New York Times

Online Betting Venue Betfair to IPO Punters: We’re Worth $2.4B
By RILEY MCDERMID of VentureBeat

The world’s largest online betting exchange, Betfair Group, today set a price range for its upcoming initial public offering and listing on the London Stock Exchange that would value the company at as much as $2.4 billion.

The British company, which allows bettors to skip the age-old process of going through a bookie to make bets or give odds on everything from soccer to horseracing online, said it would sell a stake to public investors at £11 to £14, or $17.50 to $22.30, a share.

Betfair also owns a nascent financial exchange, LMAX, whose early successes—or failures—may eventually weigh on any final IPO price.

Betfair was founded a decade ago by JP Morgan trader Edward Wray, Internet entrepreneur Josh Hannah and well-known professional gambler Andrew Black. Hannah left the company in 2004 and is now a venture capitalist at Matrix Partners in Silicon Valley. Betfair has since seen revenues climb a steady 10 percent year-over-year, with the Wray and Black now owning 23 percent of the company.

As of April 30, Betfair had seen a 13 percent gain in 2010 and listed its revenue at $543 billion. The company earns a 2 to 5 percent commission on any bets placed through the site.

As part of the new IPO, Black and Wray have said they will sell at least 10 percent of Betfair, while selling an undisclosed amount of existing shares.

Betfair said in a statement it would not issue any new shares in the public offering, although a group of 600 smaller investors, who hold a quarter of the company’s existing shares, will have the option to sell when the firm lists on the LSE.

The company’s 14 largest shareholders (including Wray and Black) currently hold about 75 percent of Betfair’s stock, with its biggest investor being Japanese telecommunications company SoftBank Corp. Betfair said that Morgan Stanley and Goldman Sachs will act as bookrunners and joint sponsors for the IPO, while Numis and Barclays Capital will help solicit investors as co-managers.

And from The Scotsman

Online betting company Betfair has attracted enough orders from investors to cover all the shares offered for its London listing, banking sources yesterday said.

The offer of about 10 per cent of Betfair was oversubscribed after the first day of bookbuilding which launched on Thursday, the sources said. The company is set to be worth up to £1.48 billion.

However You Spin It

I usually ignore any Arcade or Exchange Game promotions, but Talkbet (again) wrote the other day that

Betfair also very kindly gave me £50 to spend in their arcade. It didn't last long on one of the slots even though I was only playing £2 a spin, I kept getting disconnected as well during each spin so as soon as the £50 was gone I was happy to just leave it be. I brought in about a tenner in real cash terms, not the best of returns but it was 'free money' after all :o)

I checked my e-mail again, and sure enough there was an offer for me too - but for just £15! What's the deal with that? What's so special about old Talkie? Anyway, since this offer really was a no-lose deal, I took a spin on the roulette wheel just now, and had exactly the same problems as Talkbet. 

The 1-18 failed to come up 7 times in a row, (it happens, but a little suspicious nevertheless), and the £15 lasted about five minutes, and only that long because I also kept getting connection errors. Fortunately their Sports markets seem a little more stable these days. Games like these are fun with a crowd in a casino, craps is my personal favourite, but there's something rather sad about playing at home alone and it's not something that has any appeal for me at all.

Numbers And Unders

The SBP needs to look behind the numbers, rather than just AT them: He wrote yesterday "Tough loss for us last night. Twins jumped out to a 3 run lead but were unable to hang on. It just so happens that we'll be backing them again tonight so I'm sure this one will turn out better" - and in case you missed it, they again took a lead, and again lost it.

Just two games today. The Cincinnati Reds play at the Philadelphia Phillies (Roy Oswalt pitching), and have not scored a run in their last 30 innings v the Phillies. Bearing in mind that the Phillies haven’t exactly hammered the Reds this season either, averaging just a little over four runs per game against them, makes Under 7.5 at 1.9 look value.

Following that battle in the east, the action moves west to San Francisco for game 2 of the Giants v Atlanta Braves, and I fancy another low scoring game here. Under 6.5 should be around 1.9+ but the market has yet to settle down with just £43 traded. Matt Cain is piching for the Giants with an ERA of 3.14 this season, against Tommy Hanson (ERA 3.33). Low ERAs and neither team hits well makes the Under the value bet.

A dip in the price on Liverpool to be relegated this season after today's news. They have traded as low as 11.5 for the drop - humbling times at Anfield to be in the same bracket as Blackburn Rovers, Fulham, Stoke City and Sunderland. But you can still back them for the title at 170 - though I would advise against it.

