Category Archives: Analysis (Industry)

Are BetFair wasting their time with Right2Bet?

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A case of throwing good money after bad. Ever since the European Court of Justice’s judgement in Placanica, the European betting companies have poured good money down the drain, attempting to lobby the European Commission ( I will not name names). They have also spent a fortune attending conferences, where they have been told by European Law betting experts that the European betting market was going to be liberalised.

On 8 September 2009 the European Court of Justice ruled in the case of “Liga Portuguesa de Futebol Profissional (CA/LPFP) and Baw International Ltd v Departamento de Jogos de Santa Casa da Misericordia de Lisboa.” (”Bwin Liga”). The ruling represented an unequivocal victory as regards the right of state monopolies to exist in the field of gambling, and, moreover, it strengthened the rights of said monopolists vis a vis online betting.

The ramifications from the European Court of Justice’s ruling in the case of “Bwin Liga” are now being felt, with Ladbrokes withdrawning its legal action against the Norwegian State concerning its recent application for a licence, after Norway said it would rely on “Bwin Liga” in its defence.

Anyone who is aware of these facts, would know that Right2Bet is a waste of both time and money. This will be confirmed further when the European Commission gets around to announcing its position (post – Bwin/Liga) vis a vis the actions that it is currently taking against a number of European States.

The game is up. The monopolists and the incumbent operators have won, and the European gambling industry now lacks any significant catalysts (hence Paddy Power’s recent decision to target Australia.)

The Singularity University + The Prediction Markets

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Spot the 3 men on the right-side of the photo:

– In blue, our good friend Mike Linksvayer of Creative Commons–

– In red, the Google guy in charge of open-source software-

– In grey, Matt Mullenweg of WordPress.

Open Source Panel

So, my question to Mike:

– Do you sense that prediction markets could be a topic at the Singularity University, or do you think that they couldn&#8217-t care less?

UPDATE: See the comments by Mike and a guy at that University&#8230-

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Patrick Young (InTrades fifth Beatle) still cant figure out the industry he helped created.

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Well, we&#8217-re here to help out the lost souls. :-D

Patrick Young:

patrick-l-young

Director and Founder: Intrade

Privately Held- 11-50 employees- Capital Markets industry

September 1999 – February 2002 (2 years 6 months)

I was one of the founders and a director of the company Intrade which set up one of the first sports exchanges in Europe.

Nowadays there is a vogue for calling these businesses prediction markets&#8230-which presumably mans there must be markets that don&#8217-t predict events and trade on past [occurrence]?

No, it means that prediction markets are optimized for simplicity and usability &#8212-as opposed to the other derivative markets, which are quite complicated and inaccessible to the mainstream people.

What prediction markets can learn from Twitter – REDUX

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S-I-M-P-L-I-C-I-T-Y + C-U-S-T-O-M-I-Z-A-T-I-O-N

Twitter is a very simplistic core. Around that core is a whole ecosystem that adds value to Twitter. You have a large choice of &#8220-Twitter clients&#8221-, and there are plenty of websites out there that complement the basic Twitter service.

It is the anti-BetFair case. The future prediction exchanges will be built around a simplistic core, and there will be plenty of add-ons and complimentary services &#8212-all of which will be optional, so as not to scare off the newbies.

Patrick Young = The InTrade co-founder you never heard about

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The greatest benefit of being the most popular blogger on prediction markets is the private e-mails I get from all the corners of the globe. I come to meet, over the Internet, the world&#8217-s finest luminaries &#8212-from the Academia or from the entrepreneurial world.

Now, try to guess who that guy is:

  1. He wrote about prediction markets (before that moniker was applied) and betting exchanges in his book &#8220-Capital Market Revolution!&#8220-, published in 1999 &#8212-while Andrew Black was developing BetFair.
  2. He co-founded GSX/Tradesports/InTrade in 2000.

You have probably never heard of him&#8230- but you should compute him starting today &#8212-Patrick Young. And, of course, he blogs and twitters&#8230- Don&#8217-t miss his ultra-copyrighted podcast on the &#8220-fascinating&#8221- American Civics Exchange&#8230-

Internet betting and prediction markets on the Apple iPhone and the Google Android

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I watched the Apple event introducing the iPhone 3.0 &#8212-the new version of the operating system for the smart phone. (The competitor is the Google Android, caressed by the innocent mister Cowgill.)

We have now 2 different ecosystems for people to access betting online:

  1. a personal computer (desktop or laptop) + a connection to the Internet (coupled sometimes with the phone system)-
  2. a personal hand-held computer + a connection to both the phone system and the Internet.
  1. a personal computer is piloted by a mouse (or a trackpad) on a plane surface-
  2. a personal hand-held computer is piloted by the fingers.

More and more, businesses (like Automattic/WordPress) are developing a special entry point on the Web for the iPhone and Android users. BetFair has already developed a sub-website for them. No doubt that the other prediction exchanges will follow course &#8212-since the 2 different ecosystems are here to stay.

Blame the messy CEO -dont blame the media.

