General Betting
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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?
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?
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"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."
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frog2, do you have any opinion on the other fledgling exchange out there, SMarkets?
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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 |
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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. |
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Thanks for posting those pics,Gin. The bookmakers live on but they will have to change their ways.
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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.
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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  |
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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.
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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. |
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But they will move if Puddy Flower close their accounts
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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.
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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  |
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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. |
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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.
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Of course PP may make no changes at all.Ever considered that one, moaners ?
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Rumour has it that the first change is to kill of the already moribund forum.
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Did you start the rumour just now?
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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 |
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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.
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good read OP
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TheFear
Date Joined: 09 May 14 Add contact | Send message 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  |
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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?
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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.
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so are bettypowers gonna buy out racinguk and atr so they can make the pics faster?
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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.
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The deal has been done:
. http://www.theguardian.com/business/2015/sep/08/paddy-power-and-betfair-merger-agreed |
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It's not 'done' until the shareholders approve it, regardless of what the boards agree.
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Good point Longbridge
 What I should have said is that the terms of the merger have been agreed |
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The merger is a formality
Betfair Exchange RIP |
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Betfair Exchange RIP
why do you think this ? |
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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 |
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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. |
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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? |
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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. |
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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. |
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@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. |
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Wow. The common slang term for 'cigarette' gets asterisked by the BF naughty words filter!
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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)?
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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. |