Internationals this weekend, and Talkbet asks "does anyone enjoy them?" - the answer from me is "No". I enjoy England games when we get down to the final stages and some meaningful matches, but early qualifying games don't interest me at all. They just get in the way of my ratings!

Autumn Gold

The Minneosta Twins have taken the lead in their last eight play-off games versus the New York Yankees, and lost them all. Tonight they traded at 1.51 with just a one run lead, and went on to lose 2-5.

One day, the Twins will hold a lead, but right now it's almost a licence to print money when the Twins lead.

I'm not sure where the BETDAQ liquidity went to, but it appears to have evaporated over night. The Twins - Yankees game was great for trading yesterday, but tonight absolutely nothing.

Readying to face the Yankees in the ALCS, the Texas Rangers are on the verge of winning their first ever post-season series after taking a 2-0 lead over the Tampa Bay Rays in Florida and heading back to Arlington.

In the NLDS, the San Francisco Giants v Atlanta Braves series should see plenty of unders. The Giants have the best ERA in the national League, with the Braves in third place. Game One was a predictably tight affair, with the Under 6.5 available pre-game at 2.04.

Football, and the "weaker" draw predicted earlier this week for the Forest Green Rovers v Grimsby Town game came in with the match finishing 3-3. The light weekend means a rare opportunity to look a little closer at Leagues One and Two as well as the Conference.

Strong draws in Leagues One and Two are hitting at almost as good a rate as the Premier League right now, 41.67% and 38.89% respectively, but just the one 'strong' draw in League One on Saturday, Walsall v Exeter City.

In contrast, League Two has a veritable veast of 'strong' draws on the menu this weekend: Barnet v Bradford City; Cheltenham Town v Northampton Town; Lincoln City v Macclesfield Town; Morecambe v Shrewsbury Town. Another four games are rated as weak draws, with just Gillingham v Stockport County as a value home bet at 1.84.

In the Conference, Darlington look value at 1.78 to beat Hayes and Yeading United. Plenty of 'weak' draws here and Bath City at 2.6 v Eastbourne Borough looks tempting. The problem is that at this level, what looks value can often be explained by someone close to the club. I still have nightmares over the Weymouth v Rushden and Diamonds debacle! The raw ratings have the Barrow v Crawley Town game as a 'strong' draw, but the form tilts this one in Crawley's favour. With Crawley facing a long road-trip, and the draw available at 4.0, this might still be worth a small play.

This is a great time of year. The Elo football ratings start to settle down, the NFL is underway, baseball starts its post season, and the NBA is underway with the pre-season games at least. And now (ice) hockey is back with the NHL opening up last night, with a small profit. Always nice to start a new season in the green!

Elo ratings should work well in this league, with the draw eliminated, no single player domination such as in sports like baseball and basketball, and games almost every night. It's also a great game to watch, but as I have written before, in-play liquidity is just not there any more, (8 seconds in-play delay killed it - that's an eternity in a fast moving game like hockey), and it's seldom that I'll watch sports that I can't trade these days.

Hole-In-One Gang And More

I was reading Derek McGovern's 1999 book"On Sports Betting...And How To Make It Pay" last night, and it took me on a trip down memory lane. In the opening chapter, he talks about the origins of sports betting, and it really is astonishing that just twenty or so years ago, there was no coverage in any of the sports papers. I well remember the Racing Post beginning it's coverage of sports, and apparently that was Derek McGovern's 'baby'.

I wasn't too much into betting in those days, although I remember Novice Chases with 6 to 10 runners were good for the favourite, but horse racing, as I discovered early in life, is not a level playing field for boys from the suburbs. As Brough Scott wrote in the introduction:

It was possible to believe you would know as much about the form as the bookies did. But the number of their advertisements amongst the sports pages suggested that there were plenty of traps for the unwary.

Besides, horse-racing is just not very interesting. It was fun to go to the Derby for the social side of it, and the odd lads trip to Lingfield, or Goodwood or Windsor on a Monday night after work, but it was never going to be a steady earner. As McGovern says "Now they can bet on what they want, and what they know. Be sure racing will be at the bottom of the list".

When the Racing Post started covering sports betting, I would buy it just for those two pages. I opened several telephone credit accounts with different firms, and would spend my daily train journey to London comparing the odds offered by them, noting down any prices that were out of line with the others, on sports such as football, the NFL, Formula 1, cricket, tennis, Boat Race, snooker, rugby league and union, and politics. It was fun for a while, and though I may not have been getting value all the time, it at least made sure that I was getting the least bad value! Football was the most profitable, with Ladbrokes closing my account, but I don't recall the other sports being hugely profitable, which almost certainly means they weren't, but then they weren't big losers either. What they were though, was time-consuming, and with a young family and career opportunities overseas, betting fell by the wayside for many years.

