BetFair pretend to be taking the prediction market movement seriously, but the facts speak a very different picture —they don’t have the first clue, and they just don’t want to learn.

Three remarks:

• They got carried away from the prediction market approach (which, unlike InTrade, they never understood fully, anyway).
• This gambling approach of the marketing of the prediction markets is very interesting in terms of potential revenue growth. I encourage InTrade, TradeSports, BetFair, NewsFutures and HubDub to adopt it.
• However, it remains to be seen whether TradeFair is the right venue for gambling. TradeFair was supposed to be a serious financial prediction exchange (the British equivalent of HedgeStreet), and it is now the online equivalent of Macao or Las Vegas. Hummm… Will these 2 different worlds mix well together? Could La Callas sell pork sausages? Could Yehudi Menuhin sell used condoms?
• And I won’t mention the issue of problem gambling, which I predict will be made worse thanks to TradeFair Hi & Lo and BetFair Arcades.

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Once the previous bet is resolved, you can start off anew with another 5-minute bet on the FTSE —from the level that was the basis for the settlement of the previous bet.

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[For the difference between gambling and betting, see Vernon Smith.]

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Here’s how it works.

You follow the British stock market (and its index, the FTSE). You make a binary bet on whether the FTSE will go up or down in the next 5 minutes.

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Once the previous bet is resolved, you can start off anew with another 5-minute bet on the FTSE —from the level that was the basis for the settlement of the previous bet.

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This innovation (the 5-minute prediction markets) should probably be copied by BetFair, InTrade, TradeSports, NewsFutures and HubDub, as a way to dynamize trading, liquidity, and profitability.

This is a major innovation (focused uniquely on marketing), which may mark a new area for the prediction exchanges. New behaviors will be induced by this innovation, which will bring in new revenues that traditional prediction markets wouldn’t. Let’s see how it unfolds for TradeFair in the coming months.

There is no value added when it comes to forecasting, which will maybe prompt prof Lance Fortnow to complain.

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UPDATE: The guy in charge says in the comment area that this is just an early beta website, which is going to be much improved soon.

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WHAT I LIKE IN BETFAIR PREDICTS

1. BetFair Predicts is a (clumsy) response to some of the (harsh) criticism I directed at them. So, it shows that they listen up.
2. They chose WordPress as the content management system (CMS) for this project —it’s the right choice. (DruPal would have been OK for a more sophisticated project.)
3. They are web-hosted on an independent domain name (as opposed to a sub domain on the betfair.com website.) It’s good because it gives them freedom to use whatever information technology they want. (For security reason, they get limitations on their main website. That’s why the BetFair blog had to be run on MovableType, and not on WordPress.) – [UPDATE: The website now redirects to http://predicts.betfair.com/.]
4. The architecture of this new website is well done. It’s standard. (Unlike the BetFair blog, which is a price of crap, technically.)
5. They created a new compound chart on the 2008 US presidential elections. (I have hot-linked to it, just below.)

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WHAT I DISLIKE IN BETFAIR PREDICTS

1. It was an error to call this project “BetFair Predicts“, singular. “BetFair Predict”, plural, would have been better, because the wisdom of crowds requires both a collective judgment mechanism (here, a predition exchange named BetFair) and the event derivative traders associated with that prediction exchange. By using the singular, BetFair appropriates a predictive power that should be credited to a community (lead by BetFair).
2. Overall, it’s a very thin website. It does not bring much to the kitchen table. (That new compound chart above is really the novelty at this time. But it’s not Earth shattering, since the BetFair Politics Zone already displays compound charts, which are dynamic, and which can be hot-linked to.)
3. That compound chart is probably not a dynamic one (that is, a chart that will update itself in the future). This compound chart is just an image that has been uploaded from the BetFair exchange to this new BetFair Predicts blog, I doubt that that image will be updated in the future.
4. And they seem light-years behind when it comes to embeddable chart widgets. (They claim on the frontpage that you can “embed” their charts in your blog, but what they offer is just static charts. Those idiots don’t know what they are talking about.)
5. Their explainer on prediction markets is… so-so.
6. Their blog is written by a “Joe Seither”, whose background is not disclosed. The writings (well, only 2 posts, as of today) are typical of any copy-writer who would have been instructed about the mechanism of the prediction markets the day prior to undertaking this project. You won’t find any insights; just banalities. What I see is worthless.
   
