Betfair: The Turkey That Voted For Christmas?

First mover advantage on great innovation, dear reader, is not always a good thing. You see, even when you have a revolutionary concept that will enhance people's lives for generations to come, you still need to educate those people as to what it is you have for them, and why they need it.

Think about the telephone, for instance. In the 1870's (or whenever Graham Bell and others who claimed this fame were tinkering with wires and vibrations), people communicated by letter. If you had urgent news to convey, you either got on a coach (of the stage variety) or you sent a telegram.

But, like all novel concepts, the speed of integration and the number of users began slow and low. It was not for twenty years that the telephone became a widespread communications device outmoding and rendering virtually extinct the telegraph.

Education took time, and only through the continuous dripfeed of new business embracing this 'telephone' contraption did it become a mainstream device, eventually finding its way into residential ubiquity as it is today.

More recently, the military has been the major pioneering force of research and development for items that eventually end up as consumer electronics. Consider the internet itself. This 'thing' that is everything and nothing, palpable yet intangible, and has infiltrated Western culture more quickly than any invention in the history of the world ever (very few of us had internet in our homes even ten years ago!).

The internet was created as a messaging system between US military departments.

These days, as a direct result of such as the internet, radio and television, we live in an information age.

All of these creations, as well as the mobile phone, are examples of a concept called technological determinism: that is, in the consumer sense, a 'need' was satisfied by a technology, where the need was never previously there. The technology determined the market.

The old saying 'what you never had, you never miss' springs to mind.

I don't need a mobile phone: I have a landline and there are myriad public booths (are they still called booths?!)

I don't need a television: in actual fact, aside from football, horse racing, The Simpsons and Family Guy, I very rarely watch the thing.

I don't need a video recorder: in fact, true story, I have never owned one in my life.

But I do need a computer and the internet: this is my modus operandi. It is a way of living, and of making a living, that wasn't available even ten years ago.

The internet is an opportunity of a lifetime, and has revolutionised our collective existence. But the internet is a conduit: it is a channel. In and of itself, it is nothing more than some connected computers. Merely a pipe through which stuff flows. That stuff - bits and bytes, to be precise - transforms itself into meaningful information in front of you.

In this case, the words of this post. On another day, a video on youtube, a picture of a friend on facebook, your banking, your shopping, your dating, your correspondence, your life. Online.

How far we've come...

The point, Matt - what's the point of all this?

That's a fair question. After all, this isn't a 'History of the 20th Century' blog, nor even a 'How Technology Changed Our Lives' blog. It's a horse racing and betting systems blog.

So... the point...

The point is this: in the same way that we shop, bank, and socialise online, so do we also bet online. Traditionally with the likes of Ladbrokes and William Hill; more recently with such as Blue Square or Skybet (betting companies who never had a high street presence, and emerged as the internet epidemic spread in the late nineties).

But, most tellingly, the power of the internet is that - although physically it is divisive (how many of us have emailed someone across the office, or 'chatted' to friends via facebook or MSN?!) - it creates virtual communities which span geography with a single mouse click or button depression.

Like nothing else ever, the internet brings together like minded people to do, or discuss, or generally engage in an act of osmosis of that thing which they have in common. This blog is a fine example (though not necessarily a fine blog!), in that you come here - over 1,000 of you each day - to read some stuff which is generally about horse racing. [I hope you'll forgive this 'off topic' post, the racing is dire for a Friday today.]

And some of you share your comments at the bottom of the post, or you email me, and we share this commonality of aim. We share our love of horse racing, and of betting, and of trying to back a winner or ten. That's why I write this, and why you read it.

So then, communities. Perhaps the finest exponent, not to mention exploiter, of the online betting community concept, was a (once) small firm of bright and forward thinking techies, who decided that the bookies' overround (that is, the percentage of the odds on any event that is in the bookies' favour) was too high, and took it upon themslves to give people the opportunity to bet against each other, and to undercut the high street bookie. Thus Betfair was born.

Betfair's triumph is in the fact that it wins on every single event, without ever risking a penny. That is, rather than play any part in the transaction of buy and sell, it merely acts as the mediator, the introducer, the facilitator, the agent. The marketplace. Betfair is a virtual market square for the buying and selling of virtual commodities. If you win a racing bet, you don't get a piece of horse. If your team wins and you backed them, you don't get a football boot. You get or give cash.

It's a beautiful, simple concept. Other people's money, brought together around other people's events, in a single spot. Millions of pounds, hundreds of events, every day.

Betfair are a company of geniuses. They are amazing, and it is the single idea above all others in my lifetime that I wish was mine.

Their genius went further than providing this medium, and the inevitable but necessary advertising and educating to support, nurture and grow it.

They fought off a sustained attack from the Luddite bookies. I firmly believe that if any one of the high street big names: William Hill, Ladbrokes or Coral, had decided not to fight but instead to compete with Betfair, they would now be market leader.

