Jason Trost on BetFair: They havent innovated much, and theyre too pricey.

Jason Trost:

  • Slow innovation: Aside from a few cosmetic tweaks, reliability improvements and the Starting Price feature, Betfair hasn’t innovated much over the last few years. For a company that boasts several hundred developers, it should be able to release more major new features. Betfair gets very little traffic from organic search and has no social features apart from a forum.
  • Outdated tech platform: Betfair’s website can be quite slow at times. If you look under the hood, there’s a tangled web of javascript libraries, iframes, caching servers and images. Over the years, it has grown into a technical server farm behemoth that is difficult to upgrade and maintain.
  • Tax on top traders: About a year ago Betfair introduced a “Premium Charge” on their most successful traders, taxing their profits up to 20%. This runs contrary to typical volume rebate schemes where the more one trades, the smaller the transaction costs one incurs. The company claims the tax is to offset the cost of bringing new punters to the platform, but appears to outsiders as a clear move to increase revenue taking advantage of Betfair’s position as a monopoly.
  • Expensive transaction costs: Betfair takes 5% of traders’ winnings. If a trader bets ?100 and wins ?1000, Betfair will charge ?50 for the transaction. This is very expensive in a world of $8 online stock executions. As betting exchanges become more financial in nature, these transaction costs will shrink substantially.
  • Market Size and Competition: As Greg Wood from the Guardian wrote recently, horse racing liquidity has hit a ceiling. Will Betfair be able to maintain the revenue growth? With high costs and a smaller profit margin than Paddy Power, Betfair has found itself in a bit of “grow or die” situation. It will need to find ways to entice more customers to join its platform and spend their betting dollars with them. Betfair is looking to new sports – particularly football – and overseas markets like the US, China and India as opportunities for growth.
  • Headcount: Betfair has a tech team close to 500 people. While there is strength in numbers at times, the most successful tech projects in history started with small, nimble teams. The more tech people involved on a product, the less agile a company can be. Adapting to changing tech trends can be a crucial ingredient to remaining competitive in today’s internet startup world.

A somehwat simplistic, but nonetheless interesting, article in which the predictive quality of the BetFair market is slagged off, because it upsets their traditional form book study methods (by implication, of course, if they are right, then everybody could/should/would just follow the late money an

Niall O’-Connor offers you this link for free.

Cantor Exchange and Trend Exchange defend the usefulness of movie hedging.

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Lions Gate vice chairman Michael Burns said the marketswould allow a diverse group of motion picture industry participants, including studios, film distributors, theater owners, investors and other financial intermediaries within the motion picture industry to manage their risk and exposure to new film releases.”-

“We believe a market in domestic box office receipts would substantially widen the number and breadth of financing sources available to the motion picture industry by lowering the risk inherent in such financing,” Burns wrote.

Robin Hanson is in favor of movie business futures.

ADDENDUM:

- “-Geithner also rejected the ban on creating a movie futures market, saying you don’-t want ‘-Washington bureaucrats’- stifling innovation.”-

- Jason Ruspini sends us the link of the Senate bill.

BetFair (via Right2Bet) are furious at the new French gambling laws.

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Right2Bet (operated by BetFair):

A Senate hearing on Tuesday looked at ways in which the French authorities could make it more difficult for operators not licensed in France from offering their products to French citizens.

They are now looking at adding wording to the new gambling bill, set to ‘-open up’- the market in time for the World Cup this summer, that makes it illegal for any French-based company from taking advertising or even simply linking to certain sites.

Those sites based inside France, including multi-nationals with French subsidiares, notably Google, found to be ‘-aiding and abetting’- (no pun intended) foreign operators could face fines of up to €100,000.

This is just another example of the French bill being a facade. They want to appear like they are liberalising their market, to fit in with EU rules, but clearly they are going to make it as hard as possible for foreign operators to offer their services to value-deprived French citizens, and are even looking to make it difficult for those who do apply for a French license.

At what point is someone going to wake up and say ‘-enough is enough’-? Don’-t wait for someone else to do it, sign our petition today and add your voice to the thousands of EU citizens already calling for fairness in online gambling.

Our previous post

France = Communist China

France will soon block access to the BetFair and InTrade websites.

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Gambling operators that are not be licensed by France will have their web access blocked for the French public. The license would require that servers be located within French territory.

France = Communist China

Felix Salmon is cautiously bullish on prediction markets.

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QUESTION: Tell me what you think of the (public, real-money) “-prediction markets”- (a.k.a. betting markets) without citing the names of either Robin Hanson or Justin Wolfers. Thanks. Are they useful, really? If not, then why are econ bloggers in love with them?

FELIX SALMON (#):

I used to be a bigger fan of them, before I discovered their enormous transaction costs:
http://www.felixsalmon.com/004529.html
If and when somebody makes an easy legal and cheap prediction market, I think it will be very useful indeed. For the time being, they’-re interesting and fun.

InTrade has a higher PageRank than BetFair. No change.

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Google has just updated its external PageRank servers. (The PageRank is updated internally in a continuous way, but Google updates its external servers once a quarter or so.)

- InTrade is 7/10. BetFair 6/10. HSX 6/10. HubDub 6/10.

- BetFair’-s blog (Betting @ BetFair) is 5/10, proving, once again, that it is a mediocre publication run by mediocre people. BetFair’-s second blog (BetFair Predicts) is 4/10. Midas Oracle is 6/10.

- For the record, the goal to attain (for both exchanges and publications) is 7/10.