Betdaq’s recent decision to phase in over the next few months a commission rate increase which will bring them from 3% to being in line with Betfair’s 5% base rate has again raised the debate about the importance, or otherwise, of commission rates to betting exchange users.
My position on this remains the same – betting exchanges sell the betting product to punters at lower unit prices than traditional bookmakers hence it is a no-brainer that those punters attracted to betting exchanges must be relatively price sensitive.
"...it is a no-brainer that those punters attracted to betting exchanges must be relatively price sensitive."
Commission rates are an integral part of that pricing. However, it is hardly the only part.
The principal lure is the ability to get your bet matched at 100% book prices. Therefore, you only care about the relative commission rates if the odds available are identical and you can get your bet matched at either exchange.
This is one of the main reasons why www.backandlay.com is so slow to grow – the absence of price-setters means prospective new users surfing the site and seeing empty screens have little confidence in getting matched.
The users are out there but, if they are waiting to accept offers rather than making them, their lack of visibility puts off the newcomers.
However, ‘liquidity’ is a very personal thing. If your unit stake is to back or lay outcomes to win or lose £1,000, you may look down your nose at ‘liquidity,’ which is perfectly acceptable to someone whose unit liability is £100, or even £10 or £1. Over the course of a year, a regular Betfair/Betdaq user can amass a huge bill in commission.
Indeed, even someone paying just 2% at Betfair – and hence paying at least £1,000 in commission a week – will run up a bill of £50,000 over the course of the year whereas they could be paying £25,000 at www.backandlay.com.
"...whatever the truth, it seems certain that Betdaq's level of trade can only go one way - down - as a result of this price change"
That £25,000 can make the difference between profitability and loss in a marginal year. Given the above, does Betdaq’s move make any sense?
Conspiracy theories are rife – one is that this is merely a prelude to a Betfair buy-out, the other being that Betdaq is to merge with European outfit BetBull.
But whatever the truth, it seems certain that Betdaq’s level of trade can only go one way – down – as a result of this price change.
Betdaq has defended its decision, Russ Wiseman, Betdaq's PR director, saying:: ‘Talking to our clients [both of them, presumably], we don't think commission levels are a driving force behind the attraction of exchanges, and people will go where they get the best service and deals. We have invested massively in the product and we believe our third-version technology is the best around. We have tried to differentiate our product in a competitive industry with multiple bet and each-way options.’
This doesn’t sound right to me. Exchange functionality is all but homogenous nowadays, Betdaq is basically a Betfair clone, and, while other betting exchanges don’t offer multiple bets, every bookmaker under the Sun does, there’s really nothing original in Betdaq’s service that I can discern.
It will be interesting to see if iBetx, the only other UK exchange player that might be described as ‘significant’ raises its 3% base rate.Owner Rocky Mirza told me over a year ago he planned to move to a 4% base rate, his expressed rationale, like Betdaq’s, being that the lower rate has no bearing on his level of trade.
"...this slow, painful death for the cash burning Betfair wannabes is surely what will happen."
However, that hasn’t happened and I can’t help thinking it was a non-too-subtle way of trying to dupe me into raising my own 1% rate.
That wasn’t ever going to happen – charging the lowest rate in town and watching the other Betfair wannabes slowly run out of funding and go bust, is my game, not profiteering – and this slow, painful death for the cash burning Betfair wannabes is surely what will happen.Perhaps not in as scandalous a fashion as in the case of SportingOptions, but a commercial demise nonetheless.
I cannot believe that either Betdaq or iBetx is anywhere near profitability and, with what externally appear to be much higher operating costs, I believe both companies must be bleeding money at a far faster rate than here at www.backandlay.com.
BBC