The Racing Post did have some good articles though, and one that made a big impression on me at the time, and one I've remembered ever since, was about the Hole-in-One Gang. Quite possibly gambling's greatest coup, two friends, Paul Simons and John Carter, made an estimated £400,000 on an ingenious golf betting coup in 1991.

In McGovern's words:

In the spring of '91 they trawled Britain's smaller bookmakers asking for odds about a hole-in-one being scored in five of the year's leading golf tournaments, the Open and US Open among them. The brilliance of this idea has never been fully recognised.

Simons and Carter suspected that many bookies, while aware of the rarity of holes in one by amateur golfers, would be blissfully unaware that most professional tournaments throw up at least one ace and would therefore offer inflated odds. In fact the odds they were offered staggered even them. The intrepid duo were given anything up to 100-1 when the true odds are closer to evens.

The two of them actually won about £500,000 but some bookies welched on the bets claiming they'd been conned, instead of accepting that they had been out-witted. Still, a brilliant idea, and one that I remember well.

Another one that I remember from those days was the group who in 1991 started backing the 3-3 score line at 80-1 in singles and doubles. By the end of November, only four weekend programmes had failed to produce a 3-3 score, and realising that punters were making a healthy profit, the bookies slashed the odds to 50-1. Also bringing back memories was the 1991 Swansea v Monaco match where Hill's made an error on the price on Monaco and the Racing Post brought this to my attention on the way to work on the day of the match, and my first stop on reaching London Bridge was to find a phone. No cells (mobiles) in those days.

There're some other good stories in the book, some that would make anyone who bets on markets that depend on a vote think twice before putting their money down.

One interesting comment he has on pricing football matches is that:

in a match in which theoretically all three potential outcomes - home win, away win, and draw - are equally likely, the true odds ahould be 2-1, 2-1 and 2-1. But such odds give bookmakers no profit margin, so instead they will offer, say, 6-4 the home team, 6-4 the away team, and 11-5 the draw (the draw being the longest price because bookies know that few punters ever back it, something that will be explained later).

He also sheds some light on the odds-on draw phenomena found in Italy. Liam Brady has this to say: When a draw suits both teams in Italy, the game wil lend in a draw. It's all to do with the mentality of the Italian people. They see nothing wrong in such an arrangement".

On the draw price again, he says: 

Punters are creatures of habit. When they have a bet on a football match they are seeking an allegiance. They do not want to see a match finish in a draw. Consequently few punters ever back the draw, a point I will pick up on later in the book. 

(I guess it's one way of making me read on...).

Seriously, times have changed, and the punter he refers to is not the exchange trader looking for value.

He also has a sense of humour. When discussing why first-goalscorer is so popular relative to last-goalscorer (a bet that runs for the full 90 minutes), he says:

I've a theory here. The punters who snub last-scorer betting in favour of its less appealing half-brother are the same idiots who fancied the dark one in Abba when the blonde was different class.

A little dated, but an interesting read so far. One dated (pre-exchange betting) idea is to back the away teams except when they are playing at Arsenal, Chelsea or Manchester United. The lay of the home team might be a better idea, but some analysis will give the answer.

Pleasing baseball action overnight, culminating in my biggest ever win on BETDAQ, where trading was a pleasant surprise. Better late than never, and here's to a few long series.

On Deck

The play-offs begin today in the baseball and with some early start times and nothing in the way of football as an alternative, here's to some decent liquidity.

The opening game is the Texas Rangers @ Tampa Bay Rays, followed by the Cincinnati Reds @ Philadelphia Phillies and finally the New York Yankees @ Minnesota Twins.

Tampa Bay won their last four games v Texas this season, the Phillies beat the Reds 5-2 and the Yankees beat the Twins 6-2. Not surprisingly all three season-series winners are favourites, but the Yankees may be more vulnerable than the other two, with poor form (just 3 wins in the last 10 games) - the only problem being that the Twins are in even worse form with just 2 wins from their last 10 games!

Some statistics for the over / under bettor - Tampa Bay are on an 8-0 under run. Phillies have gone over in 6 of their last 7 home play-off games, with one push, and have won 7 games 1 on the trot.

In the NFL, it continues to pay to lay the favourite this season, with underdogs 38-24 against the spread after this weekend.

