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Betfair – doom and gloom?

My phone has rung a lot in the last 24 hours, from former colleagues, other friends, and various interested parties asking what I think about what happened on Betfair on the Leopardstown Christmas Hurdle.

I’ve fought shy of writing about Betfair since July despite plenty of opportunity, because whatever I wrote, I seemed to be onto a loser: that they have had a torrid time of things has been clear for all to see, so to write otherwise seemed perverse; but I didn’t want to be another voice of doom, and it has been easier just to say nothing. Depressingly (on many levels) I was told by one former colleague that they thought I was behind all their bad press anyway, but there you go.

The reaction to the Leopardstown fiasco/farce/flare up/embarrassment (pick your headline) – a share price fall of 3% yesterday (when the gambling industry as a whole climbed 15-30% because of the favourable news out of the United States) and a further 3% today – has me finally putting down some thoughts – on the incident itself, and what I think it means more broadly.

First, the bright side from Betfair’s perspective. The £600million liability that was offered on Voler La Vedette quite clearly falls under the palpable error rule, and anyone who argues otherwise is talking cobblers. The horse was crossing the line, and being offered at 29. People can argue all they like that they were backing it there and laying it off elsewhere, such that voiding the Betfair side means that they lost out; but they cannot possibly have been backing the horse at that price without realising that a mistake had occurred, and to try to claim to the contrary is disingenuous. Suggestions that there is a legal claim don’t get to the starting gate.

Further, all credit, in my view, to the company for the statement it put up, which was honest, straightforward, and – given the circumstances – fairly prompt in coming. You might argue that they had no option, but let’s be frank: communications like that one have been short in supply of late, and in my view, they got their response absolutely right.

Rather gloomier, you might fairly suggest, is how the mistake occurred in the first place.

As everyone knows, every bet has to be supported with the collateral held in a customer account for its maximum liability, and as liability in question was the GDP of a small country (at £600million), it is not hard to guess that this would not have been the case. A very small number of customers may have credit lines, but again rather obviously not to this level; and so it would seem that something in the software went wrong which allowed the bet to pass. I suspect that it’s upon this, as much as the customer fury, that the share price has fallen: people are worried about the robustness of the software if a mistake of that sort can occur.

But they should take comfort, in my view: I doubt very much it is a signal of broader technology problems. Once in a blue moon, software bugs get hit; and while people might scoff at the level to which I am sanguine, my view is that an unhappy coincidence of circumstances has resulted in a 1 in million occurrence occurring in a particularly high profile way on a particularly high profile race, coinciding, while it was at it, with a holiday period when there’s not a lot more to excite the markets or the business writers. We used to hit software bugs every now and again that would mean that the website did strange things, but the very nature of them is that they come to light only when they happen. That is the nature of software, and I suspect that now that they have seen it happen, they will swiftly put it right. That was the pattern for the decade that I was there; it just never happened quite so obviously as this.

So much for the incident itself. Now to the wider picture.

It was put to me today by someone that this problem goes to the heart of what the person described to me as a ‘confidence crisis’ which the public markets have about the company. It is, I was told, just the highest profile example of a general malaise, and indicates that Betfair is a busted flush.

I’ll be honest: had this happened five months ago – even three, maybe two – I might have been concerned. As I said above, I have studiously avoided writing about Betfair, not because things seemed to be going wrong at the company, but because so many people seemed to feel (both in the outside world and among the grass-roots staff) that key decision-makers were showing no signs of recognising either what or why. Perhaps that was unfair; and if it was, the last person they’d have wanted to hear an opinion from was me. But it was a reason to be worried about where the company was heading: many of Betfair’s biggest advocates had stopped being vocal supporters; negatives loomed large, magnified by nay-sayers; and positives – while still there – were hard to see. Not even the company itself was highlighting them.

But recently – first gradually, and then, in recent weeks, with notable jumps –  the gloom has been lifting. Long apparently over-burdened by troubles, everyone you talk to at the company has now re-acquired a spring in their step. And the confidence at the place – although it will have taken a knock in the last 24 hours – has returned sufficiently to be tangible for the first time in ages.

