When Betfair launched their website back in 2000 we all tend to forget the fundamental rationale of the company; that it was a peer-peer method of betting that simply matched layers with backers. The original premise was to attract commission via the Estate Agent model (a small graduated commission on winnings).
A lot of water has passed under the bridge since those days and its impossible to say whether Betfair foresaw the infiltration of a new beast, the short term trader or even that bookmakers would use their exchange to reduce liabilities but the fact is that original peer to peer model has been corrupted.
Many have complained that Betfair need to get back to their original model and now complain that discouraging those who suck backers and layers money out of that peer-peer system via punitive taxation is wrong.
I understand why they took the decision they took in introducing Premium Charges and I am sure they have weighed up the pro's (increased liquidity) and cons (more losers than winners) of their decision. They do seem happy with their decision and don't look like changing it anytime soon.
Full Timers
Betfair’s fatal mistake, when their obituary is written, was wrapping themselves up in the City’s world of continuous growth, ever increasing dividends, new markets. They deluded themselves this would succeed after Softbank took a pre-IPO stake. Yet bonds give 7% a year so 5% commission was never going to fly in the long run.
Betfair’s love affair with the City that caused three mistakes, one after the other.
First was their bet on growth from new markets, hence the almost frenzied push into Europe and the States and Australasia, which proved expensive legally and commercially for mixed results; if it had worked the premium charge might not never happened.
When new markets showed signs of plateau they turned(panicked?) to squeezing more revenue from existing customers. There were only two choices here – from the many or the few. Like a true bookie, they backed both!!
Ripping off mug punters was and is a terrible mistake, the very spirit of the gambling industry betfair once challengd, and quite shameful. This is the part of betfair I hate most. 90% of the betfair website is now about attracting mugs – casino, sportsbook, bingo. What a stupid move; their point of difference is marginal and will never impress the City; Ladbrokes and Will Hill etc are more finely honed rip off machines.
So all they have left is taxing wealthy customers, the premium charge. Which means it’s probably fair to say the premium charge will not disappear until betfair disappears.
Betfair’s love affair with the City that caused three mistakes, one after the other.
First was their bet on growth from new markets, hence the almost frenzied push into Europe and the States and Australasia, which proved expensive legally and commercially for mixed results; if it had worked the premium charge might not never happened.
When new markets showed signs of plateau they turned(panicked?) to squeezing more revenue from existing customers. There were only two choices here – from the many or the few. Like a true bookie, they backed both!!
Ripping off mug punters was and is a terrible mistake, the very spirit of the gambling industry betfair once challengd, and quite shameful. This is the part of betfair I hate most. 90% of the betfair website is now about attracting mugs – casino, sportsbook, bingo. What a stupid move; their point of difference is marginal and will never impress the City; Ladbrokes and Will Hill etc are more finely honed rip off machines.
So all they have left is taxing wealthy customers, the premium charge. Which means it’s probably fair to say the premium charge will not disappear until betfair disappears.
Earlier Jeff you also made reference to the 30% increase in share price.Ferru123 wrote:I don't think they did it out of spite - I think they did it because they felt that it was a way to maximize their profit. They possibly looked at the money those 70 traders were pulling in, and thought 'How can we get our hands on some of that?'.
Whatever you think of the ethics of the PC, there's a strong case in my opinion for saying it was a good business decision.
Jeff
But I bring your attention to what I said earlier about longevity.
The investors and shareholders jumping on the BF bandwagon probably do not spend 10 hours a day watching markets (on BF), they probably have no clue what BF do or how they do it. We do. (well I do)
Like I said, I have no idea about stocks and shares, but I do know how to read betting markets. That's why I pay the higher rate PC. I can say with absolutely NO DOUBT that we are reaching a crisis point.
They can replace all the liquidity they like. It's not the "correct" type of money (unless it truly comes direct from the sportsbook in it's entirety, without BF sticking their noses in that trough too and having a bit). I am pretty sure Gerald Ratner is advising the BF board.
Another point about the PC. There is some misconception that all the higher rate PC players make £10000's. That isn't true, trust me.
And it's a double edged sword. Ok if they take more why not just increase your stakes to compensate?
Doh! why didn't I think of that?
Less liquidity and more importantly FILL RATES mean they it's even harder to get your money matched that ever before. Truth is I get even LESS money in that before the PC came along. It's all well and good getting a couple of grand matched, your sitting pretty and then BOOM, the position changes and you need to cut your position. But you cannot get all the money matched. Sure you have all been there.
This is one of the side effects of BF "providing their own liquidity'. Sure they have provided it. But 20 ticks lower than you need it. Because the REAL money from REAL traders is not there.
Exactly right,just look back at what has happened to other companies when shareholders and not customers are calling the shots.Betfair’s fatal mistake, when their obituary is written, was wrapping themselves up in the City’s world of continuous growth, ever increasing dividends, new markets.
