Betfair set to make a killing in US Internet gambling

Betfair was the subject of a glowing article in the publication Venture Beat this week which looked at the UK betting exchange's astute move into American horse racing.

The move legally exploits the "carve-outs" in the often confusing US political deal-making process and discriminatory federal laws that permit online betting in horse racing.

Betfair is strongly positioned in the sector following its acquisition of the Los Angeles-based American TV Games Network (TVG), an online horse race betting company with its own TV channel, for $50 million in January 2009 (see previous InfoPowa reports).

Though it operates in only 16 states, the ten-year-old TVG operates the largest legal online gambling web site in the U.S., says Tony McAlister, chief technology officer of Betfair. And its horse racing channel reaches a massive 72 million households.

The Venture Beat article reveals that Betfair is now preparing to launch a social network around the TVG web site to stoke interest in betting on the sport.

It is also building applications to let people bet on horse races from sports bars via their mobile phones. To do this, Betfair will have to add about 50 people to its U.S. staff, currently around 170, and another 150 elsewhere. In the United Kingdom, the company has 1 400 employees.

Gerard Cunningham, president of Betfair USA, told Venture Beat that TVG’s web site is currently a Web 1.0 experience. But three weeks ago the company launched Ultimate Track Streaming, a media player on the site that can stream high quality videos of live horse races to viewers. It has also set up blogs for gamblers and a Twitter feed.

Future plans include the addition of live chat so that gamblers can discuss a race as its happening, says Cunningham That should be popular, since gamblers can bet on a race as it progresses.

TVG has apparently stayed out of 34 states because of unclear state gambling laws or strict prohibitions. It has rivals who aren’t quite as cautious, but Betfair is larger than competitors such as Youbet, Xpress Bet and Twin Spires.

Venture Beat opines that one possible hurdle Betfair faces is how to re-energise interest in horse racing, which has seen declining enthusiasm among gamblers. The rewards for success are considerable, the article notes - physical horse racing wagering levels are around $14 billion in the United States, of which TVG is currently handling around $500 million, leaving plenty of room for online expansion.

Betfair appears to have recognised this, and believes that, properly marketed, both online and terrestrial wagering could achieve substantially higher levels. The company is also hopeful that individual states looking for additional tax revenues and competing with other states may make them more amenable to extended horse race gambling.

Cunningham said that these factors all point to good growth prospects ahead, even if only the status quo in maintained.

"By and large, Betfair draws more gamblers because it can more efficiently set favourable odds than bookies, who build their own commission into the odds," Venture Beat concludes. "Its servers match about 1 000 bets a second, which means it’s about as busy as a stock exchange. The privately held company has six data centers to support the traffic. In the year ended April, 2008, it reported earnings of $69.5 million on revenue of $396 million. (It is not required to disclose earnings but does so).

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