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  • Outdated tech platform: Betfair’s website can be quite slow at times.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.

How should prediction market firms (e.g., InTrade-TradeSports, BetFair-TradeFair) deal with Blogospheres criticism?

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I have just spent 20 minutes reading the comments on that post. (The post itself is to be forgotten- all the comments are outstanding, though.)

Insightful thoughts about Internet marketing. Required reading for Mark Davies, John Delaney, Emile Servan-Schreiber, and the rest of our little prediction market clique.


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Niall O&#8217-Connor (who maybe ate grilled snake for his Sunday morning breakfast :-D ):

The current trend to promote almost illiquid betting markets as being predictive, looks set to backfire bigstyle. In a nutshell, to date the so called &#8220-prediction markets&#8221- have called it wrong in New Hampshire (Democrats), Michigan (Republicans) and South Carolina (Republicans). Prediction market advocates, in many instances weighed down with the baggage of being too closely associated with the prediction market industry, are guilty of churning out subjective, biased research, in an attempt to promote the industry and lure traders into the markets. Unscientific comparisons are continually made between prediction markets and polls, and, moreover, markets are deemed to have been predictive, when all they have actually done is [respond] to the unwinding of the vote count. The publication of such utter garbage does nothing but a big disservice to the fledgling prediction market industry. Moreover, it is unfortunate that prediction market industry watchers, who purport to be independent and subjective, indulge the writers of such nonsense, in the process revealing themselves to be nothing more than placemen and sycophants of unquestioning loyalty. […]

Names, please, Niall.

  1. Who are those corrupted &#8220-prediction market advocates&#8221-?
  2. Who are those rotten &#8220-prediction market industry watchers&#8221-?

By the way&#8230- I will have the charts of the expired BetFair contracts, soon, I hope- and I will publish them here for all to see.