But change is bad, thought the big boys. This is 'our manor'. And they took their case to parliament, where they were well represented with moles in high places. But their case was pathetic, counter-intuitive and illogical. And they lost in their attempt to stimy Betfair.

So Betfair's power grew. It continued to grow, until they had a near monopolistic half-nelson on the betting markets. Nothing could stop Betfair.

Except Betfair itself...

In the last few weeks, what I consider to be one of the most ill-conceived, downright arrogant business decisions for years (I'm excluded banking collapses here...) was made by the Betfair management.

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As their hegemony has grown, so has their greed. Betfair has, for a few years now, been pushing the boundaries of their customers' tolerance in terms of the commission rates they pay. In some cases now, this means that - once the commission is accounted for - punters are actually getting worse odds than at a traditional bookmaker.

Surely not. Surely this is the godforsaken antithesis of the 'promised land' that Betfair set itself up to be. Forgiving my rose tinted glass for a second, and instead doffing my cap to acknowledge that Betfair is a business and not a charity, I understand that these incremental encroachments into punters' pockets is a necessary evil of the fat cogs of the stock market.

I even understand their tyrannical and somewhat narcissistic desire to replace on course SP with Betfair SP.

Nonetheless, their latest 'stunt' beggars belief in the opinion of this (occasionally) humble scribe.

Remember as you read this that betfair has a 'perfect' business model: no liability, a guaranteed percentage return on all monies wagered, and no premises (besides call centres, and BIG datacentres).

The more money that is matched, the more money they make. The bigger the punter (and therefore the less processing power required: it takes the same computer effort to process a matched bet of £400,000 as it does for one of £4), the more money they make.

So the new 'Premium Customer' rule defies any common logic that I've applied to it. I simply cannot understand why Betfair have introduced it (except, perhaps in support of developing Betfair SP).

If you're not aware of it, it goes like this:

If, in the last 14 months you have played in more than 250 markets (i.e. you've bet on more than four races a week), and your account is in profit over this period, Betfair will deduct from you any shortfall between the commission you've paid to them and 20% of your profits.

In layman's terms, if you happen to be in front with betfair - and I know that many TTS followers, as well as other readers, will be - and you've paid them less than 20% of your profits in commission, they're going to take the rest (i.e. to make your donation to them total 20%) from you.

The chapter and verse is here (if I've misinterpreted the rule in Section 5, please let me know!):

http://content.betfair.com/aboutus/?product=exchange&sWhichKey=Betfair%20Charges

The funny (peculiar, not haha) thing about this decision is that, from being an untouchable monolith in person to person betting, Betfair now finds that it's big players are voting with their virtual feet, and moving their business to the other serious player, Betdaq.

Traders have moved 'en masse' to betdaq, as they are the obvious targets of Betfair's despotic act.

What does this mean for Betfair? And, more pertinently, what does it mean for you?

For Betfair, it means they are now facing the first serious crisis of confidence in their business since inception (barring the legislative tussle with the high street bookies). And it means that their USP's - liquidity and best prices - are under major threat.

I checked Betfair against betdaq for amount matched and prices at 9.30 this morning and discovered this:

Betfair Betdaq
Race Matched Fav Odds Matched Fav Odds
1.45 L 6332 3.55 17027 3.55
4.20 L 7845 2.38 13192 2.46
4.55 L 3662 4.4 17507 4.5
3.35 C 3454 4.9 16464 5.1
4.05 C 3718 2.4 9565 2.44

I expected there to be parity on prices, which broadly there was (although Betdaq was not lower on any market), but I was really and truly surprised that Betdaq was spanking Betfair in terms of the amounts matched.

[Incidentally, lest you think I've been cherry picking these races, I chose the first race, which usually has a decent amount of liquid, and the two highest class races at each meeting.]

Now, I should say that this is business and the betdaq management are not stupid. It is perfectly possible that betdaq are 'seeding' their markets at this sensitive time for their big rivals.

By 'seeding', I mean they are adding their own funds into the pools to inflate the liquidity and make their markets a more tempting proposition for punters.

And why wouldn't they?! This is the first, and perhaps only, chance they will get to seriously take Betfair on, and they are going for it. I salute them for that, as the monopoly may just become a duopoly. (Of course, this creates problems with cartels down the line but, for now, it's a good thing for us punters!)

So, what's the point Matt?!!

Ok, ok. If you're still with me, I hope you've seen why I believe Betfair's latest decision is akin to a turkey voting for Christmas, insofar as they have conceded their infallible status: the triple mitre slipped at the point when Betfair's papal utterance emerged into the ether (if that makes any sense).

That's what I think it means to Betfair - the end of the monopoly.

What I think it means to you and me is this:

- if you're a trader, you probably already have a betdaq account. If you don't, get one. Today. Now. Pronto!