There are lots of reasons for this.

First, to all reports, some recent hires (like Matt Robinson running the international business) have significantly strengthened the areas which fall under their control, and others look set to join that club in the New Year (Nick Hagen delivering a sportsbook, for instance).

Second, they know what this week’s US announcement has demonstrated clearly: that the regulatory position is not as bad as people are making it out to be, and surprises are to the upside not downside. When they can announce their long-awaited Italian licence, which I suspect they will imminently, it will give them further reason for cheer.

Third, perhaps because of all that, the bunker mentality (see above) that afflicted them after some difficult setbacks appears at last to have gone, for evidence of which Google the last month’s press: their communication has become pro-active and positive for the first time in a long while, which is wonderful to see.

And finally, although I am cutting my list short so as not to bore you: in their interim CEO Stephen Morana, they have someone at the top who is more than simply likeable and intelligent: he is an inspiring and charismatic leader who knows the company inside out, understands (indeed, uses) the product as well as anyone out there, and will not be afraid to confront problems head-on.

None of this, of course, excuses what happened at Leopardstown, or removes it from the company’s history. But as an indicator of where Betfair is at generally, my own view is that the moment under discussion is a hugely unfortunate technical coincidence which will cause angst, embarrassment and anger, but ultimately will pass; and the company’s reaction to it is as heartening as anything I’ve seen come out of Hammersmith in months.





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19 Responses

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  1. Trigger Happy says

    A good communications effort? It took ages after the race to make any comment at all. Surely they should have had a message up immediately saying these events were unprecedented and there wouldnt be a quick resolution. Instead they left everyone wondering if they had won life changing amounts or not. Someone I know couldnt carry on betting because he had used up his betting exposure (just 5k not 600mil btw 😉 ).

    However, the most amazing thing to come out of this situation for me is how completely friendless Betfair appear to be in the racing and betting worlds. People appear to be absolutely revelling in Betfair finding themselves in such an uncomfortable position. Their commercial rivals you can understand, pc payers you can understand, but going by twitter, the racing post site and the Betfair forum pretty much everyone seems to be against them.

    In my opinion a quite incredible place to have arrived at and the new CEO has an enormous job on his hands restoring faith.

    I don’t agree with you on palpable error, as misclicks occur everyday that would fall under this banner. The laying of the 6-4 Wolverhampton fav at 1000 was surely a palpable error also? But I do accept what Calvin said in that normal errors the customer has sufficient funds while this one obviously didn’t.

  2. Ascot says

    Mark this is a massive cock up and the way it’s been handled is a utter disgrace. This was a classic crisis management situation and it was handled like a end of the news fun piece!
    As for the point of you been behind the bad publicity, absolute rubbish as this is entirely a bet fair issue.
    Allowing Barry Orr on tv without facts and Tony Calvin to humiliate himself on ATR is a company decision. I don’t think you would have allowed this and you would have had a clear crisis strat in place and YOU personally would have faced the media, thus giving a degree of trust and confidence to customers. I’m sorry but Calvin is despised by the punters and the Market has no confidence in his poor presentation.
    As for the point of the Market been voided, yes all knew it was to good to be true but if the horse lost would we be having the discussion? It’s a odds on NO.
    So who is the mystery account with one off exposure bug that meant the xchange saw no need to close down ops?
    Personally I dont think it was the ‘him’ punter with the insane bot. I have a strong view it was the bet fair racing bot which is programmed to work across unsettled markets with huge liability exposure set to do this. Only last summer grave concerns were raised by senior management that safety settings would leave the bot exposed to this very issue should it happen. It was viewed that it wasn’t a problem and left to petrol it’s own markets cross matching. Simple to see was this issue was so easy to resolve? We both know from the past these issues like duplicate bets are very serious matters and will ruin the integrity of the exchange.
    I don’t agree with you about the new management signings and whilst Steve morana is super bloke and genuine he is not a CEO.
    Bet fair is in crisis and maybe it needs camberton now more than ever?

