Betfair

Betfair

Company type	Public (LSE: BET)
Industry	Online gambling
Genre	The Betfair logo is in reference to the fluctuating betting market
Founded	2000
Founder	Andrew Black and Edward Wray
Headquarters	London , United Kingdom
Key people	Edward Wray, (Chairman) David Yu, (CEO)
Revenue	£340.9 million (2010)
Operating income	£18.4 million (2010)
Net income	£15.1 million (2010)
Website	www.betfair.com

Betfair is the world's largest Internet betting exchange. The company is based in Hammersmith in West London, England.

Since Betfair was launched in June 2000 it has become the largest online betting company in the UK and the largest bet exchange in the world. Betfair claim to have over 3 million clients and a turnover in excess of £50m/week.

A betting exchange allows punters (gamblers) to bet at odds set and requested by other punters rather than by a bookmaker. Members can make both 'Back' bets (normal bets on a selection to win) and 'Lay' bets (bets on the opposite side of the Back, against the selection), thereby eliminating the traditional bookmaker.

Betfair claims on average 20% better odds than those offered by a traditional bookmaker.

Betfair charges a commission on all winning bets, which is set at 5% of the net winnings for most markets, although according to how much a client wagers on the site, it is possible to reduce the amount of commission paid to as low as 2%.

The Betfair interface can be seen as bearing a strong similarity to that of the Stock Exchange, with the 'back' and 'lay' options comparing to the buying and selling of derivatives. Indeed there are many professionals who play the Betfair market for profit, using purpose-designed software 'robots', in much the same way as a Stock market trader.

History

Betfair's co-founders, Andrew Black and Edward Wray, won the Ernst and Young Emerging Entrepreneur of the Year award. In 2003, the company was one of about 50 recipients of the Queen's Awards for Enterprise in the Innovation category. The Queen's Awards are the UKs highest official awards for business.

In October 2005 chief executive Stephen Hill announced his resignation when the board decided not to proceed with plans for a stock market flotation, the investors holding out for a higher valuation.

In November 2005 the Tasmanian government announced a deal to licence Betfair in the state. It was the second licence awarded to Betfair outside the UK - the first being in Malta with subsequent licences following in Austria and Germany - and Tasmania now receives substantial tax revenues. However it infuriated the established monopolistic totalisators and bookmakers (due to loss of revenue) and governments (due to loss of taxes) in the other Australian states. A ban on the use of betting exchanges took effect in Western Australia on the 29 January 2007 but Betfair successfully claimed this new law violated the Constitution of Australia.

In a unanimous verdict by the High Court of Australia on 27 March 2008, the two provisions of the legislation, purporting to ban Western Australians from using a betting exchange and prohibiting an unauthorised business from using Western Australian race lists, were declared invalid as they applied to Betfair. The provisions were characterised as imposing a burden on interstate trade that was protectionist in nature, and therefore contravened section 92 of the constitution. The Court decision suggests, but leaves open, that a more narrowly drafted ban may have been allowed (e.g., banning people in Western Australia from laying 'lose bets' on events held in Western Australia).

On 28 February 2006 Betfair launched a new interface, including current live scores of in-play soccer matches, jockey silks and horse form, and an 'express view' in which only the currently available 'back' odds are viewable. Despite claims of 'dumbing down' from a group established customers on Betfair's forum, there was a significant increase in membership and deposits during the Cheltenham Festival.

Softbank purchased 23% of Betfair in early April 2006 valuing the company at £1.5 billion. In December 2006, Betfair completed the purchase of the horseracing publishing company Timeform (which traded under the name Portway Press Ltd).

In March 2007, Betfair launched its own Betfair Radio service, available via its website, on the telephone and elsewhere. This has now become Timeform Radio, broadcasting horse racing commentary and results.

Betfair won its second Queen's Award for Enterprise, this time for International Trade, in April 2008. It joined an elite group of multiple Queen's Award winners and was recognition of the fact that over half of all new customers now come from outside the UK and they account for 44% of all revenue.

In January 2009, Betfair acquired Macrovision's Television Games Network interactive TV horserace wagering service for $50 million in cash.

In November 2009, Betfair announced a deal with the New York Racing Association that allows Betfair’s customers to start wagering immediately on Aqueduct's thoroughbred races.

In October 2010, Betfair announced to go public with valuations of up to 1.5 billion pounds.

