http://www.channelregister.co.uk/2010/1 ... n_betfair/
How I went from punting PCs to betting a quarter billion on Betfair but failed to convince Warren Buffett...
Interview Former channel man Peter Webb has become one of Betfair's leading customers and bets a quarter of a billion pounds annually on horseracing alone. He also sloshes a good amount on the X Factor market.
The ex Compaq and Medion man finally left the UK's computer distribution channel in 2003 to make a full time go of trading on the betting exchange. He says: “I doubt there's many people earning more than me on Betfair – it's substantial by any terms.”
Webb trades the exchange the way a City trader plays the financial markets. He puts around £20,000 into individual horse races (where even a snowy weekday race at Wolverhampton can attract more than £500,000 on the exchange). As there can be four race meetings in a day and seven races at each of them, it is easy to see how his turnover gets so high.
Here' how it works. Webb will back Dobbin to win (say at 5.0, which is the same as 4 to 1). If, then, the odds to back Dobbin not to win (this is called laying) fall below the back price (say 4.0, or 3 to 1) and Webb makes this bet then he has made a profit no matter what happens in the race.
The exchange keeps track of his net position so he's free to re-bet his capital immediately. If Dobbin's lay price goes up, he's stuffed. Webb makes lots of trade in this manner, on several horses, before a race starts. The odds movements don't tend to be as extreme as this example.
When there's racing in the UK, Australia and the US he'll be up at 2am working the Australian market. The UK business is usually between 2pm and 5pm, and then the US comes online at 9pm until 1pm.
Webb starts trading 10 minutes before a race starts and closes all his bets 10 seconds before the off. “Most of the money arrives five minutes before it starts,” he says. When the race starts, he no longer has any financial interest in its result, he's off to trading the next race.
“When I looked at Betfair all I could see was opportunity,” he says. “I dabbled around on several markets, and with several strategies. Horse racing stood out because of the amount of money that went through it, so I started to work really hard at understanding it.”
Webb's approach has nothing to do with knowing form or horse bloodlines. “My lack of knowledge has really helped. I'm looking at the price of a horse and estimate where the price will go. My role in the market is as an arbiter of value and whatever I do I do before the race starts – I don't believe I'm better at predicting the form than anyone else.”
This sort of thinking might be familiar to anyone who's made money not from taking a view on the absolute merits of a given technology or piece or kit - but rather on how prices are likely to move over time.
Webb will also bet major football matches, where he can put £50,000 to £70,000 through the market, and where the price changes aren't as rapid. There are also 100 dog races a day which he can trade. “Football, horse-racing and tennis are the big three markets. I've also been providing a lot of the liquidity for X Factor - people would be horrified about how much of that market was me.
These opportunities pop out of the woodwork at all times. I think the exchange is beautiful – I look at it and it speaks to me,” he says.
Webb opened an account with Betfair seven days after it first went live in 2000. He heard about it while knocking around the First Tuesday meetings of the original and glorious dotcom boom.
He deposited £1,000 and his first-ever bet (position) was placed with £5. He says he's never had to put more money in, and currently has £250,000 in his account. He doesn't need more because unlike the financial markets, Betfair settles trades immediately. A relatively small sum placed in a market can be leveraged very quickly, by closing its position then rebetting it.
Webb's last proper job was launching the Medion PC brand into the UK and managing accounts selling it such as DSG and Aldi. He builds his own PCs (and uses six monitors to trade), and upgrades them every six months. However, he says Medion is good value and he'd buy them now. “Sometimes you work for companies and think 'I wouldn't touch that',” he recalls.
He started in the distribution business straight from school working for Portsmouth distributor Softly Softly. He worked at Compaq, account managing its retail division, and had an office round the corner from legendary UK boss Joe 'Meat Packer' McNally. “I have worked with most if not all the top manufacturers of consumer technology products and their respective channel partners,” he says. “Dixons, Tesco, Wallmart, Aldi, Toys R Us, Sony, Panasonic, Samsung, Hewlett Packard, Intel, Microsoft.” He's also worked with Tech Data and Netcom Internet.
Webb won't say how much profit he makes on his Betfair trading, but stresses that each trade is only netting tenths of a per cent profit, and the line between making money and losing it is very fine. But he himself suggests £40,000 a month wouldn't be unreasonable for some top Betfair traders. Another reason to be cagey around money is that gambling profits aren't taxable in the UK – but profits from trading activity can be.
Webb is also behind a Betfair trading product called BetAngel and says he doesn't want anyone thinking that using this is route to getting rich quick. “You have to work at it,” he says.
BetAngel acts as a Bloomberg-type information screen for the betting exchange with a touch of the eBay sniping technology, says Webb. “It's a trading tool and allows you to place orders quickly. We borrowed ideas and technology from financial markets, and it allows 'fill kill', stop losses, and charting.”
Webb funds its development through subscriptions. He also runs courses in Betfair trading, which engenders the classic get-rich-quick suspicion of "Why tell anyone else, if you're making so much money?", he says.