  3. MD says

    TH – fair comment on timing. I admit I haven’t taken that into account because I wasn’t live on the site, and was only alerted to it when my phone rang in the late afternoon – by which time the posting as up.

    I also agree on your general point: indeed, it is largely the point that has, perhaps obliquely, prompted this posting. They HAVE become friendless, and for reasons of their own making, which from my point of view has been a very sad and frustrating thing to watch; but in my opinion they have finally turned the corner. While they may have been slow to react, as you state, the fact that they said what they said is in my view a vast improvement on what has happened in the recent past; and I think that the way they have been trying to get themselves back on the front foot recently (while admittedly from a position that they should never have got anywhere near) has been encouraging to those of us who are willing them to succeed. I agree that there is a big job to be done, but personally I think that the story is easy enough to turn around and I am encouraged that they have started to take the right steps. I hope this immediate issue does not set that process back, and I don’t see why it should.

    Ascot – Re. management signings, I haven’t met those already there but I speak to a lot of people who have, and while (amongst those I DO know) I can think of some who I thought were surprising hires, there are clearly some high calibre individuals who have joined as well. I’ve been encouraged by some of the feedback that has found its way to me.

    Re. Morana: you watch. He stepped up to the role of CFO without breaking stride despite being largely untipped, and I believe he will do the same now. He has always been a good manager of his team, and he will make a good CEO.

    Re. your bot comments, you’re on ground I am not aware of. If you’re right, it’s unforgivable on their part; but it seems to me to be wild speculation and it is far more likely that something broke unexpectedly. As I say, it has happened before in less spectacular fashion.

    Re. your overall comment: I believe Betfair WAS in a crisis, largely of its own making, but is coming out of it.

    Finally, of all the things we might speculate about, I think we can be pretty confident that they won’t be using Camberton in the near future!

  4. Ascot says

    Mark nothing has changed at hammersmith. It’s just like selling water with the exclusive rights to do so in the world despite all those years building the business for highly paid execs to reap that hard work now that don’t understand the exchange nor it’s customer. 

    You mention all the new hires however they nether replaced you with any success or did they? Maybe they are on a Beech in the Maldives right now in one of the busiest times for the uk industry but nothing would surprise me while we all worked on the king George and Crawley v gillingham. 

     It’s quite easy business when the punter doesn’t have a choice in the exchange land where liquidity is king.I adore betfair as a product yes  it has it’s issues in the uncharted Internet universe and we know this. I just don’t like how they have detached and pushed away from the customer, the customer that built betfair. If the exchange was not such a monopoly (you would always avoid this description) the punters would have left long ago. they have had enough to say the least fact. 

    You mention of cases like this exposure bug issue before? But we were informed on ATR that it’s unprecedented in betfair history. So who’s telling the truth? again you highlight the inadequacy of the business comm tactics to this case.

    Betfair in crisis?I don’t agree that’s it’s coming out of it, question has bf performed in the manner of a plc right now. However it did release a simple statement but it fuelled the fire. Not one affected account was called and not many had bet on the Market, all left in the dark with no money to trade in there accounts as it was held for hours meaning they lost money.  It’s comical how the customer has been treated with no party line and conjecture littering the media, how would you feel? The truth needs to be told but will it be? maybe it shouldn’t be told? Your the expert in this area.

    Tell me is the monster a bookmaker, the house or an exchange? Answer this question and the identity crisis it’s having can be solved. As for it’s crisis of contempt of it’s customers with it’s take it or lump it attitude. Well history is littered with examples of ‘let them eat cake’ cases, we know how they end. 

    However  your comment regarding camberton says all it needs to I guess. Thats very sad that they won’t call you in a time like this. Very sad indeed.