Premium Charge

In September 2008, Betfair introduced a "Premium Charge" for bettors whose winnings are deemed to be disproportionately high when compared to the amount of commission they pay. Specifically, members whose commission charges amount to less than 20% of their gross profits (across at least 250 markets) are required to pay the additional charge to make up the difference.

Even though Betfair insisted that the charge would only affect a very small portion of its members (less than 0.5%), it attracted a great deal of criticism on its member forum and from the broader exchange betting community. The charge has significantly changed the relationship between Betfair and its customers, as Betfair can no longer claim to be a neutral bet exchange provider "where winners are welcome" (its mantra for many years).

The customers most likely to be affected by the Premium Charge are successful traders, whose repeated backing and laying at small margins results in few losses (and hence yield little commission). Backers with a particularly good strike-rate may also be subject to the additional charge.

The charge seems to have had little if any effect on business, with volumes, customer numbers and revenues continuing to grow strongly in comparison with rivals.

Outside the United Kingdom

Although the bulk of its customer base is in the UK, Betfair offers its services in a number of countries. Betfair has never accepted customers and/or credit card numbers from the United States. Betfair was not seriously affected when the U.S. Congress passed strict prohibitions affecting Internet gambling in late 2006.

Betfair's Australian and New Zealand operations are a 50:50 joint venture between Betfair UK and Crown Limited (listed on the ASX). Betfair has several thousand customers in Australia and New Zealand. For the first 2½ years of its existence in Australia, Betfair's marketing activities were restricted to Tasmania, where it has been licensed since February 2006. However, in October 2008 the Victorian and NSW governments announced their intention to remove laws that prevented interstate betting companies from advertising in their jurisdictions. These changes enabled Betfair to advertise more broadly. Betfair is well known in Australia, originally because of negative publicity from the racing industry and the totalisators. However, Betfair signed a landmark agreement with Racing Victoria in July 2006. Befair now has information-sharing agreements with most racing bodies in Australia and most major professional sports, including the Australian Football League, the National Rugby League, the Australian Rugby Union, Football Federation Australia, Cricket Australia, the PGA Tour of Australasia and Tennis Australia. In Australia, Betfair also pays voluntary product fees to sports on whose events it offers markets.

On January 27, 2009, Betfair announced the purchase of the TVG Network in the United States from Macrovision $50 million USD as part of Macrovision's dissolving of TV Guide's assets. The network has a reach of 30 million households.

Controversy

The fact that punters can use exchanges to lay outcomes has caused tremendous criticism from traditional bookmakers with much of the anger coming from the UK's "Big Three" - Gala Coral Group, Ladbrokes and William Hill. Betfair has led their defence by countering that while corruption is possible on any gambling platform, the bookies' arguments are motivated not by concern for the integrity of sport but by commercial interests. Betfair also asserts that unlike the high street brokers, who all accept anonymous cash bets, Betfair is aware of who their customers are. Customers are required to create personal accounts, and Betfair keeps records of each customer's betting history. Betfair in particular has noted that they have signed numerous information-sharing agreements with governing bodies around the world with whom they co-operate fully on matters if the latter suspects corruption to have taken place. The company shares information through agreements with some 30 sports bodies, such as the Lawn Tennis Association and the British Horseracing Association, and has been instrumental in several high-profile investigations into suspicious betting.

In August 2007, Betfair took the unprecedented step to void all bets following a tennis match between Martin Arguello and Nikolay Davydenko, quoting: 'Betfair has suspended settlement of the match-odds market on this afternoon's second-round match of the ATP Orange Prokom Open in Poland between Martin Arguello and Nikolay Davydenko, pending consultation with relevant regulatory authorities.' It prompted the establishment of a new investigative agency by the governing bodies of tennis.

In September 2009, The Advertising Standards Authority (ASA) banned Betfair from running two billboard adverts which claimed that their Starting Price (SP) offered 40% better returns, on average, than the industry SP. The ASA found that only 10% of the bets used by Betfair in their calculations yielded at least 40% better returns than the industry SP.

