When Andrew Black and Ed Wray started Betfair back in 2000 they could not have dreamed what was about to happen, from zero to Billion in less than a decade, in fact, Betfair was so successful that it won the coveted Queens award for enterprise!
In the late 1990’s we had what I would like to call the betting revolution, it started when people like Victor Chandler took their business offshore, it gave a competitive hedge as 8% betting tax was being saved, the Betting exchange idea was also tax efficient, peers could bet against each other without having to pay anything to the state, furthermore,this could be done without moving away from the UK, in terms of being competitive the exchange went even further, Bookmaker margins where effectively eliminated, the only charge was a commission on winnings! Exchanges had found a concept that could scale rapidly!
Black and Wray realized that liquidity was the key to success, the platform they built was vastly different to the one flutter.com was using, at Betfair punters could take part or all of the bet, they could also request a bet to be matched, its main rival flutter.com had serious limitations, all bets offered had to be matched in full, this created a scenario where the layer were forced into splitting their offer, the result being a lot of small bets where being offered, it was messy to say the least.
The real breakthrough for Betfair was the day it joined forces with Flutter.com, database and liquidity increased overnight, the beast was gathering momentum, in the coming months they also managed to get the customers of Sporting options, a company that had failed badly and was about to default on its clients, Betfair received great publicity when it agreed to payback the customer funds of sporting options.
The betting exchange idea was nothing new, years earlier a company called SSP operating out of Luxembourg offered high rollers a fax/Tel service that allowed customers to call in odds and betting offers, the betting sheet was faxed out to clients every morning, the minimum bet was $500and commission was 3%, the concept ran its course until technology came to the fore, the ascending of the world wide web changed everything!
Betfair gathered pace despite the objections of the bookmakers, by 2005 it was in literal control of the horse racing market, on course bookmakers where simply tracking the prices and arbitraging back,Customers of betfair where literally controlling the S.P. mechanism.
It was all looking extremely rosy up to 2008, Betfair in its greed to satisfy shareholders introduced the dreaded ‘premium charge’,this was a further commission on winning punters, the whole concept of betfair was taken down with catastrophic publicity, Greg Woods a leading journalist commented ‘Betfair was started by punters for punters and has transformed the betting landscape in less than a decade. The news of premium charges, though,could spark the moment when it stopped being a plucky start up and turned into another faceless corporation.
The other exchanges saw their chance and parodied Betfair’s name, with ads like, ‘pay even more commission’ and ‘how’s that betfair’, in 2011 they upped the premium charge to a whopping 60%, for me the whole concept of their business died that very day!
More recently, in 2013 Betfair turned down a GBP 9.50a share takeover bid, the board threw its support behind CEO Brian Corcoran,In his recent CEO review Corcoran said; "The Exchange appeals greatly to many consumers but does not fully address the mass market, due to perceived and real complexity." In order to overcome this apparent shortfall in the betting exchange model, Corcoran has set his stall out around adding a sports-book to the Betfair portfolio. With the introduction of a sports-book the entire ethos of the Betfair brand has been undermined.
The wheel came off for Betfair when countries like Germany, Cyprus, Greece and Spain introduced restrictive legislation, this affected revenue by a whopping GBP 24 million, the future doesn’t look too bright either, more restrictions are under way, it was recently reported,online betting companies based in offshore havens to sidestep Britain's gambling taxes will be hit with a new levy that could cost the industry £300 million ($467million).Under rules published today, Britain will tax gambling according to where customers are based rather than where the online operator is registered,this means that offshore operators will pay the same 15% tax rate as domestic remote-betting companies. Betfair derives most of its business from the UK, its Malta operation will become a liability!
Betfair are lacking direction, they are nothing more than another Betting company, the opportunity to win has become more difficult since the introduction of the ‘premium charge’, the masses of customers that lose on a regular basis will continue to feed the beast, accept, opportunities are limited and it’s not about to improve!
For professional online sports-betting punters there is only one way to go, you simply need to bet with theAsians (Asian handicap bookies), get yourselves a decent broker account, you will be able to operate a single wallet account and have access to Bookmakers that don’t offer a direct service!
Betfair has had its day!!