Since Betfair was launched in June 2000 it has become the largest online betting company in the UK and the largest Betting Exchange in the world. Betfair currently has over 1,000,000 clients and a turnover in excess of £50m/week.
A bet exchange allows punters to bet at odds set and requested by other punters rather than by a bookmaker. Members can make both 'Back' bets (normal bets on a selection to win) and 'Lay' bets (bets on the opposite side of the Back, against the selection and wanting it to lose), thereby eliminating the traditional bookmaker.
Betfair uses decimal odds, which are easier to calculate with than fractional odds. Its bookmaking model brings together two counterparties with opposing views, and thus removes the need for a bookmaker's markup or overround. As a result, the odds are up to 20% better than bookmakers' odds, according to the site's operators. Betfair punters are able to offer odds based on their own opinion rather than on a set bookmakers' margin. Betfair charges a commission on all winning bets, which is set at 5% of the net winnings for most markets, although according to how much a client wagers on the site, it is possible to reduce the amount of commission paid to as low as 2%.
The Betfair interface can be seen as bearing a strong similarity to that of the Stock Exchange, with the 'bet' and 'lay' options comparing to the buying and selling of derivatives. Indeed there are many professionals who play the Betfair market for profit, using purpose-designed software, in much the same way as a Stock market trader.
The company has attracted much comment in the British and Australian press. Its co-founders, Andrew Black and Edward Wray, won the Ernst and Young Emerging Entrepreneur of the Year award. In 2003, the company was one of about 50 recipients of the Queen’s Awards for Enterprise in the Innovation category. The Queen's Awards are the UK’s highest official awards for business.
On 28th February 2006 Betfair launched a new interface, including current live scores of in-play soccer matches, jockey silks and horse form, and an 'express view' in which only the currently available back odds are viewable. Within two days the 'Xpress' idea was also adopted by BETDAQ. The changes were criticised on the Betfair forums by many members who disliked the smaller fonts and the right-aligned columns, which displayed a large amount of whitespace. On March 1st these display issues were addressed, although many users still felt the site had been dumbed down in order to attract new punters to the exchanges. The gambit worked, however, with a significant increase in membership and deposits during the Cheltenham Festival.
Softbank purchased 23% of Betfair in early April 2006 valuing the company at £1.5 billion. In December 2006, Betfair completed the purchase of the horseracing publishing company Timeform (which traded under the name Portway Press Ltd).
Betfair launched its own radio service, Betfair Radio, in March 2007 available via its website and on the telephone. Betfair Radio broadcasts horse racing commentary, results and sports news seven days a week from the studios at their headquarters in Hammersmith.
The fact that gamblers can now lay outcomes on the exchanges has caused tremendous criticism from traditional bookmakers with much of the anger coming from the UK's "Big Three" – Coral, Ladbrokes and William Hill. These firms argue that granting who they consider to be anonymous punters the ability to bet that an outcome will not happen is causing corruption in sports such as horseracing (since it is much easier to ensure a horse will lose a race, the bookmakers reason).
Betfair has led their defence by countering that while corruption is possible on any gambling platform, the bookies' arguments are motivated not by concern for the integrity of sport but by commercial interests. Betfair also asserts that unlike the high street brokers, who all accept anonymous cash bets, Betfair is well aware of who their customers are. Customers are required to create personal accounts, and Betfair keeps records of each customer's betting history. Betfair in particular has noted that they have signed numerous agreements with governing bodies of sport including the Jockey Club, with whom they insist they will co-operate fully if the latter suspects corruption to have taken place.
Betfair outside the United Kingdom
Although the bulk of its customer base is in the UK, Betfair offers its services in a number of countries. Betfair has never accepted customers and/or credit card numbers from the United States, where online gambling is legally proscribed. Being the leading betting exchange, Betfair has been reluctant to entangle itself in legal trouble and has thus turned away business from countries where its services are likely prohibited. As a result, unlike some other online gambling operations Betfair was not seriously affected when the U.S. Congress passed strict prohibitions affecting Internet gambling in late 2006.
Betfair has several thousand customers in Australia but its marketing activities are currently restricted to Tasmania, where it is licensed. Betfair is well known in Australia because of negative publicity from the racing industry and the totalizators. However, Betfair signed a landmark agreement with Racing Victoria in July 2006 which saw Betfair begin covering Victorian racing and left the exchange on decent terms with two of Australia's six states. Betfair also has agreements in place with several major sports in Australia including the Australian Football League, Cricket Australia and the PGA Tour of Australasia.