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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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Replies: 167
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brilliant post
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Absolutely, spot on frog2
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Great post,frog. Well said.
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agreed and have been on here since 2002 so sad to see this outcome
but don't understand the bit about some punters winning too quickly, where was the impact on betfair of this, they were taking commission so why did it matter who was winning and who was losing? i've never really bet in-play much although i can see the attraction but not sure how betfair could have overcome the delay in some of the pictures which punters were using to influence their in play bets - can you explain? and finally, whilst not a conspiracy theorist!, it wouldn't be a surprise if somewhere down the line we find out that betfair BOTs were creaming up on some of the markets, certainly now they are a full blown bookmaker rather than a peer-to-peer betting facilitation service, i think that possibility has increased |
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Good stuff, Frog...
Wonder how your 2030 Synopsis will read? |
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A couple of things will certainly happen
1. The hope that more losing punters (lets keep it polite) will migrate to the exchanges will be diminished. The exchange will be kept going but not for the recreational punter that we all need to win and would love to see more of on here 2. Winning exchange players will be data mined in order to improve the books on Power |
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lost me at pay check ..
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Well said Frog and I agree with Gordon - there should be total transparency on BF bots
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Great post Frog.
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agree with all your post frog. well said.
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Excellent post,frog.
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Andrew Black was no philanthropist. He was a city trader and the grandson of a Tory MP ( the Mary Whitehouse of his day ).
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I don't think Mary would have approved, salmon.
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Neither would Sir Cyril. He thought gambling was almost as evil as sex
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we have been sold down the river
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Some very Good points frog!
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There will always be those that disagree,and I am in that camp.I have been with Betfair since I was invited to there former premises at Parsons Green ,employing just a handful of people,and watched their growth with interest.
What is mistakenly forgotten by the constant moaners is that in the near 16 years since this exchange came into being the betting world has greatly changed,and companies that don't move with the times don't progress. Yes,liquidity on horse racing has greatly diminished overnight and early morning,hardly the fault of Betfair. The use of bots is a big contributor to the introduction of PC.and is responsible for several of the problems. Liquidity on sports(T 20 cricket for an example) has shown big growth,as has football,tennis etc. Horseracing,which for many of us,is the main thing,still has good liquidity for the bigger races,because those are the races that most want to play on,so some of the smaller midweek dross shows a decline,which isn't unexpected. Imagine having no Betfair,like pre 1999,it is hard to fathom,and for most gamblers I expect it is still the first port of call for wagering.Being able to lay is a fantastic option,and shouldn't be under appreciated. What services Betfair now offers are vast,and I see nothing wrong in that.This forum is loaded with constant complaints about punters having accounts with the firms closed,or restricted,meanwhile this exchange offers full service. It will always be possible to find fault with any company over a period of time,but my experiences of using this site,including now the new site,that received unprecedented moans,are still it is a great operation. I look forward to the negative response from the forum. |
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Excellent post.
"Merger" is just semantics too. The deal being reported has Paddy Power as the 52/48 the majority owner of the "merged" entity. A merger would be 50/50. Betfair is becoming a subsidiary of Paddy Power if this deal goes ahead. All so sad, thinking back to how it all started... |
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I cannot foresee any benefit to the current betfair platform because of this, admittedly it makes the business stronger but at who's expense ?
Just look at what Fred Done has done to the TOTE, it used to be a viable betting platform but is just an industry joke now. |
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Yes,liquidity on horse racing has greatly diminished overnight and early morning,hardly the fault of Betfair.
Premium charge, customer service diabolical, Volor le vadette fiasco, unsuspended markets, downtime with customer funds at risk, voided bets when it suits them, any customer loss due to a BF fault is ALWAYS a customers fault, broken promises to customers, etc etc etc. They have turned themselves into a company that is dispised, but due to no viable alternative the exchange is still here. |
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PS - good post frog
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The future of the industry is, and has been for a while in Asia imo, particularly for those larger/profitable punters.
I'd expect the likes of Pinnacle, SBO and IBC etc to begin taking a bigger and bigger share of the pie over the next decade or so as the exchange continues to decline, and the rest of the industry begins to go bust from being restriction-happy and refusing to take bets from even long term losers |
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Only problem is pinnacle, sbobet and ibcbet aren't in the UK market anymore. So for UK gamblers there is no future.
