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frog2
26 Aug 15 10:20
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Date Joined: 01 Feb 08
| Topic/replies: 4,229 | Blogger: frog2's blog
15 years ago Betfair paraded a coffin in London announcing the end of bookmakers. Today there is news of Betfair merging with one of the biggest recreational bookmakers in the world. How did it all go so wrong?

The original idea was brilliant. Punters bet against themselves directly so the bookmaker takes no risk. Punters loved the new idea. They came in there tens of thousands to bet at bigger prices, lay horses they didn’t fancy and to trade on price movements. We all told our friends and they told their friends. We were all in it together fighting the establishment who was trying to shut Betfair down. Many customers worked for free helping Betfair build its case to stay in business. People like Andrew Black, Mark Davies and Mick Stone understood the change they were making to the world of betting. It was truly a revolution.

As the company grew liquidity grew. All was good. During the 2000s three major problems occurred. (1) Some punters were winning too quickly and (2) International expansion was stopped by increased protectionism (3) They failed to educate punters how to use the exchange.

Betfair has two options to deal with some punters winning too quickly. Either, assess who was winning and take measures to make the exchange fairer to stop them or charge the winners more money. No action was taken to make the website fairer. To this day you have in running betting on racing with a 1 second delay whereas the TV pictures can be over 5 seconds delayed. The on course players are cleaning up. The same applies in tennis. This unfairness drives the recreational punters away.

Their preferred option was the much hated Premium Charge. 40%-60% of winners’ money taxed. The result was the much loved company became hated. It was up there with the rest of them taking every last penny it could with Betfair. But nothing was done to stop the losers losing too quickly. To this day the on course players and courtsiders are still creaming off their supernormal profits. The only difference is Betfair now takes a bigger slice of those profits.

The result of the charge was a quick win for Betfair. But it started the long term decline of the stage. Figures (see ‘THE PREMIUM CHARGE MUST BE SCRAPPED’) show that non-inplay betting has been decimated by the Premium Charge. Side markets in all sports have all but disappeared. One of the unintended consequences is some bigger markets have grown due to big players churning money to avoid the charge.

Betfair have no idea how big the exchange would have been without the Premium Charge. 10%-20% annual growth in the horseracing pre-play markets stopped overnight. Without the charge would the average a race be over a million now? We will never know because they took the greedy short term choice rather than deal with the heart of the problem and making the exchange fairer.

It was natural that with the side markets gone, the exchange growth stopped, the Betfair educational department gone and other countries closing the door Betfair would go with sportsbook idea. The new CEO has done a great job for those that hired him. Share price flying and now a merger with his old firm.

But where does this leave the revolution? Those of us who have stuck with the exchange for fifteen years have been betrayed. All the founders left years ago and Betfair is now just another greedy corporation serving its shareholders and top management. The sportsbook is great for them. It brings in the mug money through bait offers like ‘best odds guaranteed’ and free bets. But no one that has a clue can place a bet. Like all the others it is not a bookmaker. It is place where losers hand over part of their pay check each week and winners are not welcome.
It was not supposed to be like this. Andrew Black set out to revolutionise betting not become a bookmaker. It was a good business making tens of millions a year in commission as an exchange. But somewhere along the line they got greedy and wanted more. They got more but the revolutionaries are now firmly part of the old establishment. There were several attempted revolutions in France before the monarchy finally fell. Will there ever be a second betting market revolution?
Pause Switch to Standard View Paddy Power Merger: The final betrayal?
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Report cdog August 26, 2015 10:26 AM BST
"The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which."
Report Mr Magoo August 26, 2015 11:12 AM BST
frog2, do you have any opinion on the other fledgling exchange out there, SMarkets?
Report Gin August 26, 2015 12:15 PM BST
The mods won't approve my pictures so have to share them as links.

