Results Highlights

Al is still bitter about the US election: 

It's good no emotions are used in your draw selections. Unlike your love of Obama which is based purely on emotion and no logic.

The bet was made because the price on Obama was value if you ignored the mainstream press and looked behind the numbers. The signal and the noise in fact, as Nate Silver calls it in his new book. It was a rare opportunity and all the sweeter that it was Obama and not Romney in the winner's circle. Keep drinking the Kool-Aid Al.

A Little Misleading?

A couple of interesting details in Betfair's latest results.

Part of this increase has resulted from many customers being introduced to the concept of trading through our 'Cash Out' tool, which makes it simpler for customers to lock-in profits or limit losses during a sporting event. The tool is one of the ways that we are bringing the advantages of the exchange to a wider audience and it has been particularly popular with recently acquired customers.

For recently acquired, read 'those who don't yet know any better'. And on 'risk' revenue they reported:

Risk revenue increased by 47% in the period, reflecting the higher volumes and an easy comparative in the first quarter of last year, when margins were weak following losses in our telephone betting channel. Margins in August and September were affected by adverse sporting results, but October and November have seen strong margins.

It would be interesting to know what those adverse sporting results were. I've had a few adverse sporting results myself over the years!

Betfair employees might be a little nervous, reading under 'cost cutting' that:

These efficiencies will include how we source services from external suppliers as well as the number of people we employ. This will involve some difficult decisions, but we are confident that our employees see the need for the business to become leaner and will embrace being part of a more efficient organisation.

Other nuggets:

Our trading team further manages risk through exposure management, including hedging into the Exchange, and customer management, including limiting the stakes of certain customers.

Betfair also offers products such as casino and arcade games in which customers are playing against the ‘house’. Revenue is generated through an inbuilt margin, with the odds favouring the operator. Over a short period of time returns can be volatile, but in the long run the operator should win.

Reduced activity by a significant number of customers could have a material adverse effect on our operations, financial performance and prospects.

We closely monitor the behaviour of customers and have a team focused on their management and retention. We aim to ensure we provide a service and platform which grow value for both the customer and Betfair, and significantly reduce the risk of customers leaving.

It could of course be a coincidence that just a few weeks after entering the 50% tax zone, and with the subsequent significant decrease in activity on my account, I received an email from my new 'account manager' - I never heard from the 'old' one - asking for my opinion on a number of topics. It was actually rather annoying that they only bother when it's too late, but while I won't be closing my account, I will certainly be spending less time on Betfair, not that my £30k of Premium Charges over the years will make much of a dent in their numbers, but if enough people reduce their activity, then as noted above, they might notice.