7. They can’t spell “RSS”. (See below. )

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TAKEAWAY:

1. BetFair is still struggling with the web publishing technologies.
2. BetFair is still struggling with the prediction market approach, embodied by InTrade.
3. BetFair has a hiring problem: they pick up incompetents on the job market and put them in charge too quickly. The result is the disaster detailed above, and chronicled in the Midas Oracle archives since 2006.

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Brought to you by CountryWatch, which has been providing “country intelligence, news, and forecasts for over 10 years — with customers both international and domestic customers in the academic, corporate, government and military markets.”

Best wishes to them.

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Global Election Market is powered by the Bet2Give software, which I like less than the NewsFutures software. NewsFutures abides by the prediction market approach (also adopted by InTrade .NET and HubDub). Bet2Give is less interesting in that respect.

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As for attracting new traders, pay attention to my next story about Predictify.

1. It shows that the prediction market approach is paying off. Do provide journalist-friendly objective probabilistic predictions (expressed in percentages –not those fucking decimal odds), and the media will link to you, thanks to all the free-market economists who love your model and act as unpaid publicists for you. Make sure your website can resist under heavy traffic loads on Election Day, and during the occasional days where important news break. Then, milk out all this free publicity. Run registration ads allover your exchange website to attract new traders. Make money. Invest in IT —but don’t let the IT maniacs complicate your prediction exchange too much (as BetFair did).
2. Long-term, the InTrade model (based on the prediction market approach) should be more profitable, in theory. Because of legal impediment, InTrade is not as profitable as it should be, alas.

Previously: The prediction market approach

- HubDub

- InTrade .NET … [*] … would get the full point if they were to switch the label “price” for “probability” on their charts.

- NewsFutures … gets half a point. No mention of “probabilities” on their charts.

- Inkling Markets … gets a quarter of a point.

- TradeFair … gets an honorable mention, but won’t show its charts to the non-registered public.

[*] Which prefigures what InTrade .COM is going to be, soon, if I understood well my Deep Throat’s tip.

As for the ultra innovative YooPick, is it yet another case of “do what I say, not what I do“?…

APPENDIX: Lance Fortnow is PMA compatible:

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UPDATE: See the comments…

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BetFair was created in 1999 and started off in 2000. Since that time, 2 major things arrived on the world scene. Number one, we have seen the emergence of the prediction market approach. Number two, the Web has taken our lives, and Google has become the dominant Internet search engine. Here are how these 2 major trends are affecting BetFair negatively.

1. Decimal Odds (a.k.a. Digital Odds). - The prediction market approach means that we attack the public with the news and their associated probabilistic predictions, expressed in percentages, where high prices mean high probabilities of happening. BetFair, at the contrary, approach the public with a betting universe and an arcane vocabulary (“backing” and “laying”) where low prices mean high probabilities of happening. That is totally counter intuitive.
2. Non-Indexable Prediction Market Webpages. - Like it or not, Google is now the world’s #1 media. We “google” anything, first thing in the morning. None of the BetFair prediction market webpages can be indexed by Google and the other Internet search engines. That means that BetFair is missing out, in my estimation, on hundreds of thousands of Google visitors each year. Those Google visitors will favor other prediction exchanges (e.g., HubDub) whose prediction market webpages are indexed naturally by the Internet search engines.

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The British, who drive on the wrong side of the road, don’t have the 2 most important keys of the future.

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… and then… Prices.

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Talk first probabilities… because people interested in news get the concept and vocabulary.

Then, later on, when only the bettors and traders stay with you for the rest of the conversation, talk prices.

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BetFair’s Mark Davies croaked in French about “les prix des paris” (the prices of the bets) to 1.6 million frogs, on French TV, last Sunday.

I’m persuaded the frogs didn’t get the first clue about what he meant.

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It shows, once again, that BetFair is a laggard when it comes to adopting the prediction market approach.

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