Came across this via another forum:
http://corporate.betfair.com/investors/ ... cement.pdf
Page 8 of 24 Para 2:
High Roller segment
During the first quarter of the year, Betfair ran a trial service with a small number of ‘‘High Roller’’ customers. The size and scale of the betting patterns of these customers is too large to be fully hedged through the Betting Exchange and so Betfair has necessarily accepted proprietary risk on these bets. The trial with High Roller customers proved to be profitable, but the volatility of returns from such customers is such that Betfair has now decided not to proceed with this product offering for the foreseeable future.
Revenue from the High Roller segment during the first quarter was approximately £25 million and EBITDA(2) was approximately £7 million. The results will be reported as a separate segment in FY11 and have been excluded from the Core Betfair revenue for the quarter stated above.
Quite interesting that they made £7 million from this but have decided to not offer it anymore at the moment.
Also it sounds to me as though they took on the risk themselves rather than hedge in the exchange and as such I wonder how they decide on the price to pay out at? Are they in effect offering fixed odds to High rollers or have I misunderstood?
First I have heard of this service - anyone else heard of it before?
Betfair High Rollers Service
Just goes to show how betfair basically are indeed a bookmaker and are prepared to take on risk, and not just on their multiples products. I'm sure that they have bots running through, trading and taking risk on many markets daily. Betdaq openly admit seeding their markets, and according to people who were around from the very start on betfair the early markets were clearly seeded here too. I see no reason why they would stop to be honest. I think it was Mark Davis who told parliament once that the whole 'peer to peer' betting thing is just marketing speak. I think of betfair as more of an interactive bookmaker which manages risk in a uniquely flexible way rather than as some sort of 'broker'. I think it would do the BHA and the Levy board a lot of good to look at what betfair actually is in practice
It would be very interesting to understand what would qualify an individual/group as "High Roller". I would expect the full time traders on here to be pushing in excess of £10m easy, Peter is probably in the 8 figure mark I would have thought (and he doesn't even have an account manager!)
My take on everything that is happening at the moment is to "Fill ya boots" and make as much as you can. Who knows what betfair will look like this year, when the emphasis on returning Year on Year growth and dividends...I'm dreading to see what happens to the PC charge...
regards
Peter
My take on everything that is happening at the moment is to "Fill ya boots" and make as much as you can. Who knows what betfair will look like this year, when the emphasis on returning Year on Year growth and dividends...I'm dreading to see what happens to the PC charge...
regards
Peter
I reckon these high rollers are customers who just have massive punts & don't care too much for trading, hence the reason Betfair decided to stomach the liabilityPeterLe wrote:It would be very interesting to understand what would qualify an individual/group as "High Roller". I would expect the full time traders on here to be pushing in excess of £10m easy, Peter is probably in the 8 figure mark I would have thought (and he doesn't even have an account manager!)
My take on everything that is happening at the moment is to "Fill ya boots" and make as much as you can. Who knows what betfair will look like this year, when the emphasis on returning Year on Year growth and dividends...I'm dreading to see what happens to the PC charge...
regards
Peter
This shows they probably grade all customers according to their profit/loss and betting activity
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andyfuller
- Posts: 4619
- Joined: Wed Mar 25, 2009 12:23 pm
From tonight's Q&A:PeterLe wrote:I'm dreading to see what happens to the PC charge...
Can you confirm or deny the rumours that you are to change the premium charge requirement to 25% instead of the current 20%
You will understand that failure to address the question will of course only ignite further speculation.
At present we have no plans to change it.
They just mean people like the mad bomber who are happy to throw 30k or 40k backing one horse for fun. A typical traders volume figures may look high with lots of quick transactions but when that's matched against other traders it doesn't amount to making you a high roller. Like in the market below today, I matched over 3k on both sides and only actually made a fivers profit. Times that 3k by 20 races a day five or six days a week over 40 odd weeks a year and you'd be looking at a huge figure (and Im sure some others would be far higher,) but it doesnt really add up to anything like what people would think as the margins on here are so tight.PeterLe wrote:It would be very interesting to understand what would qualify an individual/group as "High Roller". I would expect the full time traders on here to be pushing in excess of £10m easy, Peter is probably in the 8 figure mark I would have thought (and he doesn't even have an account manager!)
