Could bookmakers be out of the running?

The Times, Tuesday January 28, 2003

It was once said of Stan Bowles, the iconic former QPR and England centre forward, that he would have had no worries if only he could have passed betting shops as well as he did footballs. Bowles was never shy of a flutter, and tales abound of his love affair with the bookmaker. Like all affairs, it was as memorable for its lows as much as the highs.

Nowadays, if Bowles happened along to Loftus Road he'd be as likely to find near-neighbours Fulham there as QPR, owing to this season's ground-sharing arrangement. If he happened to watch a Fulham game, he would notice the name of a sponsor on Fulham's shirts that is scaring traditional bookmakers as much as the Bowles left foot terrified full-backs in his heyday.

Betfair.com is a success story from the madness of the dotcom revolution, now increasingly visible via a sponsorship deal with Fulham for the Barclaycard Premiership. The company was launched in June 2000 via a publicity stunt that is proving as prophetic as it was provocative. Betfair paraded the streets of central London with a coffin in a mock-funeral, to mark 'the death of the bookmaker.'

The likes of William Hill, Coral Eurobet and Ladbrokes sat back and waited for Betfair to fail. Instead, though, the company has gone from strength to strength. A glance at the betting press shows just how much Betfair has upped the ante. Again and again the company's critics seize the slightest opportunity to condemn Betfair as 'illegal', or a 'menace' to the punter. Meanwhile, the punters continue to register with Betfair, happily leaving the industry to play out its debate over whether what it does is legal or not while they take advantage of its revolutionary betting exchange system.

Betfair was the brainchild of Andrew Black, a man whose career began inauspiciously when he departed Exeter University having failed a pure maths exam. Since then, his colourful life has seen him work as a caddy for a professional golfer and find out first-hand how Stan Bowles used to feel in a stint as a professional gambler.

In one incarnation, working on top secret software projects at GCHQ, Black came up with Betfair, a betting exchange set up to enable punters to bet against one another rather than have to take whatever odds the established bookmakers were offering. Black's system removes the role of the traditional bookmaker, and, needless to say, the bookmakers aren't happy about this.

John Brown, chairman of William Hill, has been vehement in his denunciation of what Betfair does, accusing the government of a "dereliction of duty" in not recognising that Betfair's operation is, to him, illegal. Brown and other bookmakers claim that punters using Betfair are acting as bookmakers, and as such should themselves acquire bookmaker's permits. Perhaps aware of the practical problems with this approach, the Home Office has responded by saying that Betfair's betting exchange "doesn't fit neatly into the current legislation."

But Mark Davies, Betfair's Director of Communications, hits back eloquently at Betfair's opponents. Davies points out that Betfair itself has a bookmaker's permit, as required under the 1963 Betting Act. This legislation was introduced to protect the betting public. Bookmakers have to prove that they are 'fit and proper' to hold a bookmaker's permit, and yet even so tales abound of the smaller bookmakers simply shutting up shop when asked for a payout they can't meet.

In contrast, Betfair's betting exchange requires punters to deposit enough money to cover their exposure. If a customer wishes to offer odds on an event, he has to have enough money in his account to meet his maximum possible liability. As Davies says, "Betfair offers a cleaner way of betting, with our only interest being to maintain the integrity of the system. This way the punter is always protected."

In its two year trading history Betfair has gone from humble beginnings in Putney, in the shadow of the Tote, to a swish new-age office block in Fulham, on the banks of the Thames. The company employs over 130 people and currently matches 12,000 bets per minute, with 2million spent on technology in the last three months alone. Its turnover is a staggering 50million per week, making it one of the UK's fastest growing companies. Now principally privately owned, Betfair has three institutional investors, UBS Capital, Benchmark and JP Morgan Chase. Already, it has gobbled up its only UK competitor, buying out flutter.com in a deal in December 2001.

Davies insists that plans for flotation are some way off, but confirms that Betfair is developing a presence in Asia, and has even begun talks with United States regulators, whose regime is notoriously hostile to betting. As Paul Renney, an expert in betting and gaming law with Theodore Goddard, says, "they may not crack the US just yet, but I can't currently see any reason why they won't succeed elsewhere."

The way Betfair is going, you wouldn't bet against him.