They are from the birth of Betfair and include the bookies obituary:
.
http://tinypic.com/view.php?pic=2vb8kf9&s=8#.Vd2ezJfy2N9
.
http://tinypic.com/view.php?pic=svga3q&s=8#.Vd2fXZfy3Bg
Report Johnny The Guesser August 26, 2015 2:36 PM BST
Corporate greed knows no boundaries. No matter how much profit a company makes , the shareholders demand even more next year. That is the way of the world. To believe otherwise is naïve.

The exchange concept, as brilliant a concept as it was, just can't generate enough profit to satisfy PLC shareholders.

Would you rather own shares in a pure betting exchange making a few million a year or in a messy rag tag and bobtail business making over a £100 million a year ?

What next ? Fewer markets , higher commissions and restricted even closed accounts. There will be no desire to expand the exchange , far better to let the sharp minds  bet against each other and have an in-house hedging system to control fixed odds risk when needed.
Report reb August 26, 2015 3:49 PM BST
Thanks for posting those pics,Gin. The bookmakers live on but they will have to change their ways.
Report DStyle August 26, 2015 3:51 PM BST
yep, they certainly changed their ways. instead of looking to get exchanges closed down, or have prohibitive taxes placed on them, they just bought them out instead.
Report Westender August 26, 2015 5:31 PM BST
Not in that order.

They get their staff to apply for the top post, run the Exchange down then they pounce for a takeover.

Agent Corcoran's work is done LaughLaugh
Report vic August 27, 2015 11:41 AM BST
If I remember correctly Mark Davies once said "Betfair make about 2% on all amounts matched". If a new Start-Up had all Markets as UNMANAGED and therefore reduced costs it would a licence to print money and punters would be happy as well. The only downside would be that punters would have to be more wary. A small price to pay for an Exchange that would be dynamic.
Report TheVis August 27, 2015 11:57 AM BST
No exchange will work without market makers and as Frog said earlier, £10, £20 and £50 bettors who are happy to lose and reload on a continual basis.

I think the years have shown there is only room for one exchange and bar some kind of very unlikely individual sport regulation, one exchange will remain.  Nobody moves unless the biggest players move and they are going nowhere even now as I strongly suspect they don't pay premium charge and are happy enough with a very small ROI on a huge turnover.
Report Westender August 27, 2015 2:13 PM BST
But they will move if Puddy Flower close their accounts
Report sideshowbob August 27, 2015 2:55 PM BST
exactly, as soon as accounts get closed the exchange is finished. as all uk bookies close accounts left right and centre, what are the chances theyll leave the exchange alone? limiting stakes on an exchange obviously isnt a realistic option. premium charges may have drove some away, but closing accounts will kill the exchange stone dead. all that will be left is paddy seeding the markets themselves and having to shutdown anybody who makes even the tiniest profit off them.
Report TheInvestor2 August 27, 2015 8:28 PM BST

Gin 26 Aug 15 12:15 Joined: 02 Jun 03 | Topic/replies: 1,886 | Blogger: Gin's blog
The mods won't approve my pictures so have to share them as links.

They are from the birth of Betfair and include the bookies obituary:
.
http://tinypic.com/view.php?pic=2vb8kf9&s=8#.Vd2ezJfy2N9
.
http://tinypic.com/view.php?pic=svga3q&s=8#.Vd2fXZfy3Bg


This brought a wry smile to my face Plain
Report askari1 August 28, 2015 2:08 AM BST
I can't believe the mgmt. of the potential merged company haven't run how they'll handle the exchange past its big MMs.

