Technology company, gambling company or both?


Most great business ideas are based on the simplest of premises. But it’s often said that success is 10% inspiration and 90% perspiration. In other words, it’s essential to have the right initial “eureka” type moment, but it will be the application and delivery required afterwards that will really determine its success.

This is clearly the case when it comes to peer to peer gambling exchanges. The initial idea of having simply a market online of buyers and sellers like so many others, but in the gambling world, was a very novel one back at the turn of the century.

It may seem like nothing particularly ground-breaking now – but it most certainly was back then. And the company that has come to dominate this market, becoming the largest gambling exchange in the world, is the FTSE 250-listed Betfair. The company also has the appropriate epic code of “BET”.

Based next to the river Thames in Hammersmith, Betfair sees itself today much more as a tech-based business than a gambling one. But it’s probably fair to say that the rest of the world doesn’t share that view. Ask the man in the street what it’s all about and he’ll probably say it’s something to do with horse racing – even if he doesn’t know much of the detail. But whilst gambling on horse racing remains huge, other sports are now catching up.

Football, in particular, is the big growth area globally – with millions being gambled on the biggest games and with the World Cup just around the corner, you can bet there’ll be a huge scramble for market share.

And in order to win that market share, Betfair has to market itself aggressively against all the big bookmakers out there – but it has to really concentrate much more than most on getting its technology platform absolutely spot on.

This is reflected in the headquarters which looks like it belongs more in Palo Alto. Today, Betfair, which launched in 2000, has annualised revenues of around £400 million and is still managing to increase its numbers of customers in the UK and Ireland. It is also seeing revenue and margin growth in its Betfair USA operation and has launched a casino in New Jersey.

But it was launched at the absolute apex of the “dotcom” boom, as one of two different companies to introduce peer-to-peer gambling to the web. Betfair bought out its rival, Flutter.com, the year after it floated. Co-founder Andrew Black merged the companies to broadly build an exchange betting mechanism based on that of the New York Stock Exchange – replicating the rapid flexibility and opportunity to be able to buy and/or sell. Before the exchanges were introduced, people the man in the street couldn’t legally take both sides in any betting mechanism. This meant that traditional bookies were able to set the price and punters simply had to take it or leave it.

Of course – all that is now history and Betfair managed to bring power to the punter, with itself as the marginal middleman, averaging around 5% commission of the winning bet in all transactions; nice work if you can get it!

Today, Betfair is the largest operator by a long chalk in peer-to-peer gambling exchanges, accounting for around three-quarters of the UK exchange betting market.

But ask any employee – and it’s really all about the technology platform.

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