My take on everything that is happening at the moment is to "Fill ya boots" and make as much as you can. Who knows what betfair will look like this year, when the emphasis on returning Year on Year growth and dividends...I'm dreading to see what happens to the PC charge...
regards
Peter
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andyfuller
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Interesting stuff again from the Q&A. I doubt this is anythign to do with the Mad Bomber etc as it was only a short trial and the strange stuff has been going on for a couple of years now:
Documents associated with your float give the impression that Betfair is increasingly standing certain client bets rather than feeding these through to be taken by the majority of Betfair's customer on the exchange:
"During the first quarter of the year, Betfair ran a trial service with a small number of ''High Roller'' customers. The size and scale of the betting patterns of these customers is too large to be fully hedged through the Betting Exchange and so Betfair has necessarily accepted proprietary risk on these bets.
The trial with High Roller customers proved to be profitable, but the volatility of returns from such customers is such that Betfair has now decided not to proceed with this product offering for the foreseeable future.
[Net profit] from this segment in the first quarter [was] approximately £7 million."
My question is, why can't these bets (in whatever size) be passed through to your smaller customers? Since you charge a commission on winning bets, submitting the high-roller bets to the exchange mechanism would not result in any volatility of returns for Betfair (or would at least not threaten Betfair with losses).
The impression, unfortunately, is that you are cherry-picking high-staking losing clients, while allowing skilled players (who perhaps cannot get on at conventional bookmakers) to fight it out between themselves on your P2P exchange. Some might think that this formula would yield greater profits that allowing skilled players to bet against high-rollers on your main site.
Thank you.
Over the years, we’ve been approached by a number of high roller clients who were looking for a telephone based service that would guarantee their bets were on no matter what the size or timing. These customers would often want to bet on markets at times where there was insufficient liquidity to absorb the full bet or on markets which were nascent. Given the size of bets made at agreed prices in many cases it was not be practical to offer theme on the exchange and the only way we could set up the service involved taking risk. We trialled it and, while were doing so, hedged bets on the exchange to the extent practical. That made them available to the rest of our customer base. Overall, whilst we made money during the trial, the revenue was too volatile and we discontinued the trial as a consequence. As an innovative business, we should be continuously trying new things and we should also be prepared to stop them if they don’t work.
Documents associated with your float give the impression that Betfair is increasingly standing certain client bets rather than feeding these through to be taken by the majority of Betfair's customer on the exchange:
"During the first quarter of the year, Betfair ran a trial service with a small number of ''High Roller'' customers. The size and scale of the betting patterns of these customers is too large to be fully hedged through the Betting Exchange and so Betfair has necessarily accepted proprietary risk on these bets.
The trial with High Roller customers proved to be profitable, but the volatility of returns from such customers is such that Betfair has now decided not to proceed with this product offering for the foreseeable future.
[Net profit] from this segment in the first quarter [was] approximately £7 million."
My question is, why can't these bets (in whatever size) be passed through to your smaller customers? Since you charge a commission on winning bets, submitting the high-roller bets to the exchange mechanism would not result in any volatility of returns for Betfair (or would at least not threaten Betfair with losses).
The impression, unfortunately, is that you are cherry-picking high-staking losing clients, while allowing skilled players (who perhaps cannot get on at conventional bookmakers) to fight it out between themselves on your P2P exchange. Some might think that this formula would yield greater profits that allowing skilled players to bet against high-rollers on your main site.
Thank you.