Webb says he just enjoys meeting people and talking about his business. “I'm a social person and trading is a lonely business. When I first started doing courses, they came off the back of the software. I didn't think trading would last very long – I thought I had three or four years in it – so software and training was a bit of an insurance policy.”
Gambling and the gaming business is afforded quite a low status by many people (Reg readers among them), and at the heart of Webb talking up his business is that he wants his performance to be recognised.
“Having worked so hard and so long on this, I just want some legitimacy added to it,” he says. “Spread betting is considered normal and what we do here is exactly the same. Rather than the price of oil to go from here to there, we're looking on the price of Yojimbo [a horse racing on the day of the interview] to go from here to there."
In 2006, Webb did some financial shows with Betfair. The betting exchange's name wasn't proving a draw and Webb says he only got any attention when he started putting up financial-style market charts and explaining how he would trade the position. “The next slide would say the 14.10pm at Wolverhampton,” he says.
“I consistently get people saying what I do is not possible. I've been doing it for 10 years and still get that.”
Webb is also a financial investor and a big fan and shareholder of billionaire Warren Buffett's Berkshire Hathaway business (a single share of which is currently priced at $120,000). The backbone of Buffett's business is insurance. At one shareholder get-together, Webb asked Buffett how he reconciled his anti-gambling views with his risk-related business.
“When I look at the insurance industry I see an industry based on probabilities and people not knowing those true probabilities. Money is being made for the house in the same way I see it being made in the gambling industry,” said Webb.
“Gambling involves creating risk that doesn't need to be created,” replied Buffett. “If you want to go out and gamble on a where little ball is going to fall on a wheel that's revolving, that's a created risk. You can watch a football game without betting on it, but you can't live in a house on the Florida coast without having a risk that your entire investment can disappear. But I hope that you're right and that the house wins in both cases.”
Webb does have his battles with the Betfair house and thinks he should be treated better by them than he is. He doesn't have an account manager, which he thinks strange, and the business has introduced premium charges for customers placing or editing more than 1,000 bets an hour, or making large numbers of data requests within the same second. Which is exactly what he does.
“Betfair's argument is that people like me, who make money consistently, should help fund acquisition of new customers,” says Webb. “But I'll put through millions a week, all at my own risk.”
The newly floated business has changed a lot since he first joined. “It's much more like a traditional bookmakers now. The Utopian dream has faded,” he says wistfully. A bit like the channel perhaps?®
Peter Webb - Interview
The world is full of jealous people, so I'm a little surprised Peter happily tells everyone he has £250,000 in his account!
We see how quickly BA users vent their anger on this forum whenever they can't crack the trading game, so when PW readily shows his wealth, that will get some people's backs up
We see how quickly BA users vent their anger on this forum whenever they can't crack the trading game, so when PW readily shows his wealth, that will get some people's backs up
Most active users know you don't need much in your account on a day to day basis, certainly not a number of that magnitude. Unfortunately boring articles don't get noticed, so I think all journalists will always try to add some spice to any story even if that means a bit of embellishment.
I've deliberately avoided talking numbers to anybody as its difficult for people to understand the true nature of this sort of activity and that can easily mislead people, especially the lay person. I don't want to do that.
However, I am happy to try and promote the wider concept, as it's a poorly understood area. By doing that hopefully people can gain a better understanding of why we sit here most days trying to make a living!
I've deliberately avoided talking numbers to anybody as its difficult for people to understand the true nature of this sort of activity and that can easily mislead people, especially the lay person. I don't want to do that.
However, I am happy to try and promote the wider concept, as it's a poorly understood area. By doing that hopefully people can gain a better understanding of why we sit here most days trying to make a living!
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giulio2010
- Posts: 962
- Joined: Sun Sep 12, 2010 9:11 am
How can you not be jealous?LeTiss 4pm wrote:The world is full of jealous people, so I'm a little surprised Peter happily tells everyone he has £250,000 in his account!
We see how quickly BA users vent their anger on this forum whenever they can't crack the trading game, so when PW readily shows his wealth, that will get some people's backs up
I am able to manipulate some markets for 30sec with only £500 when I need to close my position avoiding disasters. Can you imagine what can you do with 250K?... .. 
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andyfuller
- Posts: 4619
- Joined: Wed Mar 25, 2009 12:23 pm
Can I have one of the ones you are throwing out pleaseandyfuller wrote:He builds his own PCs (and uses six monitors to trade), and upgrades them every six months.
One thing I was surprised about was the drawing of attention to how much you make a month, even though you don't say how much it does seem to imply you make over £40,000 a month.
That information could be used by the BHA/Levy Board with the Norwich Pharmacal court orders they are banging on about - not that you state you make any money from horse racing, it could all be from other sports of course
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mister man
- Posts: 363
- Joined: Tue Jul 27, 2010 2:10 pm
im not jealous but i agree with the below, apart from not agreeing with the jealousy bit..if only !!!! i guess im envious not jealous.
i think that in this like in most walks of life, once you get to a certain degree of proficiency, money just goes to money, which is why ive said before that having a reasonble size bank makes a big difference to your potential profitability.How can you not be jealous? I am able to manipulate some markets for 30sec with only £500 when I need to close my position avoiding disasters. Can you imagine what can you do with 250K?... ..
