INTERNET BETTING: Greg Wood reports on a new dotcom phenomenon that is causing concern for the traditional bookmaking firms.
If you stand on the roof of Betfair's new Thames-side offices in Hammersmith, London, you can just about see the attic room in Putney where the business was founded only three years ago. In a physical sense, the company has not travelled far. By any other measure, however, all the visitor can do is look around and gasp.
"The exchanges" - which means, for most purposes, Betfair alone - have been absorbed into the punting vernacular so quickly that it is easy to forget how young the idea of person-to-person betting via the Internet still is. Betfair started out with three people working in a single room, and its website was launched in June 2000. By December 2001, the payroll had risen to 30. Barely a year later it is 160.
The amount of money going through their site has also risen exponentially. In April 2001 it "matched" - and took its commission from - £1 million of bets in a week for the first time. It was £5 million a week in December 2001, and hit £10 million the following month.
The firm now matches about £50 million each week, though these days it prefers to measure performance by the number of bets matched each minute: at busy times Betfair processes 12,000 bets every 60 seconds.
Making it all possible, of course, is the Internet, and as a child of the dotcom boom that has never made a loss Betfair can fairly claim to be the most successful web company ever. As a measure of the Internet's global reach, Betfair has to employ two Chinese speakers on its help desk to deal with Far East inquiries.
Walk around the Hammersmith office and everywhere there are people doing jobs that did not exist at the turn of 2000. This time they have a 10-year lease and first refusal on enough extra space to double the workforce once again.
No wonder so many people are nervous. Change is often frightening, but lightning-fast, fundamental change like this can easily breed paranoia. Traditional bookmakers do not like betting exchanges, and Betfair in particular. They have seen its business grow by the week and plotted graphs in which their own turnover eventually buckles.
And now that anyone can lay any horse they please, quickly and easily, what might it mean for the integrity of racing? Only two weeks ago Royal Insult, a runner in a race at Lingfield, drifted from 9 to 2 to 49 to 1 on Betfair. He was injured in the race and later destroyed, and even Andrew Black, one of the exchange's founders, admitted that the betting pattern looked "dodgy". You do not offer 49 to 1 about a horse that has a solid chance on form unless you are positive it is not going to win.
It is a stick that has been used to beat betting exchanges with since the concept was devised, but if the blows are hurting then Betfair keeps it well hidden.
"Integrity is something that people have always attacked us on," Mark Davies, Betfair's spokesman, says, "but I think that in not too long things will come full circle and people will realise that we can uphold the integrity of the sport far better than ever before.
"We've raised the bar. We can see everything that happens in the betting world and we're an independent middleman - we have no interest in the outcome of a race. We just sit there analysing what's going on, which as far as the fight against corruption is concerned is a massive positive."
It is a persuasive argument. The arrival of SIS cameras on racecourses in the mid-1980s made it much harder to run a non-trier, and Davies suggests that Betfair can offer a similar window into betting markets. As money flows to and fro in the minutes before a race, anyone with a computer can click and watch. Suspicious betting patterns will be far more obvious in an exchange market than they could ever be in the shadows of the betting ring.
Betfair is also putting the finishing touches to a "memorandum of understanding" with the Jockey Club, which will enable it to provide information on bets - and who is placing or laying them - to the club's investigators when there are reasonable grounds to do so.
What remains to be seen is whether the firm can hang on to its immense "first-mover" advantage in the market. In particular, there is the question of how long the established bookmakers will wait to tackle the betting exchange on its own territory.
"I think my biggest worry is that one of the big players could start an exchange and then really bastardise the model to the detriment of the punter," Davies says. "If we got into a situation where, for argument's sake, Ladbrokes took over the betting exchange world and then effectively closed it down two or three years later and went back to where they were, we would have achieved nothing.
"We don't want to be the Betamax of the piece and find ourselves being overtaken by an inferior product just because it has a bigger backer."
Another possibility is that Betfair might fall into a very old-fashioned trap and grow too big, too quickly. Bloated companies are easy prey for leaner, hungrier competitors.
Guardian Service