Refusal to pay winnings and threats to successful players

In November 2010 Betfair offered an attractive bonus promotion. A great number of players who took on the offer were either not paid or were required to return their winnings . Players who withdrew their winnings on time had their account in Betfair set to a negative balance and were threatened by Betfair management as follows: "As your Betfair account held insufficient funds to accommodate such a debit, your account will now show a negative balance. Please fund your account with the negative balance amount of -£xxx at the first opportunity. Failure to do so by 26 November 2010, may result in us taking the appropriate action to recover this sum from you." Some people, who thought successfully withdrew their money, reported that Betfair took back the money from their ewallet, or bank account.

Other services

In addition to its online betting market, Betfair offers a number of gambling-related services.

Betfair Poker

In late autumn of 2005, Betfair finalised a deal that began in early summer, to purchase the online poker site PokerChamps.com, which the company will integrate into its network, replacing a poker arm that previously used gaming technology software from CryptoLogic Inc. On 30 October 2006, Betfair Poker left the Cryptologic network to move to its new platform.

In a press release the company's then poker head, Ben Fried, stated: "Having our own poker software puts us in command of our own destiny. It means we can react quickly to customer feedback and continue to develop an innovative, community-focused product. We are confident that we are laying the foundations of a market leading poker room."

On 21 July 2006, all American accounts were frozen and the return of players' funds were in progress, a move that immediately followed the arrest of David Carruthers, former Chief Executive at BetonSports. Betfair had previously implemented geolocation software in 2004 to deny U.S. residents the ability to place bets on its site.

Noted professional players who were sponsored by Betfair include John Tabatabai, Sorel Mizzi, Peter Jepsen and World Series of Poker Europe bracelet winner Annette Obrestad Since then Annette has left, and moved over to fulltiltpoker and has become a red name pro there. Betfair Poker also sponsor the WSOPE festival, which is a European version of the World Series of Poker held in the USA. This event is held at The Casino at The Empire in London's Leicester Square.

Zero Lounge

In 2006 Betfair Casino introduced its "Zero lounge - where the house has no edge". According to Betfair, perfect play should result in the player having an equal chance of winning or losing. For example, the roulette wheel has no zero. This means that someone playing red-black, odd-even, or high-low has an exactly 50% chance of winning, (as opposed to a 48.65% chance on a normal roulette wheel with a zero). However, in some games, such as blackjack, it is necessary to learn perfect play in order to match the house. Players who draw a card when they have 17 or more are likely to lose money to the house. The zero blackjack rules have been slightly modified (re-written) compared to normal European blackjack. For example natural suited blackjacks pay 2 to 1 instead of 1.5 to 1, Any five card 21 automatically pays 2-1, pairs of aces cannot be split, all other pairs can be split, including 4s, 5s, and 10s, only one split is allowed, doubling is allowed on 8, 9, 10 and 11, including "soft" 18s, 19s, 20s and 21s, and insurance can be taken any time the dealer shows an ace, no matter what cards the player holds.

The games offered in the Zero lounge are blackjack, roulette, baccarat, Jacks or better and Crazy Eights .

Tradefair

Launched in November 2008, Tradefair offers financial betting and trading. Tradefair brings the benefits of Betfair's technology to the financial bettor and trader.

Tradefair currently offers Tradefair Spreads, which is a financial spreads betting product. It allows you to speculate on the movement of stocks and shares without using a stockbroker and therefore does not require a commission payment. Tradefair Spreads aim to help customers new to spread trading with automated stop-loss orders and the provision of easy to understand market information.

An earlier product, HiLo was closed down in 2009.

Betfair Arcade

In September 2008, Betfair launched Betfair Arcade, a series of easy to play games, including Monopoly, Cluedo and Deal or No Deal. The Betfair Arcade is the first games site to incorporate a Bonus Bar, which rewards players automatically the more they stake.

Cash 4 Clubs

Cash 4 Clubs is a sports funding scheme set up and funded by Betfair. The scheme provides sports grants to local community sports clubs.

Betfair Mobile

Betfair Mobile was introduced in 2007 to allow users who are away from their PC to login to their Betfair account, view markets and place bets. The nature of Betfair means the odds are always changing so users need 24 hour access to effectively manage their bets or position in a market.

The Betfair Mobile Java application is downloaded to a phone and then the API allows customers to login to their account on a secure server. Advancements in mobile phone technology mean that bets can be placed at a speed equivalent to that of a broadband connection. As long as there is a GPRS signal, Betfair Mobile allows bets to be placed and cancelled.

External links

• Official site