And in England, it's a boring week ahead - time for some more analysis of previous season's results. A new blog that has recently added to the blogroll reminded me that I need to go back and review the results of laying favourites based on their "Group". (Long-time readers may recall that I separated the EPL teams into the Big 4, Europas, Middlers and Struggers). The blog article looked at whether there may be value in laying EPL favourites outside of the Big 4, but I want to look at the results by 'group'.

"A dollar won is twice as sweet as a dollar earned." - Paul Newman, The Color of Money

Bundeslayga

Anonymous writes:

Well done on an interesting blog. In relation to your findings on the laying odds on in the Bundesliga, you said last season (09/10) would have produced about 40 points profit to a level 1 point stake (I think). What were the returns for the previous 3 seasons you looked at?

These numbers assume a commission rate of 5%, and the prices would almost certainly have been bettered on the exchanges, so with that in mind here are the numbers for the past four seasons:

2009-10: +40.6 points
2008-09: + 7.82 points
2007-08: + 8.63 points
2006-07: +30.35 points

Overall, during that time, a 13.98% ROI, which for a simple system, isn't too shabby at all.

A look at the Conference fixtures for today, and there are two "strong" draws; Hayes and Yeading United v Cambridge United and Histon v Southport. A weaker draw on Thursday at Forest Green Rovers who play Grimsby Town.

The Ryder Cup got a little closer than I was expecting, but all's well that ends well, even if Mrs Cassini wasn't too happy. Actually, I'm not sure she even knows what the Ryder Cup is, but next time I visit with her Dad, the Cup will be mentioned early and often. I'm like that.

The NBA came to London today with the Los Angeles Lakers losing an exhibition to the Minnesota Timberwolves. 32 year old, and declining, Kobe Bryant played for just six minutes, and missed all three attempts. I have a lay on the Lakers for next season, and hope this result is a sign of things to come rather than a meaningless pre-season game...

Ratings v Positions

One of the strengths or weaknesses of Elo ratings is that they adjust slowly. This is a strength in that when a Barcelona loses at home to a Hercules, since the new ratings don't immediately have Hercules as the stronger team, but the weakness is that when a team genuinely is weaker, it can take a while for the ratings to reflect this.

With the new season 6 to 8 games in, there are some glaring differences between the ratings and the league standings. In the EPL, Everton and Liverpool are rated 5th and 6th, yet occupy 17th and 18th places respectively.

In Serie A, AS Roma are 4th ranked, and sit in 19th place, and in Ligue 1, Lyon are rated 3rd, yet are in 17th place.

In the unpredictable Bundesliga, Bayern Munich are still top-rated, but are languishing in 12th place while in La Liga, the ratings and table are very much in synch.

Of course the season is still young, and the ratings reflect more than just league games, so it's likely that most of these discrepancies will turn out to be temporary aberrations.

In the top leagues, the biggest climbers are Juventus and St Etienne, both up 8 places, and the biggest decliners are Lens, down 10.

Overall, the biggest movers in the leagues I follow are Queens Park Rangers and Accrington Stanley, who are both now ranked 15 places higher than at the season's start. The biggest decliners are Bristol City, 12 places worse off.

One other English club worthy of mention, is Berwick Rangers, who have climbed from 8th to 1st in the Scottish Third.

Barcelayna

Lecce defeated Catania today, so no joy there for the "strong draw" system, but a lay of Barcelona, far too short at 1.19, more than made up for that. Less than a month ago, Barcelona were 1.07 at home to Hercules, and lost. Next home game, they beat a weak Gijon side (rated 19th) by just 1-0, so their home record by no means justified the 1.19 price. 

Other odds-on favourites failing to win this weekend were Stuttgart, Paris St Germain, Manchester United, Liverpool, Internazionale and Osasuna for an overall profit on this system of 2.22 points and a positive ROI in all leagues bar France, where it is down by 1.8%.

Backing the "strong draw" lost .53 points this weekend with 2 winners from 7 selections. Not too much coming up for football with another international weekend ahead, but there's a full slate of midweek Conference games to dabble with. Strong draws here are hitting at 35%, and while there's not the same level of confidence in these as with the top leagues, they appear to offer value.

The Ryder Cup bet is looking good for now, and although the conventional wisdom is that the Americans play better in the singles than with a partner, I'm not looking to lay off the bet.

Thanks to Joep for his recommendation of Matchbook as a possibly better site for trading basketball and baseball. The liquidity on the Padres - Giants game wasn't great, but I'll open an account for the play-offs and the upcoming NBA season.

I do like how sites other than Betfair have more than one market on the screen - the Match Odds, handicap and over / unders for example. Something I would like to see Betfair introduce - there's a lot of white space to fill without the screen looking cluttered.