I'd actually argue that Betfair works better with small stakes. The liquidity is not good enough to commit large amounts of money to the market. If it was then real investment funds would have stepped in long before now and mopped up. As it is, it just suits smaller participants.
When you start raising stakes you can't get orders filled as easily and therefore your strike rate suffers. That ends up imbalancing the whole thing. You simply can't earn a good return on large amounts of capital, the law of diminishing returns kicks in very quickly. But that's a helpful problem for smaller participants.
When you start raising stakes you can't get orders filled as easily and therefore your strike rate suffers. That ends up imbalancing the whole thing. You simply can't earn a good return on large amounts of capital, the law of diminishing returns kicks in very quickly. But that's a helpful problem for smaller participants.
Why not use a bigger bank then giulio?giulio2010 wrote:How can you not be jealous?
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RinTaaramae
- Posts: 15
- Joined: Tue Jul 13, 2010 5:06 pm
A Norwich Pharmacal court order is the (expensive, time consuming) mechanism the Levy Board would need to follow in order to force Betfair to reveal the names of people making big money. They don't need a Norwich Pharmacal order in Peter's case: he's already volunteered his identity!andyfuller wrote:
One thing I was surprised about was the drawing of attention to how much you make a month, even though you don't say how much it does seem to imply you make over £40,000 a month.
That information could be used by the BHA/Levy Board with the Norwich Pharmacal court orders they are banging on about - not that you state you make any money from horse racing, it could all be from other sports of course
Their next step would be to take Peter to court, claiming that he meets the definition of bookmaker for the levy legislation, and then sue him for 10% of his racing profits (nothing stopping them claiming the same for prior years too). Obviously if they succeeded then he'd owe 15% of his lifetime profits from all sports including Racing to HMRC too (the levy definition and tax definition are identical, word for word). What's left over would then of course be income from bookmaking, rather than gambling winnings, so it would be taxable income, so he'd owe 10 years of back taxes on that too.
End of the day boasting about how much you make in articles like this increases the risk of all of us being taxed/levied. Still it's a small price to pay for a bit of advertising for betangel.
I think it's very inspirational and give you a sense of possibilities and put things in context very well.
Fear & greed are two very destructive emotional traits particular to people involved in sports exchanges and trading in general. The last thing people need is to add Jealousy to that deadly mix.
I'm not sure why Bookmakers' Levy is being brought in the discussion of this article. Not that I follow mottos regorously but one that I do is 'Little knowledge is dangerous thing' and so my goal has been to learn little as possible about horse racing but instead relying on market sentiment and momentum to get favourable positions in horse racing market. But what I can gather from little I read on the subject of levy, I can infer that Bookmakers’ Levy is placed on those who are profiting from i) horse racing but more importantly ii) having an ability profit from overarounds in excess of 10%.
Betfair users don't have this generous luxury and are
compled to accept or offer margin of next to nothing. So no profit is made through position of advantage to one group from the other, and it follows that no levy needs to be paid in this respect.
However, I do appreciate that horse racing, unlike, other sports does not have mass appeal and is very high in terms of fixed costs and that only be maintained by those people/organization profiting most from it should contribute. People should contribute in proportion to the level of benefit that the survival of healthy horse racing industry is going to bring. To that end those Bookmakers who are shunning Britain for favourable tax climate abroad are not only shooting themselves but potentially the whole industry in the foot.
Anyway, I think I’ve started to ramble on things that might’ve been covered or commented on other threads so I’ll leave it there except to say Betangel software and forum and Peter, for that matter, are honest and open which shouldn’t be taken for granted.
Fear & greed are two very destructive emotional traits particular to people involved in sports exchanges and trading in general. The last thing people need is to add Jealousy to that deadly mix.
I'm not sure why Bookmakers' Levy is being brought in the discussion of this article. Not that I follow mottos regorously but one that I do is 'Little knowledge is dangerous thing' and so my goal has been to learn little as possible about horse racing but instead relying on market sentiment and momentum to get favourable positions in horse racing market. But what I can gather from little I read on the subject of levy, I can infer that Bookmakers’ Levy is placed on those who are profiting from i) horse racing but more importantly ii) having an ability profit from overarounds in excess of 10%.
Betfair users don't have this generous luxury and are
compled to accept or offer margin of next to nothing. So no profit is made through position of advantage to one group from the other, and it follows that no levy needs to be paid in this respect.
However, I do appreciate that horse racing, unlike, other sports does not have mass appeal and is very high in terms of fixed costs and that only be maintained by those people/organization profiting most from it should contribute. People should contribute in proportion to the level of benefit that the survival of healthy horse racing industry is going to bring. To that end those Bookmakers who are shunning Britain for favourable tax climate abroad are not only shooting themselves but potentially the whole industry in the foot.
Anyway, I think I’ve started to ramble on things that might’ve been covered or commented on other threads so I’ll leave it there except to say Betangel software and forum and Peter, for that matter, are honest and open which shouldn’t be taken for granted.