- if you're a winning punter who plays a fair amount of markets (say, a TTS punter who uses betfair), you need to get a betdaq account, because Betfair will come knocking for shekels at some point in the not too distant future. Get one today. Now. Pronto!

- if you use oddschecker to see where the best prices are, it is now more likely than ever, that betdaq not only have the best price, but that you can get a halfway decent stake matched with them, due to the increased liquidity. Get a betdaq account today. Now. Pronto!

In short, if you're in any way a serious or value minded punter, you need to have the choice that a betdaq account affords you.

It has never before been competitive (except in football match markets where its long rivaled Betfair) and, therefore, it has never before held much interest to me. It does now!

You can click the ad at the top and to the right of this post, or just go to www.betdaq.com. (In the interests of transparency, I will receive a small commission if you sign up via the ad though not if you go directly to the website, so thanks in advance if you take the ad route).

For the first time, we are now seeing real competition in the person to person betting market, and that is a great thing... for now. I'll be watching with interest how this develops.

********

Onto Fancy Fillies and Legacy system trials, and blow me if they didn't both have a winner yesterday!

Fancy Fillies managed to nominate Dunes Queen as a lay, and she was turned over at skinny odds of 8/13 - well played! FF is now two from two in this mini-trial, and going well.

Legacy system had its first runner yesterday, which obliged also. Legacy System is a backing system, and it nominated Take Me There, which won at 2/1.

Today, there are no Legacy system runners, and FF has Applause as the selection.

Incidentally, the selections guy at FF was good enough to email me (thanks Jon), and help me understand the rationale for his differing selection from me on Wednesday. It was simply that in order to satisfy the needs of his subscribers, he sends the selection email at 0830. That is the most expedient balance between a time of day when there is a reasonable liquidity in the market, and catching people before they go to work. Nothing more sinister than that.

So, two from two for FF, and one from one for Legacy. I do not expect things to continue on such a 'via senzo unico' (one way street) forever. Obviously. Stay tuned for further updates.

[Incidentally, and a very important point which applies to all systems I trial, both of these are sold via a third party called Clickbank. The important point that applies to all systems I trial is that Clickbank is another marketplace - like betfair, but for ebooks and software - and they offer a money back guarantee on all products. So, if you buy and it's not for you, or you just think it's a bit 'pants', get your money back. Easy as that.]

********

Yesterday, was a 'no cigar' day (incidentally, for the etymology of 'close but no cigar', google 'nag3 no cigar'), with three seconds (11/4, 9/2 and 7/1), one each way selection finishing 4th (at 25/1, supported from 40/1) having been 2nd jumping the last, and one stuffed. Only Fair Dual, which I put up as a lay, did as I thought, pulling up when sent off joint favourite.

Far from being disappointed, I take days like yesterday on the chin, knowing that my selection criteria are pretty much spot on, and that on another day - which will be soon enough - I'd have had three nice winners and a tidy each way ticket.

********

The racing's pretty terrible today, to be honest (Ayr had a decent card, but it was abandoned).

At Carlisle, there are a couple of interesting races, but probably nothing to tempt me to have a bet (aside from the TTS horses, natch).

Of the TTS squad, I reckon Astarador looks the most interesting. His form is a bit binary, i.e. 1's or 0's, so if he's on a going day, any better than evens is fair!

Good luck if you're playing this afternoon, and get yourself a betdaq account today!

Matt

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4 replies
  1. Ernie says:

    An excellent bit of literacy Matt, and a fine blog it is.
    Thanks for explaining the new Betfair rules. I’ll be moving my accounts in the next few days, remembering that other fine exchanges are also available.
    A lot of people have noticed eBay going the same way. No longer strictly an auction site for Joe Bloggs off the street, but a virtual marketplace for retailers.
    Cheers

  2. Anonymous says:

    Enjoyable article but it’s worth pointing out that Betdaq use a different method to calculate the value matched. I think it is Amount x Odds as opposed to Betfair’s Amount matched x 2.

  3. Matt Bisogno says:

    Thanks Ernie – good point about eBay. I think they are moving to protect themselves more against a spate of ‘knock off’ goods. (They got taken to court in France by, I believe, Louis Vuitton).

    Re anon’s comments, you may well have a point regarding different interpretations of the term ‘matched’ between the sites. I’ll look into that because, as you say, it’s definitely worth pointing out.

  4. Toby says:

    A nice write up Matt. We've always promoted a minimum of 2 exchanges – Betfair & Betdaq with WBX being a 3rd (if only for their opening offer). We also noticed over the last month or so a bigger take up on the Betdaq signups – 3/1 ratio – which we've never seen so high from our 2 sites before. It isn't just the big punter who is voting with their "virtual feet" – the smaller punter seems to have twigged on as well.

    Betfairs' problem is they are using the wrong tactics to cure a big problem (mainly the big players in the "in running system"). A re-think of Betfair policies may well be in the pipeline!!

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