    I don’t agree with your view about coming out of a crisis, liquidity is down, customer confidence is at a all time low and betfair really doesn’t have a usp for the customer any more other than you can be a bookmaker without a license! At heart we all adore betfair, we know everything changes but it’s not what we wanted it to be right now and that’s why no one is left who started on day 1.
    Ps. As for Stevie M absolutely great bloke, you would always go out of your way for him, his knowledgeable and his honest. He will always be one of the boys and that’s why we love him, I think that presents my view on that.

  5. colston says

    Mark I’m afraid I agree with most of what Ascot and TH have posted and would like say that in years gone by Betfair would have tried to turn what was a seriously poor customer experience into a more positive one.
    Off course all those chancers who tried to back VLV at the odds of 29, knowing that something was patently amiss, deserve nothing, but how would you feel had you backed the beast at 2.0 in running well before the error lay was posted on the site?
    I would have liked to see Betfair pay out any winning bets placed before the phantom lay bet was posted and void ALL losing bets in running. At least it would look like someone has given a thought to the genuine customer base, and perhaps a couple of commission free markets on Saturday! Who knows it may even drum up some new business if this was posted in an advert in the Racing Post.

  6. TheGambler says

    Would you expect that a company operating an exchange would have software indemnity insurance in place to cover liabilities from a technical glitch? If so, how much do you think they would have?

  7. MD says

    Colston – again, fair points – although it wouldn’t surprise me at all if they weren’t currently working out how to deal with the people you are talking about with some kind of compensation.

    To be clear, though… I’m not suggesting that Leopardstown was a moment of glory: far from it. What I’m saying is that it is not, in my view, indicative of an underlying malaise. I think all sorts of things over the last year have been, but I think there have been indications of a corner being turned, and I hope that this incident doesn’t affect that. You may well be better-placed to judge than I am; but I remain hopeful. I strongly believe that the company can regain the position that it once had and I know there are people working hard to achieve that.

  8. MD says

    TG – I don’t know but I would doubt it, and in my view they don’t need it here. I am sure there are people scouring the Terms and Conditions who will offer a counter view, but on the specific point regarding those who were sitting on “life-changing” sums after lumping on at 29, I cannot see how anyone could have placed a bet in the genuine expectation that it would pay out and not be cancelled.

  9. cantbearsed says

    I think this blog post is spot on. I put 100 on it after it jumped the last, and obviously knew I’d never get paid. The guys complaining that they tied up their whole bank obviously knew it was an error, as did I, and it is fair punishment for being greedy. The same with the arbers laying it on betdaq at 12 that paid out. Serves them right, it was clearly an error.

    I see Ralph Topping posted his usual tripe on his blog about needing to know who the big layers are. Surely it is more important to know who the big backers are, as connections can’t lay their own horse? Anyone who backed another horse in the Lexus (even with Hills) was effectively laying Synchronised the winner. Same thing with get me out of here at the festival and countless other the same.

  10. Ascot says

    A first at betfair and hats off to Stevie M for putting his name to it.