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contention

–

Nothing is more untrue than that.

I do report things &#8212-bad things, and good things (like the NKM scandal, which &#8220-StrangeLove&#8221- alluded to).

I give my opinions &#8212-and I link to or re-publish other people&#8217-s opinions.

If the coverage of InTrade has not always been positive, it is due to the *illegal* nature of their business and the many marketing and P.R. *mistakes* that (former accountant) John Delaney made &#8212-you might remember that he acknowledged some of those.

As for BetFair, and you might remember that I criticized them in the harshest terms at times, the truth is that they are the most polite, correct, professional and ethical people in the worldwide prediction market industry.

Scrutinizing InTrades financial statement for 2008

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Jesse Livermore (the &#8216-nom de plume&#8217- of an InTrade trader):

Now THIS is interesting.

Midas Oracle has obtained the shareholder reports for Intrade. Links here, here, and here.

I do quite a bit of investing in the stock markets and read plenty of financial statements, so I feel reasonably qualified to comment. Keep in mind that Midas Oracle does not have the full documents, so there are footnotes which might be materially relevant.

Highlights:
-Total member funds on deposit were about 7 million euros in 2006 and 2007 (for the combined Tradesports/Intrade entity), and $14 million for Intrade alone on September 30th, 2008. Reassuringly, members&#8217- funds are properly segregated and listed as both assets and liabilities.

–Intrade currently has about $1.2 million in cash net of debt. They list only $11,692 as Fixed Tangible Assets. That&#8217-s the category that includes computers, servers, office furniture, etc. I suspect this is low because of accounting rules. The value of tangible goods is generally amortized over a period of a few years. For example if you buy a computer, it will lose value over time, even though it does the same job it always did. The amortization rate varies, but a typical method might have computers lose 1/3rd of their purchase price each year.

–Intrade/Tradesports has lost money in all of these years. 950,000 euros in 2006, 1.4 million euros in 2007, and $800,000 in the first 9 months of 2008. This seems to have everyone in a tizzy, but I don&#8217-t see anything to worry about. 1) The last 3 months of 2008 were probably the most profitable in the site&#8217-s history. Election trading really zoomed up, plus they got all the expiration fees once the election finished. Not sure if that put them in the black for the year, but it was probably a profitable quarter. 2) Intrade is really a start-up. Sure, they&#8217-ve been in business in various forms for several years, but there&#8217-s the potential for massive growth in the future. In particular, when the legal status of prediction markets is clarified, their user base could grow very quickly. If UIGEA is repealed or amended, or if the CFTC certifies their legality in the US, they could eventually grow to be like the NY Stock Exchange or Chicago Mercantile Exchange, which are valued in the hundreds of millions of dollars. Bottom line, it makes sense for the directors to continue to lose money at this stage in the hopes of a huge payoff later on.

-There is no accounting at all for the intangible assets of Intrade. The Intrade brand name is valuable. When the Economist or any other media source wanted to estimate the odds for the presidential election or any other current event, their first stop is not Hubdub or Predictify or any of the other play-money sites, it&#8217-s Intrade. For real-money current events betting, it is the first and last place to go. If Intrade were sold, I would expect it would go for a large multiple of its book value, maybe in the $10 million range or above.

The 6 little things David Pennock didnt tell you about the Prediction Market Institute

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– #1. – It is not such a great idea to call it a &#8220-prediction market institute&#8221-, for the reasons that it excludes the non-market mechanisms and the other collective intelligence mechanisms. (See Daniel&#8217-s comment on the Pennock blog, here.) That said, it should focus on prediction markets &#8212-do you feel the nuance, doc?

– #2. – It shall not be a pure academic endeavor. It shall be a mix between academics, exchange operators, and other participants in the field of prediction markets. The term &#8220-applied research&#8221- conveys it. It is &#8220-applied&#8221- in the sense that it is not research eggheads bottling up in yet another Ivory Tower. The outputs of this PMI should be useful for the prediction exchanges and the software vendors.

– #3. – One of the purpose of regrouping the prediction market forces into a grand consortium would be to seek external alliances with some foundations, think tanks or educational organizations that might share our ideology &#8212-yes, I said &#8220-ideology&#8221-.

– #4. – It is not such a great idea to set up our own organization from scratch. It is more pragmatic to seek out the creation of a &#8220-unit&#8221- or &#8220-department&#8221- within an already existed organization that has a larger purpose than ours &#8212-for instance, one focused on &#8220-derivatives&#8221-, &#8220-wisdom of crowds&#8221-, &#8220-digital business&#8221-, &#8220-knowledge management&#8221-, &#8220-forecasting&#8221-, or whatever meta keyword you can think of and that encompasses the prediction markets and their cousin mechanisms.

– #5. – It shall have a clear strategy, game plan, and way to assess the results.

– #6. – It shall have David Pennock on top. That guy is our common denominator. He is our most sociable element. He never slammed anyone. (The only time he went on being bombastic is when, being a boy, he told his mother, &#8220-I don&#8217-t like broccolis, they taste like fractals.&#8221-)