With the premium charges, BetFair is asking the hogs to pony up. However, the collateral damage is that the concept of exchange is stabbed in the back.

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A list of the Betfair forum threads about the new premium charges.

A FaceBook group has been created to protest the new BetFair premium charges.

PREVIOUSLY: BetFair impose new &#8220-Premium Charges&#8221-&#8230- Do BetFair gag the critics, too?

One day after BetFairs PR move, the very active event derivative traders are still very displeased by the new BetFair premium charges.

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I have re-published yesterday&#8217-s BetFair Q &amp- A at the bottom of my previous post &#8212-because that&#8217-s the post that Google features, bringing in 300 people a day.

My analysis of this PR debacle:

  1. BetFair has a very complex information technology system, which is very costly, making BetFair less profitable than the fixed-odds betting operators (the big British bookmakers). They attack the problem with a dual approach: they try to lower the IT costs associated with each bet transaction (see FlyWheel Lite), and they try to spot and exploit their most costly customers (hence the premium charges).
  2. BetFair&#8217-s PR department is made up of friendly, knowledgeable and competent people. However, they are not up to date with BOTH the brand-new web publishing tools AND the brand-new behaviors associated with these tools. In other words, they don&#8217-t grasp the Web &#8212-where velocity and interactivity are 2 factors. Hiring a SEO is not the solution. BetFair should embrace the culture of the Web.

A FaceBook group has been created to protest the new BetFair premium charges.

Here are some BetFair traders&#8217- takes:


A list of the Betfair forum threads about the new premium charges.

UK billionaire Andrew Black (the BetFair co-founder) owns and manages a stable of 30+ Thoroughbred horses, but cant stand anymore to hear about the event derivative traders whom he extracted wealth from.

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The Independent

PREVIOUSLY: BetFair impose new &#8220-Premium Charges&#8221-&#8230- Do BetFair gag the critics, too?

UPDATE: They announce a Q&amp-A.

BetFair co-founder Andrew “Bert” Black’s blog is flooded (New Orleans-style) with comments from event derivative traders who question the rationality, logic, extent, fairness, true pupose and timing of the new “premium charges”.

PREVIOUSLY: BetFair impose new “Premium Charges”… Do BetFair gag the critics, too?

UPDATE: They announce a Q&A.

Some vocal event derivative traders reject the new BetFair premium charges -as a matter of principle.

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PREVIOUSLY: BetFair impose new “Premium Charges”… Do BetFair gag the critics, too?

UPDATE: They announce a Q&amp-A.

#1 -above The Guardian… and far above BetFair.

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PREVIOUSLY: BetFair impose new “Premium Charges”… Do BetFair gag the critics, too?

UPDATE: They announce a Q&amp-A.

Reverse engineering of a nasty BetFair rumor that made rounds on Midas Oracle and elsewhere

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  1. The Sporting Exchange (BetFair-TradeFair) is a gaming company that operates on many countries.
  2. It would happen, occasionally, that one country&#8217-s laws would allow fixed-odds bookmakers &#8212-but not betting exchanges.
  3. BetFair would still want to operate in that country &#8211-as a bookmaker, not as a prediction exchange&#8211- to have its name out there &#8212-with the long-term goal of reverting it to a full exchange, once the laws will have been modified, later on, in the future.
  4. To do so, in the summer of 2007, BetFair began to hire people to provide prices and manage risk for that Internet sportsbook. That sportsbook has no connection whatsoever with the UK betting exchange.
  5. One un-hired job candidate told everyone who would listen that BetFair was preparing to do some hidden market-making on their betting exchange &#8212-hiring a &#8220-team of traders&#8221-.
  6. BetFair wouldn&#8217-t deny those allegations, out of fear of hinting its competitors.
  7. The sportbook, which was at the origin of that market-making rumor, is BetFair Italy &#8212-which has opened shop recently.

BetFair is experimenting a phenomenal revenue growth with sports prediction markets, as I am typing this post. Maybe our good friend the pragmatist could look into that, and report his research findings to the CFTC. Im sure hell do. The delicious sound of a red-hot cash register, with the dollars (o

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BetFair’s bet matching process stopped for one full hour on May 7, 2008, and their P.R. people are over-apologizing for it. They are apologizing for the problem, and for their slow response to affected customers &#8212-good move. They are also giving out 10 bundles of ?1,000 each to 10 affected traders chosen at random &#8212-a move I have mixed feelings with.

OK. Now, the beef.

General Formula for Equation of Exponential Growth

During the same period we’ve continually seen record volumes of bets. For example, the value of bets placed on Betfair last week was greater than for any previous week including Cheltenham or Aintree [which are big British horse racing events].

Three different expontial growth functions

HubDubs Nigel Eccles pinches Henry Blodgets nose (like trumpetist Miles Davies did for one of his musicians, on stage, one day), and the damn result of that, believe or not, is that the valuation of The Sporting Exchange (BetFair-TradeFair) drops from $5 billion to $3 billion. So, either Nigel shoul

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Nigel Eccles:

How did you forget yadda yadda yadda. [ Hilarious. :-D ]

Nice list, roughly makes sense but lots to disagree with (as you would expect). However one clear mistake is BetFair. They should be valued at $3 billion. They just did a recapitalisation which distributed 10% of the company in cash to shareholders (I got the check this morning). It was at a valuation of ?1.5 billion, so unless you are even more bearish on the exchange rate that works out at $3 billion.

Henry Blodget:

Thanks for the info on Betfair&#8211-that&#8217-s exactly the sort of concrete detail we&#8217-re especially looking for. We&#8217-ll see if we can confirm, and, if so, the valuation will drop to $3 billion.

And there&#8217-s another interesting comment, on the other page:


why the gratuitous &#8212- and painfully ignorant – -swipes at the USA?

can&#8217-t you do your job without the silly &#8212- and, again, factually incorrect &#8212- morals lectureds and editorializing?

actually the U.K. is one of the few countries in the world where online gambling is essentially legal (though the U.K. still hasn&#8217-t sorted out all the laws it is creating to govern online betting)

many EU countries are literally at each others throats about how/when to tax internet gambling (principally because state-run lotteries are specifically carved out of the E.U. free trade agreements)

japan, australia and china have sever and horrible and harsh punishments for internet gambling

of course, pretty much all of the islamic world puts people to death or dismemberment for breaking qu&#8217-ran-ic law – and gambling is totally and utterly forbidden under the qu&#8217-ran

it is you who are &#8220-of arbitrary morals&#8221-. stick to blogging.

Insider&#8217-s comment sounds informed, but he/she should have avoided the nasty last line.

&#8220-Stick to blogging&#8221- is an insult I was served with, recently, (by a UK-based financial trader), so I can relate. But that&#8217-s never helpful. Educate that blogger, instead. You&#8217-ll get a better ROI, believe me.

PREDICTION MARKETS HAVE ARRIVED: The Sporting Exchange (BetFair-TradeFair) ranks #4 in the Silicon Alley Insiders list of the top 25 digital startups, and is valued at 5 billion US dollars. (Yes, billions.)

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SAI 25 Live


Current listing

Blog post


Estimated Value: $5 billion

Business: World&#8217-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 :-D ]

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&#8217-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&#8217-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&#8217-t see that happening. In fact, their neighbor&#8211-the E.U.&#8211-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.


That will help a lot.

Congrats to the BetFair-TradeFair people.

UPDATE: BetFair&#8217-s valuation will probably drop from $5 billion to $3 billion!!!!