suggest the converse is true - it's the losers who keep this site going. What's more the losing punters' continuing custom is far from guaranteed, whereas no one who is winning here consistently is going to pack it in voluntarily. The consistent big winners make a lot of noise on this forum about how the place couldn't run without them, but in reality, it's the (often silent) losers who do most to oil the wheels. |
|
By:
DJ ref my post cash cow how would you avoid closure or how could you continue to trade without B F
|
|
By:
Bridgey> I'm sure there are many other ways of putting food on the table ;):)
|
|
By:
CAT - wheels don't need oiling. your metaphors are getting out of hand.
|
|
By:
and cash cows aren't real cows either.
|
|
By:
DJ if they increased commision wouldn't you have to bite the bullet as no other exchange has the liquidity of B F
|
|
By:
What would be the maximum win amount per account per year?
|
|
By:
liquidity is just a frame of mind. there's only so much cash flying around you know.
|
|
By:
dogdice on some exchanges you would struggle to get 500 matched how would dj and troy etc get matched without bf
|
|
By:
I can't see its in Betfair's own interests to allow winning accounts, in particular ones with 100% success rates on different sports.
My gut feeling is that once the target is no longer growth, but rather extracting maximum profit from the current userbase (with a stable rate of churn of new customers to replace older losing accounts), the sights will be set towards extracting more money from the accounts who have the highest elasticity of demand for the product (the big winners, or the uncontrollably addicted). |
|
By:
In the end there will be just two accounts in active use, and those two will battle it out to become the King of Betfair. Then the competition will be over for another year and we can all start again?
|
|
By:
the free publicity generated by the limited number of big winners may be worth more than restricting them.
It is interesting to think of the implications of charging the winners more commission, whilst charging the losing/turnover accounts less. Your point about restricting user activity which appears to be exclusively benefitting from prior knowledge is, of course, a valid one. (although it's getting a bit boring reading it again and again). |
|
By:
bridgey - they would just have to try harder. simple as that.
it's a zero sum game, so they should quit while they're ahead. have you heard of Amaranth ? |
|
By:
"elasticity of demand"
Anyone for a game of Buzzword Bingo? |
|
By:
If they start closing winning accounts no one will play and the business will die.
|