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SAI 25: THE BETFAIR PAGE

Estimated Value: $5 billion

Business: World’s largest Internet betting exchange where users can gamble on everything from horseracing to tennis matches.

Location: London, United Kingdom

More Info: About Betfair

CEO: David Yu – [ a US citizen ]

Investors: Index Ventures, JP Morgan Partners, Benchmark Capital, UBS Capital, and Soft Bank.

Analysis: People love gambling, and Betfair provides a safe, simple, and un-sleazy way for them to do it. The company allows bettors to place bets and bookies to arrange them, and it keeps 5% of winnings.

Betfair’s business is illegal in the United States of Arbitrary Morals, of course (thanks to the gambling lobby?), but the rest of the world isn’t so uptight. Unlike other British market makers, Betfair has been smart enough not to accept American credit cards, which puts it out of reach of US regulators. We suppose the British government could destroy Betfair with an attack of Americanitis, [????????] but we don’t see that happening. In fact, their neighbor–the E.U.–is reportedly looking into whether or not the U.S. ban on Web betting hurts E.U. companies, and, if so, it might be willing to take the US to the WTO court.

Softbank bought a 23% interest in Betfair for $600M in February of 2006, implying a valuation of $2.6 billion. The company has grown from $10 million in revenue in 2002 to $365 million in 2007 and generated $70M in operating profit in fiscal 2006. We estimate about $500 million in revenue in 2008 and believe the company is worth about 10X that. Thus, we estimate that Betfair is worth about $5 billion.

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Fantastic.

That will help a lot.

Congrats to the BetFair-TradeFair people.

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UPDATE: BetFair’s valuation will probably drop from $5 billion to $3 billion!!!!

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Most of the popular blogs, all of which started out as one-person shops, have now hired separate sales staff to handle sales. We have, Om has, etc. Hell, that’s the main reason we are working with FM Publishing, so that we don’t have to talk to advertisers directly. They turned out to be the wrong choice – throwing us under a bus as soon as the found it convenient, but it doesn’t change our position on the matter. We’re a small operation, we work 24 hours a day to break stories and write interesting content, and we’re trying to earn enough money to keep these things growing. Something Cooper would never understand. [CNET's Charles Cooper is] a paid journalist who has the luxury of sitting back and opining on others, even when he has no idea what he’s talking about. It’s what too many mainstream media journalists do – write about things they don’t know and don’t care about. And that’s why blogs are stealing their page views at an alarming rate. Based on my estimates, the average A-List blogger generates 10x the page views that the average journalist does. Why? Because we’re running our own businesses, because we support each other with linking, and because we care, deeply, about what we are writing about.

Mike Arrington says, in another paragraph, that he doesn’t care about being linked to by CNET News (a news website devoted to the business of the information technology) because it generates small traffic compared to what some IT bloggers (like Om) can deliver. Entirely true. Midas Oracle was linked to by CNET News in May 2007, and we received a fistful of visitors only, compared to thousands of people coming from the economics blog Marginal Revolution.

NEXT: Google Search, the New York Times, and the blogs

All-Purpose Sportsbooks. These are the Bloomingdale’s of the offshore world – one-stop outlets to cover almost everything you might want, while providing stability and reputation. The Greek, WSEX, and Bookmaker/CRIS fall into this category. Their “sister” books can also be included, most notably BetJamaica, Matchbook, and BetDSI. These shops will book action on most sports and props, although the lines will be a little tougher to beat than at smaller operations. At least 40% of your total bankroll should be parked in 2-3 of these types of books for general wagering and safety, with no more than 20% at any one group.

Second-Tier Sportsbooks. Another 40% of your bankroll can be spread around at slightly less-established operations. Look for books with useful options like reduced juice, baseball dimelines, free half point days, cash or free-play bonuses or other perks. Opinionated lines are also a key characteristic. Legendz, Bodog, Tradesports, and 5Dimes are three operations in this category that are well-regarded and likely offer value to most bettors. Keep no more than 10-20% of your bankroll at any one operation.

High-Risk Sportsbooks. Sportsbooks lacking established track records should be mostly avoided in the current environment. However, with the added risk can come added reward, usually in the form of either cash bonuses or slow-moving (or just outright bad) lines. When bonus-hunting, avoid excessive rollover requirements. In today’s environment, the shelf life of any operation is far from guaranteed, and agreeing to play-through requirements that will take weeks or months to meet will cause added stress in the event of adverse news. Play up to 20% of your funds in these books, with no more than 10% of your bankroll in any single account. Even with a 10X rollover requirement, this small of an amount should be clearable within a few days by any player. Keep a careful eye on any high-risk books that you decide to patronize so you can quickly withdraw if a slow-pay situation seems to be developing. Withdraw your funds as soon as you have extracted the value from the account – this means immediately after meeting rollover for bonus hustlers. For players playing into weak/slow lines you may end up keeping your account active until you get booted, but you should actively draw down your account balance to lock in profits and minimize downside risk.