    The email sent to customers

    This note summarises all that we know of the issue, with all of the facts laid open.
    The race in question was of course the 2pm at Leopardstown on 28th December, won by Voler La Vedette.
    The race went off on time and there were no issues with the bets struck on the race before the start.
    During the race, one bet was placed, and allowed onto the Exchange, laying Voler La Vedette for £21,474,836 at odds of 29. This would have left the customer with a maximum liability of close to £600m.
    This bet was placed by one of our UK customers trading the race via our API or Application Programming Interface ( using an automated program (a “bot”). Their bot had developed a fault causing it to try and place a very large number of bets on the Exchange. These bets were large in size and mispriced. As you know, the Betfair system is designed to prevent customers betting unless they have the funds to cover their maximum liability. In this case, the customer had less than £1,000 in their account so none of these bets should have been accepted.
    However, due to a technical glitch within the core exchange database, one of the bets evaded the prevention system and was shown on the site. This was an issue that was triggered because of a unique sequence of events that had never happened before.
    The race continued and Voler La Vedette won. £822,614 of backers’ stakes were matched of the customer’s bet, resulting in a potential liability to the customer of £23m.
    Once the race was completed, the market remained suspended such that no bets were settled and an investigation started.
    We identified that this was an isolated incident specific to one account, which we immediately suspended. There were no further issues reported on any other markets on site and the site therefore remained open for business as usual.
    At 4.41pm on the 28th of December, we announced that the in-play markets associated with this race would be voided due to technological failure in accordance with our terms and conditions. This is similar to the “palpable error” rule enforced by other bookmakers in the past.
    We had to void both the win and place markets and, to be clear, we would have voided the race regardless of who had won and whether or not we had suspended these markets sooner. This is because the bet in question had significantly impacted both markets. We did not void those bets placed before the off because they had not been affected by the bet.
    The Betfair technical teams continued to investigate the details of the fault and, having identified the issue, worked on putting a fix in place which was applied at 10.15pm on December 28th.
    Following extensive testing, we can confirm that there have been no subsequent occurrences of this fault and we’ve taken steps to prevent its reoccurrence in the future.  
    We have been criticised for not having suspended the market earlier but in reality, while our market operations team did realise that something had gone awry, the procedures they had in place dictated that specific checks needed to be made prior to suspending the market; hence the delay in suspension.
    Again, I would like to clarify that the account in question has no commercial relationship with Betfair other than being a customer. Our reputation has been built on integrity and we have been pioneers in the industry in ensuring that betting is carried out in a fair and transparent manner. By making the voiding decision, I can assure you that this decision was not taken lightly and that we have implemented what we believe to be the fairest solution in these truly exceptional circumstances.
    Since Betfair began, we have matched nearly half a trillion bets for our customers that have provided greater value than offered by the established bookmakers. This is the first time that we have ever experienced anything like this in all of that time which goes to show how robust and resilient the bet matching engine is and will continue to be.
    Lessons have been learnt in terms of how quickly we need to respond, and how we need to communicate with our customers. We will continue to strive to deliver the consistently high standards that you have come to expect over the years.
    I was personally devastated when this event occurred and would again like to take this opportunity to apologise for the regrettable customer and betting experience in this market.

    Stephen Morana, Interim CEO, Betfair

  11. MD says

    Yes – good for him, and good for them. I wouldn’t like to go as far as to say I rest my various cases under discussion, but it certainly strengthens them!!

  12. Trigger Happy says

    “I cannot see how anyone could have placed a bet in the genuine expectation that it would pay out and not be cancelled.”

    I would say the exact opposite. There’s not a person who took that 29 who believes Betfair would have voided if the horse got beat or fell. I’d say after the race most of my friends who took the price felt we had no chance of getting paid but you are not much of an in running player if you don’t back a 2-1 shot at 29 and wait for explanations later.

  13. MD says

    TH – I think if it had been just an in-running price of 29, that would have been one thing. The fact that is was up there in the millions of pounds is what in my view demonstrated very clearly that there had been a malfunction of some sort.

  14. Leonthefixer says

    Hi Mark,

    As I posted elsewhere:

    “Also I figured out last night finally why I thought at first the stake on offer was only £21,000 not £21m. My screen setup is different for inrunning and only is able to show a stake of 5 figures. So claims the stake size made it obvious it was an error don’t always hold tight. A £600,000 liability is not out of the realms of all possibility in someone making a fat finger.”


  15. bigdipper says

    I find it odd the new sportsbook–and executive hired to deliver it–are being described as a step forward for betfair. Surely they will have to start banning and restricting like a conventional book? How does this enhance their USP or the model of person-to-person betting? It seems, instead, to say that exchange betting is not viable as a money maker, and that the true betting innovator of the last ten years was Bet365. It’s reminiscent of the scene in Animal Farm where the pigs–betfair–sit down with the humans–the high st.–and no one can any longer tell them apart.

  16. geoffbanks says

    definite palpable error. No questions there. Extremely slow and inept handling of the follow up by PR, especially TC denying on ATR it as a bot?
    Rather a lot of technical errors – slowdowns-crashes seem to be hitting the site I hear.

Continuing the Discussion

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