30th October 2001 - issue 7
1. Overview
It was once said that it is not the pioneers but the settlers who thrive, and it will be interesting to see how well this saying applies to the bookie free betting sites. After eighteen months which has seen the original bookie free sites enjoy mixed fortunes, including a number who have disappeared without trace, we are now starting to see the second generation of sites spring up. Whilst these sites do not have first mover advantage, they do have the knowledge that they are now entering into a business with a proven demand, and are therefore taking less risks than the bookie free pioneers. In addition they have the luxury of learning from the mistakes of the pioneers and the ability to copy their successes as well as bringing on board some ideas of their own.
Betdaq announced their arrival on the bookie free scene with their sponsorship of the high profile BETDAQ Festival of Racing at Ascot . Betdaq clearly mean business and a quick look at the site gives an impression of a serious well funded operation. The credentials of the senior management team appear impressive, and the site itself is well designed, clean and professional. But beyond first impressions and down to the nitty gritty, does the site live up to its promise, and more importantly, what opportunities does it offer us bookie free betters?
The key selling point of Betdaq is the unrivalled levels of liquidity that they promise, and without doubt the most significant feature about Betdaq is the minimum bet limits which apply on the site. If you want to accept a bet you must stake at least $100. Compared with the £1 or £2 which applies elsewhere, this is a bold stand they are taking. Even more significant is the $500 you must stake if you want to make an offer of your own. This is a consciously high sum that Betdaq must be aware will prove too high for the great majority of the British gambling public. In excluding the casual gamblers who have made up a significant proportion of the other sites members, Betdaq clearly expect that this will be more than made up for by the high rollers that they will attract as a result of this strategy. So who are these high rollers that have so far eluded the other sites? A casual glance at the home page gives you at least part of the answer. As well as English the site is available in Chinese and Japanese. Betdaq are expecting to make serious inroads into the far eastern gambling market. Estimates of the value of the far eastern sports betting market are quoted in billions rather than millions. If Betdaq succeed in selling the concept of exchange betting to this market the potential rewards are immense and the unrivalled levels of liquidity that Betdaq boast of seem a realistic proposition.
Critics of p2p betting have recognised the exceptional value that is available on these sites, but have dismissed it because of the very small sums that are sometimes available to bet at these exceptional odds. Betdaq can guarantee that if a bet is available then you will be able to place a sizeable bet on it at the price on offer. However, by restricting the numbers of potential members, it has to be questioned whether there will be enough competition to generate the value that is available elsewhere. On Betfair for example if a member offers a bet of just £2, then other members intent on offering the best odds are obliged to match or improve upon these odds. Whether a small number of well heeled Betdaq members with $500 to gamble on a single bet will generate the level of competition which results in such good odds remains to be seen. This is the major hurdle that Betdaq have to overcome if they are to be successful in combining exceptional liquidity with the value which is available elsewhere. Betfair in contrast have built up their site slowly, giving punters regardless of their size equal status in offering their bets and now have the best of both worlds with high liquidity and excellent odds on the majority of major events.
Another notable feature of the $100/$500 limits is that this has created a two tier value situation between members prepared to bet at these two levels. Take the example of a $100 punter who wants to bet on his team to win their game. The best odds on offer are 2.4 back or 2.8 lay. He doesn't consider 2.4 enough, he wants 2.6. On any other site he would ask for it, (and probably get it), but at Betdaq he can't because he would have to stake $500 which is out of his range. Therefore, whilst on the face of it the site is available to $100 punters, in reality it is an inferior facility depriving him of value which could be available to the $500 punter. This further undermines the competitive nature of this site.
Whilst it is very much early days for Betdaq, so far this observation appears to be borne out, as there are relatively few instances of the odds available on Betdaq being competitive with Betfair and Flutter. For example, as a write this article a comparison of the odds available on the 2 nd round matches of the World Matchplay matches show that of eight golfers playing tomorrow, Betfair members are offering superior odds on seven.
2. Commission
On the face of it Betdaq's commission of 1% sounds exceptional value, however, when you look closer you find that its not as straight forward as that because commission is not charged on profits as at Flutter and Betfair, or winnings as at Play121 but on the total of stake plus winnings. This system can penalise the member offering odds, although it generally benefits the punter receiving the odds. For example if you offered odds of 6.0 against an outcome and staked $1000 you would stand to win $200, however you would pay commission of 1% on $1200 which at $12 works out at 6% of your potential winnings. In comparison your opponent who would pay $12 from winnings of $1,000 is only paying 1.2% commission. The cut off point at which the layer receives superior value on Betfair is 5.0, for backers it is 1.25. Compared with Flutter's 2.5% commission any bets laid above 3.0 or backed at odds below 1.5 means higher commission payments on Betdaq.