The people for whom the deal will be bad are the smaller skilled winners, taking between 5k to many times that amount out the system. Anyone price-taking successfully without providing massive spot liquidity is in the new company's sights.
Report Templeton Peck August 28, 2015 9:35 AM BST
PP aren't going to close down winning accounts on the exchange!  I don't wish to be rude but that's laughable.  What's more likely is they'll snoop.  They'll look into what the winners are doing and use that info, whether it's to help sportsbook pricing/exposure or to mimic the activities on the exchange themselves.
Report artie August 28, 2015 5:16 PM BST
Of course PP may make no changes at all.Ever considered that one, moaners ?
Report TheInvestor2 August 28, 2015 5:49 PM BST
Rumour has it that the first change is to kill of the already moribund forum.
Report TheFear August 28, 2015 7:54 PM BST
Did you start the rumour just now?
Report Coachbuster August 28, 2015 7:59 PM BST
PP won't interfere .


there will be many on here making small amounts ,but that helps the system -  it would cost PP more in FT traders .

many will be laying at huge odds - PP and other bookies could do that if they wished ,but NONE of them do .

It's not what they're interested in .

Picture sharks are the biggest problem
Report TheFear August 28, 2015 8:03 PM BST
Pictures could be viewed as one good thing to come out of this. Previously no betting company apart from Betfair really required "live" pictures for their customers (although they were all happy to have them themselves via Cobain). Now at least we have the combined power (no pun intended) of PP and BF it may have more influence.
Report Dav_vin03 August 28, 2015 11:29 PM BST
good read OP
Report TheInvestor2 September 3, 2015 6:48 PM BST
TheFear
Date Joined:    09 May 14
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28 Aug 15 19:54 Joined: 09 May 14 | Topic/replies: 638 | Blogger: TheFear's blog
Did you start the rumour just now?


Yes. Yes, I did Cool
Report Latalomne September 4, 2015 10:12 AM BST
Maybe I'm being thick, but why would PP want to improve the speed of pictures?  Surely that time 'edge' is required for them to maximise profits from their own in-play offerings?
Report TheVis September 4, 2015 12:04 PM BST
I think for racing certainly the theory is that given near to live pics there would be a lot more players in-running on the exchange.
Report G1_Jockey_4 September 4, 2015 4:02 PM BST
so are bettypowers gonna buy out racinguk and atr so they can make the pics faster?
Report slayerofthe'kins September 5, 2015 11:54 PM BST
The problem with the premium charge was that it didn't discriminate between types of betting. In running hoverers pay it. People who lay every horse and make a book for 0.3% profit and who provide huge liquidity pay it. But it was never supposed to be fair. It was supposed to take money from profitable gamblers who couldn't go elsewhere. And they promised they would put it back into gaining more exchange clients. Yeah right. I make more money elsewhere now than from betfair. One day I will quit possibly. We will just be left with another bookie, but hopefully, someone not so greedy, will rise up and replace them.
Report Gin September 8, 2015 11:30 AM BST
The deal has been done:
.
http://www.theguardian.com/business/2015/sep/08/paddy-power-and-betfair-merger-agreed
Report longbridge September 8, 2015 5:27 PM BST
It's not 'done' until the shareholders approve it, regardless of what the boards agree.
Report Gin September 8, 2015 6:03 PM BST
Good point Longbridge Blush

What I should have said is that the terms of the merger have been agreed
Report Westender September 8, 2015 8:57 PM BST
The merger is a formality

Betfair Exchange RIP
Report pablo-fanque September 8, 2015 9:00 PM BST
Betfair Exchange RIP

why do you think this ?
Report fixed September 8, 2015 10:08 PM BST
because he may have been a (marginal) winner when gambling was a lot slower and isn't anymore


those guys bid farewell to the exchange when PC was introduced in 2008, when it was raised in 2010 and again in 2012

you will get used to it.... no matter how often proven wrong some humans will never stop making stupid predictions
Report Westender September 16, 2015 8:00 PM BST
Liquidity has disappeared big time since PC so observations are spot on guys.

Marginal winners like myself bet on here occasionally compared to the past as the profits per hour work out at less than 20& of the minimum wage when PC kicks in.

Most people on here can make far more money impersonating a sign on the street or selling newspapers.

Betfair needs to offer people incentives to bet on here or they go elsewhere to bet or do other things with their money.