Everything and i mean everything undertaken is related to increasing the share price and the return for investors.
So when you see a new idea or gizmo on Betfair, it is solely there to increae the share price and has absolutely nothing to do with the customer. Keep that in mind, when you visit the sportsbook, or get an e mail asking you to trade between 8am and 10 am etc.
The critics of the PC could be right - I keep an open mind.
I like the original P2P model, and I think it's a shame it's been corrupted. Perhaps it was an inevitable result of the company going public. Maybe the demand for short-term profits from shareholders undermined the company's original vision.
I'm reminded of this quote:
'Public companies almost inevitably seek to grow profits faster than expected, which means beyond the organic growth that comes from doing what made them great in the first place. In order to gain that profit, it's typical to hire people and reward them for measuring and increasing profits, even at the expense of what the company originally set out to do.
Every company at a certain stage ends up with two sorts of employees... some that work hard to improve the experience and value for the original customers, and some that tear down that experience and value in order to please shareholders in the short run.'
From http://sethgodin.typepad.com/seths_blog ... t=FaceBook
Jeff
I like the original P2P model, and I think it's a shame it's been corrupted. Perhaps it was an inevitable result of the company going public. Maybe the demand for short-term profits from shareholders undermined the company's original vision.
I'm reminded of this quote:
'Public companies almost inevitably seek to grow profits faster than expected, which means beyond the organic growth that comes from doing what made them great in the first place. In order to gain that profit, it's typical to hire people and reward them for measuring and increasing profits, even at the expense of what the company originally set out to do.
Every company at a certain stage ends up with two sorts of employees... some that work hard to improve the experience and value for the original customers, and some that tear down that experience and value in order to please shareholders in the short run.'
From http://sethgodin.typepad.com/seths_blog ... t=FaceBook
Jeff
I think what upsets everyone about BF PC and Sportsbook, is it goes against the grain of everything they stood for when they set out. Their marketing tools that made them successful and made us all excited about their product included the prospect of P2P model where winners were not barred, and they actually had a campaign to ridicule the bookmakers
To see them now is like watching Nick Griffin getting married to a Muslim black asylum seeker
To see them now is like watching Nick Griffin getting married to a Muslim black asylum seeker
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andyfuller
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Very few of the top earners on BF are 60% PC customers and of the top 10 or so customers, not one pays 60%.mugsgame wrote: Another point about the PC. There is some misconception that all the higher rate PC players make £10000's. That isn't true, trust me.
There are also very few customers who actually pay 60% due to the fact that most customers have adopted marginal activity that drops them to at least 40%.
Myself and Mugs would be very much in the minority as 60% payers.
Furthermore, BF do not envisage the £250,000 cap being an issue as the years pass.
The fact is they don't need to, it's more about the distribution of winners. The core model is sound in that half the people are losers and the winning half is split up between Betfair and the winners. But it's more about that distribution of capital. Concentrated in one area too much and the model fails, so I'd imagine the internal thinking at Betfair is to spread that money amongst as many people as possible.
I'm assuming they would ideally love to ban Peter Webb from the exchange completely
However, Peter has them by the short & curlies, because they would be worried his demise would see BA either close or become BD orientated, and therefore would probably lead to many of his customers following suit to use BD only
However, Peter has them by the short & curlies, because they would be worried his demise would see BA either close or become BD orientated, and therefore would probably lead to many of his customers following suit to use BD only
Having followed this thread closely, one question that keeps arising is: How many betfair users now use BetDaq because of the changing markets, fill rates, bet matching etc?
More importantly, are these numbers of users transferring increasing?
More importantly, are these numbers of users transferring increasing?
It's doubtful that betfair would ban winners, as it's rational (to their view) to tax winners recruited with sunk marketing costs. Banning winners increases betfair's marketing costs to recruit new traders to tax; or cost-of-sales to seed the (diluting) markets with hired money, which they are probably reluctant to do on a serious scale (even though they already are, it seems, in pockets).mcfc1981 wrote:when will the day come that they will start banning winners
But this does bring in the next chapter in the trading exchanges story, where will winners be welcome in future. Specifically, who believes betdaq will stick by their commitment for no premium charge?
I doubt betdaq will be honourable in the long term.
Once (if) Ladbrokes can dilute or destroy betfair they will have enforce tricks on the market. Ripping off individuals is their DNA. They may implement capped positions on betdaq, so there's no premium charge but premium charge-type winners can't place large positions. Meanwhile in house Ladbrokes traders will be allowed any size trades on betdaq; ie their version of betfair will be mugs channeling profits to Ladbrokes.
The only real solution is a replacement to betfair not listed on the stock exchanges. It may be a name we have never heard yet.