By effectively penalising the market maker prepared to offer generous odds, Betdaq have introduced another factor which is likely to stifle competition on the site. Furthermore, it makes hedging on the site very difficult, with a substantial proportion of profits going on commission. Flutter started with a commission structure very similar to this and were forced to change it very early on, and it is surprising that Betdaq have fallen into the same trap. This has been a topic of lively discussion on the p2p message boards, and it will be interesting to see whether Betdaq bow to pressure to change this. The impact of commission on your betting is a significant factor that you need to understand in order to maximise your long term bookie free profits, and a detailed analysis of the impact of commission will follow in a future newsletter.
3. Variety/choice of bets
Betdaq is an exchange betting rather than a p2p betting site. All bets are aggregated, and anonymity is maintained. At present the selection of bets available is less than Flutter and considerably less than Betfair. At the time of writing the only sports offered are football, horse racing, golf, tennis, rugby and "other highlights", which at the time of writing currently only features the Japanese Grand Prix. The selection of bets available on this race are:
M Schumacher v the Field
R Schumacher v Barrichello
Button v Irvine
Montoya v Hakkinen
Therefore the only driver you can bet on to win the race is Michael Schumacher. On football, bets are limited to betting on the result with additional markets on the number of goals and perhaps a handicap market. If you wish to bet on the result you can only bet for or against a particular team winning. If you wish to bet on the opposing team, you have the choice of also taking on board the draw, or going elsewhere. No doubt in due course more markets on each event will become available, but will punters go back for a second look when the other sites already have the bets they want on offer?
4. Other observations
Betdaq has some nice features. For example you can specify whether you want the odds displayed as odds or fractions. This is something which the other sites could consider. In addition, whilst dollars is the currency of the site, you can have all transactions converted to alternative currencies if you wish. In terms of cash deposits the usual range of payment options are available, although if you went for a cash transfer, you will incur costs at your bank. Interestingly, before you can withdraw any funds from your account you have to send proof of your identity. This is a measure against money laundering, but something the other sites do not demand, perhaps they will be obliged to fall in line in due course.
5. Betdaq and bookie free bettors
All p2p sites have different members following different agendas, employing different tactics and arriving at different conclusions. These differences result in market imperfections which give us the opportunity to profit. All serious bookie free bettors need to have accounts at all the sites and this certainly includes Betdaq. Unfortunately, the problem with Betdaq for many of us will be the large size of the minimum bets. I would say that on 85% of my bets I seek better odds than those available. This is an absolute cornerstone to my strategy of maximising my statistical advantage on every bet, which on Betdaq means I would be mostly placing minimum bets of $500. If you are betting sensibly within your limits you will never risk more than 5% of your bank on any one outcome, therefore to be offering prices on Betdaq you really need to have a bank of $10,000. If you are in this category, Betdaq will offer good opportunities, and these will probably be better now than ever.
At present there is often a larger spread between odds at which bets are available to be laid and backed, than at the other sites. When you have this large spread it means worse value for the person accepting the bet, which by definition clearly means better value for the person offering the bet should it be accepted. This means that on the major bets that you could have superior opportunities as an odds setter on Betdaq than elsewhere, so long as there is sufficient depth of membership for your bet to be accepted.
In addition whilst Betdaq are offering a relatively limited range of bets, some of those are not widely available elsewhere, for example the F1 head to head bets. Without a market reference point there is a strong chance that the market makers on these events will have misjudged the likelihood of the outcome. This could give the well informed and well researched bookie free bettor with a substantial balance the opportunity to place really big bets at odds which offer a substantial statistical advantage.
6. Summary
So, is Betdaq likely to trouble the established p2p sites? In the short term the answer is probably no. Whilst there's not much to criticise about the site, there isn't really anything about the site which will excite people enough to switch allegiances. The p2p market is still growing at such a pace that there is plenty of room, especially overseas for Betdaq to carve out their own niche without affecting the others. Indeed if they are successful in selling the concept to the Far Eastern markets all the p2p sites are likely to benefit. Betdaq have hung their hats on the levels of liquidity they anticipate getting. If they do manage to combine these exceptional levels with a large and active enough membership to generate strong competition and also to support wider markets, then the other sites may start to look over their shoulders.
(Post editorial note – since this review Betdaq has changed considerably with none of the negative aspects discussed here surviving to the current day. Betdaq is now the world's second biggest betting exchange behind Betfair)