Thursday, 1 April 2010

Bet365

News that Bet365 toppled Betfair on Oddschecker over Cheltenham is likely to raise eyebrows in various places for various reasons.

Not least of the points that should be taken out from it, though, is that it ought to put to rest forever the absurd and oft-repeated notion that Betfair is the cause of falling margin in racing.

Not that falling margin is a bad thing, of course, as I have often suggested. With betting so often demonstrated by economists to be an elastic product, a fall in margin leads to a commensurate increase in turnover; and in a world where racing is paid on the basis of gross profit (the product of the two), that means the two things balance each other out (that is, 10% of 100 is the same as 5% of 200).

But the reason for falling margin, as I have said ad nauseam over the last few years, is not just Betfair, but competition. And while I am delighted to accept that Betfair is an extremely competitive operator, it isn't the only one.

The internet has made lots of operators more competitive, which would be seen as a good thing in any other industry but for some reason is a cause for a great deal of bleating in ours. I wonder whether the next time we hear a racing industry rep or a William Hill executive complaining about the pressure on their margins, we also hear them say, "it's all because of those beastly people at bet365".

I won't be holding my breath.

4 comments:

  1. This is even more remarkable as Bet £3.65p don't lay a bet if anyone has even the slightest clue as to what they are doing!

    Mike Quigley

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  2. Mark,

    I agree your general point: anyone arguing that without Betfair there wouldn't be price competition or pressure on margins in online betting is being disingenious. With or without Betfair there'd be competition between bookmakers (which would be a good thing).

    But I think your argument falls down when you bear in mind that Bet365 don't compete on price with the big boys. The main reason for their success is the way they've built their brand - it's simple, fun and straight to the point, just like Paddy Power.

    As Mike Quigley says they don't lay bets to anyone even vaguely resembling a winner, but that's a good thing for *their* profits.

    More to the point their advertising is miles more effective than Betfair's, even if it's misleading and dishonest.

    http://www.asa.org.uk/Complaints-and-ASA-action/Adjudications/2010/1/Bet365-Group-Ltd/TF_ADJ_47988.aspx

    http://www.asa.org.uk/Complaints-and-ASA-action/Adjudications/2009/10/Bet365-Group-Ltd/TF_ADJ_47164.aspx

    Contrast Bet365's simple and to-the-point advertising (like Phil Daniel's head telling you simply how to place a bet) with Betfair's idea (create the least believable living room setting for 5 actors to express opinions you have no interest in listening to). Is there anyone who doesn't hate those adverts?

    http://www.guardian.co.uk/sport/blog/2010/mar/29/martin-kelner-screen-break

    The best selling point of Betfair isn't that it gives you the chance to hang out with opinionated wankers in their front room - it's that cutting out the bookies gets you better prices. Even if you don't agree with that, and you do assume the person-to-person thing is the big deal, that doesn't mean any customers are going to receive that message from those advert - they're too obtuse.

    Just think as an advertising executive which contract you'd prefer: Bet365, build a popular fun brand with a product that's no different from dozens of others against competitors with multi-million pound advertising budgets, or Betfair, a trendy, disruptive company with a better priced and more flexible product.

    It's so easy to come up with a fun advertising theme for Betfair adverts: how about adverts commiserating with anyone who backed "100-1 winner" Mon Mome last year (it was 140-1 on Betfair)? Advertising should be about emotions - why not make people feel silly for not betting on Betfair. The current emotion you'd get if you thought about betting on Betfair is "am I one of those front room wankers?"

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  3. Hi Alice

    I don't understand your argument that 'bet365 don't compete on price with the big boys'.

    Of course it is true that they have innovated in the way that they offer their product (and all credit to them and to Paddy Power for making it fun), but they have also offered a host of concessions that are quite clearly a form of price competition.

    Best Odds Guaranteed, Double Result, 5 places in big handicaps, non-runner no bet in advance of big festivals, money back if your horse falls etc etc. all exert downward pressure on margins. When I back a horse at 5/1 in the morning and get paid out at a bigger SP, that reduces margins too. So does me getting paid out when I back a horse each way that finishes 5th.

    I think too many people are too quick to take the view you express. The fact is that we are all competing for the punter's pound, and all these concessions - none of which I am against, I repeat again (because I don't buy the argument that falling margin is bad for racing) - have an impact on margins (and cannot, as it happens, be offered by Betfair).

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