If nobody wins except Betfair, then not many stay long term.
Report Mistermind September 24, 2015 11:48 AM BST
Approximately what is the ratio these days, of Betfair turnover from Fixed Odds bookmaking in contrast to Exchange matching?
Does Betfair have reason to exit exchange matching as a business?  If so, surely **** would step into the breach?
Report frog2 September 24, 2015 1:29 PM BST
They stopped splitting the sportsbook and the exchange data a couple of years back.

Looking at Q1 results for each financial year by revenue

Exchange
2011 59.6m
2012 59.5m
2013 68.9m
2014 60.0m

Growth in the exchange basically stopped when the Premium Charge came in.

Sportsbook
2011 3.9m
2012 0.3m
2013 3.4m
2014 4.0m

Since FY 2015 they have combined the two as 'sports'

2011 63.5m
2012 59.8m
2013 72.3m
2014 64.0m
2015 83.0m
2016 89.9m

So it appears all the recent growth is due to the sportsbook. Obviously no way to know for sure. It has the pull factor of a £100m a year plus marketing budget and the exchange has had the push factor of the premium charge since 2008 and the super premium charge since 2011.
Report Westender September 24, 2015 5:04 PM BST
The Sportsbook remains a small todger when you consider Betfair purchased the Blue Square customer base.

Even after hiding the Exchange, spending millions advertising the Sportsbook and taking football matches/other markets off the Exchange - the Betfair Sportsbook is still the equivalent of a 2 inch penis when erect.

No wonder they agreed to a Paddy Power takeover. LaughLaugh
Report longbridge September 24, 2015 5:50 PM BST
@Westender

I don't see how your numbers work.  Most recent PP Annual Report (FY 14, so year to Dec 2014) has annual online sportsbook revenue of EUR 194m - say about £140m.  Recent updates (August 2015) are less detailed but talking about 25-ish % increase year on year, so assume their online Sportsbook is at £175m annual revenue currently.

If we go with frog2's suggestion that all the growth in 'Sports' is actually Sportsbook and the Exchange revenues are flat, that gives us an estimate of £30m extra revenue in Q1 FY2016 (May-Jul 2015) over the corresponding quarter in FY14 which we must attribute to Sportsbook revenue or crudely a £120m annual revenue currently.

That's all a bit 'back of a **** packet' but it puts the BF Sportsbook as about two-thirds the size of the PP one and definitely up there with the main online players.
Report longbridge September 24, 2015 5:51 PM BST
Wow.  The common slang term for 'cigarette' gets asterisked by the BF naughty words filter!
Report frog2 September 24, 2015 7:05 PM BST
What is unclear is the cost of the '£120m a revenue' from the sports book. How much of the £100m plus marketing budget goes on it? How much management time is spent on it? How much growth has the exchange lost because of it (and the PC)?
Report Westender September 25, 2015 9:35 PM BST
If the Betfair Sportsbook is growing so quickly and soon to overtake Paddy Power in terms of market share - why are they being taken over by the Irish?

Betfair lack transparency when reporting figures - all spin and window dressing aimed at achieving a short-term objective in boosting the share price.

Betfair Sportsbook is a small todger when you take the boxer shorts down.
Report frog2 September 26, 2015 10:02 AM BST
Paddy power online sportsbook revenue was £305m (412m euro).

The figures Longbridge is quoting are the operating profit online. These include online gaming revenue and exclude 320m euros of costs. PP also give their sportsbook margin of 8.9% on turnover. Betfair does not profit any real detail on its sportsbook revenue, margin or costs.
Report Westender September 26, 2015 12:58 PM BST
jamesdean works for Paddy Power and will hopefully provide the inside line
Report stu September 26, 2015 5:39 PM BST
105 on the footy forum recently saturday, live game on, and about same as a small local bookies could hold standing around, most prob not even reading the forum...