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agree ted.
think this merger is a way of cashing in their short term successful policy. long term it faces a really tough ride imo. |
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great post frog
quite likely ted brogan, but would love to see an exchange developed in asia, if betfair shrinks surely someone will pick up the idea and opportunity missed/lost |
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Near perfect summary the only thing I would add is that the PC made a farce of the 20% better prices bullshit cos if you actually won/win the PC charge would/will take that away and more. Trades description Act?
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Don't Betfair have a huge database of customers compared with normal bookies. Ladbrokes now have my details because I have a ( dormant ) account with quack. They wouldn't have them otherwise. Same goes for PP.
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Its a legal minefield though. UK customers are not even supposed to bet with these firms. There is a huge market here in the UK but the bookies are growing it as a 'bit of fun' for recreational players. The serious punter in the UK is running out of legitimate places to play.
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Yomo, the big boys get around those restrictions already by using agents etc.
If/when the Asian books have enough big UK players going through agents in asia, and the UK industry is dying on its ar5e, somebody in the government will realise that a small % of a big figure is better than a large % of a small one, and will bend over backwards to let the Asian books back in. I forgot to say thanks for your great post frog. Only thing I'd add is that when Betfair came on the scene, the idea of a 100% book (minus 5% commission) was the real attractive draw to most, as everywhere else in the UK industry was still betting a 1X2 football market to 115-120, minimum trebles etc etc. Betfair's smaller margins forced the bookmakers to reduce theirs, thereby gradually lowering the price difference between Betfair and their rivals (added to further by PC etc) |
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The majority don't trust anonymous agents with their money.
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Another possible route may be that one of the failing UK books (ie Jokes/Lads) may realise that the way they're currently running things is counter-productive in the long-run, and attempt to recreate an Asian-style book whereby they lay large bets to small margins and don't fanny around with a load of pointless side markets that they won't take a bet on, but have on their site because it'll get them 6 lines of free publicity in tomorrow's paper.
Unfortunately, for this to happen, you'd need someone with good industry knowledge and insight, as well as some balls, at the top running it, and as we know, the UK bookmaking industry these days is run by bean counters |
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Betfair RIP? A good post Frog.
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Dont really matter who own Betfair it is and will be for a very long time the best thing since sliced bread ..... no knock backs , and you can be on ...unlike the high street or oncourse books ..........
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Hi Paddy, any special offers today?
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Frog what difference does it make to you who owns Betfair ?
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frog2..a great post.
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In some ways it doesnt matter who owns BF but there has to be to some degree a conflict of interest in the same group owning an exchange and also operating as a traditional bookmaker. Since the advent of the sportsbook this was the case anyway but not to the same degree as with this new merger. There are obviously going to be winners and losers as but it hasnt come about to benefit the punter.
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zipper - years ago you could easily get a decent bet on here in the morning, and even the night before. You see a bit of a punt on one now and if something goes from 14 to 8 on here there will only be a few hundred matched on that selection. Years ago it would have been a few thousand.
Do tell us all how to get a couple of hundred on a 10/1 shot on here at 10am, stick up 50 quid and a £2 bot jumps in front, you go in front of that and it does the same. Before you know it it's 8/1 and then goes blue on oddschecker (as they are all linked up to here) and not even a quid has been bet. The lemmings think they see a gamble and it goes even shorter. I would guess there are plenty making money just from market manipulation due to the markets being so easy to dictate. |
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Zipper, different owners (and top management) run the business in different ways. The reason for the Premium Charge was sold to punters because Betfair needed the money to get new customers to the exchange. The current managers and owners are not doing using the money for that. They appear to not have being trying to grow the exchange for a long time. Thats great for the managers and owners. It has worked from their point of view.
Had a different person taken over the helm of Betfair, e.g. someone who had run a financial exchange, you would have seen a very different Betfair today. So it makes a huge difference who the shareholders bring in to run the company. Most of the revenue for the new company will now be from reactional 'bookmaking'. My point we all backed the revolution Betfair started. We made their markets and spread the word for them. Now they have a 'brand' they have joined the establishment and gone back to being part of exactly the thing they were trying to destroy in the first place. |