Over the years, we’ve been approached by a number of high roller clients who were looking for a telephone based service that would guarantee their bets were on no matter what the size or timing. These customers would often want to bet on markets at times where there was insufficient liquidity to absorb the full bet or on markets which were nascent. Given the size of bets made at agreed prices in many cases it was not be practical to offer theme on the exchange and the only way we could set up the service involved taking risk. We trialled it and, while were doing so, hedged bets on the exchange to the extent practical. That made them available to the rest of our customer base. Overall, whilst we made money during the trial, the revenue was too volatile and we discontinued the trial as a consequence. As an innovative business, we should be continuously trying new things and we should also be prepared to stop them if they don’t work.
There are quite a few things in the financial report that stick out, but this was a surprise, but then again nothing surprises me about Betfair any longer!
I'm not clear on whether they are saying this revenue is or is not included in what figures, but if it was included in the figures then it would flatter profits significantly.
There was also this bit in the report.
"revenue from customers using Betfair’s public application programming interface (‘‘API’’), which allows customers to access the Betting Exchange electronically using their own or third party software, rose by 31 per cent. in the year and contributed 17 per cent. of sports revenue;"
I'm not clear on whether they are saying this revenue is or is not included in what figures, but if it was included in the figures then it would flatter profits significantly.
There was also this bit in the report.
"revenue from customers using Betfair’s public application programming interface (‘‘API’’), which allows customers to access the Betting Exchange electronically using their own or third party software, rose by 31 per cent. in the year and contributed 17 per cent. of sports revenue;"
You get the feeling they will rule nothing out. I think the age of the true exchange passed a long time ago with Betfair.andyfuller wrote:Over the years, we’ve been approached by a number of high roller clients who were looking for a telephone based service that would guarantee their bets were on no matter what the size or timing. These customers would often want to bet on markets at times where there was insufficient liquidity to absorb the full bet or on markets which were nascent. Given the size of bets made at agreed prices in many cases it was not be practical to offer theme on the exchange and the only way we could set up the service involved taking risk. We trialled it and, while were doing so, hedged bets on the exchange to the extent practical. That made them available to the rest of our customer base. Overall, whilst we made money during the trial, the revenue was too volatile and we discontinued the trial as a consequence. As an innovative business, we should be continuously trying new things and we should also be prepared to stop them if they don’t work.[/i]
There does seem to be some conflicting information being reported. Betfair state that the "High Roller" service was trialled and discontinued but the report goes on to detail that Betfair take risk on Multiple bets and more importantly:
Some Larger bets - where the customer wants to place a larger bet without having to perform multiple transactions on the Exchange, Betfair can choose to transact the entire bet, subsequently hedging it on the Exchange (without paying commission). It currently offers the service to a small number of customers on a trial basis via a product known as Betfair Select"
Is this the trial that was discontinued or something different?
Some Larger bets - where the customer wants to place a larger bet without having to perform multiple transactions on the Exchange, Betfair can choose to transact the entire bet, subsequently hedging it on the Exchange (without paying commission). It currently offers the service to a small number of customers on a trial basis via a product known as Betfair Select"
Is this the trial that was discontinued or something different?
Hi Andy
It seems unlikely that the likes of Harry Findlay and Dave Nevison would place bets that would make Betfair a profit over time (or that Betfair would be stupid enough to accept their bets!).
It therefore seems likely that Betfair is accepting bets from bookies wanting to minimise their liability.
What do you think?
Jeff
It seems unlikely that the likes of Harry Findlay and Dave Nevison would place bets that would make Betfair a profit over time (or that Betfair would be stupid enough to accept their bets!).
It therefore seems likely that Betfair is accepting bets from bookies wanting to minimise their liability.
What do you think?
Jeff
andyfuller wrote:
Revenue from the High Roller segment during the first quarter was approximately £25 million and EBITDA(2) was approximately £7 million.