From the equivalent of inventing a cure for cancer, they create a business that fails. Surely an epic case study for future business studies academics?
Report stu September 26, 2015 5:56 PM BST
76 now Plain
Report Westender September 26, 2015 6:13 PM BST
The customer base has dried up and no surprise when you consider the following:

1. The Exchange hidden away from potential new customers on www.betfair.com
2. Zero advertising for the Betfair Betting Exchange
3. Increases in commission for foreign customers
4. Failure to apply for Exchange Licence in many countries
5. Live Video Streams cut to the bone
6. Football matches taken away from the Exchange
7. A very reliable Sportsbook website but a bucket of dug poo for the Exchange Website
8. Plenty of offers on the Sportsbook but ZERO offers on the Exchange

The net result of this deliberate action is that liquidity has increasingly dried up on the Exchange.

This is all under the watch of the current Betfair CEO (Paddy Power) and current Paddy Power Betfair CEO.

Yet jamesdean and Darlo Bantam fail to notice
Report pablo-fanque September 26, 2015 6:35 PM BST
westender

what markets do/did you bet on and what PC bracket are you in ?
Report Darlo Bantam September 26, 2015 9:12 PM BST

Sep 26, 2015 -- 6:13PM, Westender wrote:


The customer base has dried up and no surprise when you consider the following:1. The Exchange hidden away from potential new customers on www.betfair.com2. Zero advertising for the Betfair Betting Exchange3. Increases in commission for foreign customers4. Failure to apply for Exchange Licence in many countries5. Live Video Streams cut to the bone6. Football matches taken away from the Exchange7. A very reliable Sportsbook website but a bucket of dug poo for the Exchange Website8. Plenty of offers on the Sportsbook but ZERO offers on the ExchangeThe net result of this deliberate action is that liquidity has increasingly dried up on the Exchange.This is all under the watch of the current Betfair CEO (Paddy Power) and current Paddy Power Betfair CEO.Yet jamesdean and Darlo Bantam fail to notice


Really. Show me exactly where I've failed to notice any of these points?

Report frog2 September 26, 2015 10:59 PM BST
The customer base has dried up and no surprise when you consider the following:1. The Exchange hidden away from potential new customers on www.betfair.com

default landing page is the sportsbook not the exchange.

2. Zero advertising for the Betfair Betting Exchange

Have a look at TV and press adverts since the new leadership. They are all for the sportsbook. The 'betfair' brand of revolution and great value has been shipped onto a regular sportsbook.

3. Increases in commission for foreign customers

has a look at the market base rate for markets in non-uk countries.

4. Failure to apply for Exchange Licence in many countries

The policy as a plc is to not get involved in grey markets.

5. Live Video Streams cut to the bone

Cannot comment.

6. Football matches taken away from the Exchange

I understand that there are more matches on the SB than the exchange now.

7. A very reliable Sportsbook website but a bucket of dug poo for the Exchange Website

Cannot comment on quality of sportsbook website.

8. Plenty of offers on the Sportsbook but ZERO offers on the ExchangeThe net result of this deliberate action is that liquidity has increasingly dried up on the Exchange.This is all under the watch of the current Betfair CEO (Paddy Power) and current Paddy Power Betfair CEO.Yet jamesdean and Darlo Bantam fail to notice

All the offers are to lure punters to the sportsbook. Where are the offers to new exchange punters? How has the tens of millions in premium charge revenue per year been used to attract new fish to the exchange??
Report stu September 27, 2015 3:18 PM BST
Compare the pathetic effort to advertise the BF exchange, to the lurid campaigning that has been lavished for the sportsbook.

It really beggars belief why marketers thought such a non-original product (a bookies) was worth marketing so much more than the unique exchange concept.
Report stu September 27, 2015 3:23 PM BST
39 viewing current live world cup rugby game forum thread - years ago that would have been 390 or more.
Report Coachbuster September 27, 2015 6:07 PM BST
the forum will be dying  anyway if the SB are taking all the exchange customers.

.... there is quite a clear a link to the forum on the exchange  - but not one for the SB as far as i can see .
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