On Betfair..

"You cut out the middle man."



Unless the fellow betting is a big rich mug, then we'll keep his 7 million for ourselves, ta..

http://corporate.betfair.com/investors/fy-2010-financial-results/~/media/Files/B/Betfair/pdf/results-announcement.pdf

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.

Hmmmm, it would easily answer some peoples liquidity questions. Ya never know who youre betting against eh?

Also in this evenings live chat:

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.

What happened to the person to person exchange..? Interesting.