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RinTaaramae
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I'd be very surprised if it was bookmakers either. What bookmaker would want to dump losing money onto Betfair, when they'd make more money standing the bets themselves? Smart money, OK I get why a bookie would want to palm that off onto Betfair, but then Betfair's not going to make £25 million out of that per quarter.
Isn't it going to be the same as Ladbrokes or Victor Chandlers high-roller service: mega-wealthy mugs who want £50k on a horse just for an interest, and who are quite prepared to take 4-1 about an actual 5-1 shot?
I can't understand for the life of me why people continually moan about Betfair not being a "pure exchange" (what, like Betdaq???). OK the betting exchange is the perfect product for me, and for most people on here. But what about everyone else? What about the mugs who want an acca on tonight's football? What about someone who wants to put £20 on Chelsea, £50 on a horse and is happy spending £50 on roulette? What about a multi-millionaire whose idea of an interest on a dull afternoon is flipping on ATR and having £20k on a random horse?
What do we want Betfair to say to customers like that? "Fuck off and take your money to Bet365 (profits of £100M, seven time more than Betfair). They've got what you want, but we need to preserve the purity of the exchange"? If someone's got off their backside at Betfair and done the legwork to get hold of some big customers of competitors, and dropped the best part of £18m (£25m - £7m) into our pockets hedging then great. How much of it did people want before they consider free money a good thing rather than evidence that Betfair is evil? I bet there's some deluded soul at Betfair who thought that when they announce that they've done something new to bring millions of mug money to the exchange the pros would welcome it.
The biggest weakness of Betfair's model is that it shares the money its losing customers lose, and that even keeping 22.5% of that is seen by most as "too much", a diabolical liberty. That will be the albatross around its neck IMO. They've already got to the surreal point where some imbeciles who make a living out of Betfair will happily tell mugs that they're better off betting elsewhere. The result: they go to Ladbrokes or Bet365, where we can't make a penny out of them. If the people who make the most money out of your business aren't advocates any more (and in many cases actively try to persuade mugs to bet elsewhere), then you may as well look to cut them out of the loop.
What will we do then? Moan a lot? Try to get people to bet with Betdaq? We do that already.
Isn't it going to be the same as Ladbrokes or Victor Chandlers high-roller service: mega-wealthy mugs who want £50k on a horse just for an interest, and who are quite prepared to take 4-1 about an actual 5-1 shot?
I can't understand for the life of me why people continually moan about Betfair not being a "pure exchange" (what, like Betdaq???). OK the betting exchange is the perfect product for me, and for most people on here. But what about everyone else? What about the mugs who want an acca on tonight's football? What about someone who wants to put £20 on Chelsea, £50 on a horse and is happy spending £50 on roulette? What about a multi-millionaire whose idea of an interest on a dull afternoon is flipping on ATR and having £20k on a random horse?
What do we want Betfair to say to customers like that? "Fuck off and take your money to Bet365 (profits of £100M, seven time more than Betfair). They've got what you want, but we need to preserve the purity of the exchange"? If someone's got off their backside at Betfair and done the legwork to get hold of some big customers of competitors, and dropped the best part of £18m (£25m - £7m) into our pockets hedging then great. How much of it did people want before they consider free money a good thing rather than evidence that Betfair is evil? I bet there's some deluded soul at Betfair who thought that when they announce that they've done something new to bring millions of mug money to the exchange the pros would welcome it.
The biggest weakness of Betfair's model is that it shares the money its losing customers lose, and that even keeping 22.5% of that is seen by most as "too much", a diabolical liberty. That will be the albatross around its neck IMO. They've already got to the surreal point where some imbeciles who make a living out of Betfair will happily tell mugs that they're better off betting elsewhere. The result: they go to Ladbrokes or Bet365, where we can't make a penny out of them. If the people who make the most money out of your business aren't advocates any more (and in many cases actively try to persuade mugs to bet elsewhere), then you may as well look to cut them out of the loop.
What will we do then? Moan a lot? Try to get people to bet with Betdaq? We do that already.