The Atlanta Braves beat the Philadelphia Phillies earlier today, and the San Diego Padres currently trail the San Francisco Giants 0-2 and if that result stands, there will be no play-off games needed next week. The Giants will win the NL West, and the Braves take the wild-card spot.

The SBP served up another losing College Football platter this weekend going 10-12 overall. His NFL tip of the Colts is still in-play, and tomorrow he's on the New England Patriots (-1) @ Miami Dolphins. Update: Colts lost by 3. Oh dear.

Football Elite had a nice Recommended Bets winner in Mainz '05 at 2.34, while the short-list selections weren't so good with Birmingham City, Hannover and Parma all losing, and just Sochaux (2.18) winning.

Finally, from Victoria's The Age comes this piece on problem gambling being hereditary. I particularly enjoyed the contribution from "The InterChurch Gambling Taskforce" whose spokesman Mark Zirnsak said the results were "a wake-up call around the harm that gambling is causing to children, as well as the gamblers".

No mention of the harm that primitive superstitious beliefs cause each day around the world. "Children [of gamblers] aren't given a choice," he says. As if children of the less educated religious among us are given a choice!

Presumably he expects religious parents not to indoctrinate their children with their religious beliefs too? Nah - didn't think so. Taking children to a place of worship for some brainwashing is to be encouraged, but teaching your kids to understand odds and probability and value is a sin.

Given the choice between my kids spending time on Betfair or in a Catholic Priest run chat room, I know which I would prefer.

The problem, of course, is that the definition of 'gambling' is a loose one. The degenerate gambler betting the mortgage / grocery money at the track or bookies is one thing. The nerdy, value seeking, mathematically inclined trader gambler is quite another.

Finally, to Anonymous who writes

Hi, i remember reading somewhere on your blog about the FTS picks - can you direct me to that particular article? ta

I'm afraid that wasn't this blog. I am familiar with Ian Erskine's system, lay the draw, but am not a big fan of it. Here's an except from his Bankbuilder pdf:

I want to back the draw at 2.0 for £100. I then want to immediately place a Lay of the draw at 1.85 for £105.

The key is the timing and you will need to watch the match coupons first to get the gist of the movement but this all happens very quickly. Once the two bets are matched you will leave a profit of £5 if either team wins and £10.75 if it remains a draw (commission to be deducted).

The only way you can lose is if there happens to be a goal between the back bet being matched and the lay bet being matched but the crash happens so quickly that you would have to be really unlucky to get caught (and you still have the draw in your favour).

This method is very effective and the key is to not get too greedy with the size of your bets or the time between the two bets, trying to nick an extra point either way.

The only way you can lose is by being really unlucky. Er, yes.

Money And Happiness

Most readers of this blog are probably looking to make a little more money to supplement their regular income, and might be interested to read that money can buy happiness, but only up to a point. Be careful what you wish for.

A Princeton study reports that emotional well-being peaks at an annual income of about $75,000 (£47,408 at today's exchange rate) - the point at which most people feel they have enough money to purchase their basic needs.

As incomes rose beyond that point, people did report a higher level of overall life satisfaction, probably because they felt more successful. But going from a job that pays $75,000 to, say, $200,000 also brings what researchers termed "negative effects" - more responsibility, more pressure to perform, and more stress. In that larger sense, the study found, money does not buy happiness; it can, in fact, buy more worry, anxiety, and aggravation.

Game 162

There's Game 7s, and there are game 162s.

The San Francisco Giants and San Diego Padres are now separated by just one game and the Padres are about to be tied with the Atlanta Braves in the wild-card race after this evening's games - unless the Braves can come back from a 0-5 deficit in the 8th

Football, and the 'second round' of "strong" draws showed another profit tonight. Nancy lost 2-3 to Lyon, Parma lost 0-1 to AC Milan, but St Etienne and Marseille drew 1-1, for another profit.

Just the one "strong draw" on Sunday, the game at Lecce who host Catania.

The SBP had / has no less than 22 bets for the Saturday College Football schedule. With 7 games completed, he has two winners.

Update: Credit where it's due, he won the next three for a 5-5 record so far.

In the NFL tomorrow he has the Indianapolis Colts -6.5 @ Jacksonville Jaguars, so beware.

I also have a small interest in Europe for the Ryder Cup tomorrow.

Penultimate Day

After a losing September, October is off to a good start with some baseball profits overnight. At this time of year, there's value in laying teams who are already in the play-offs. One example was the Los Angeles Angels who were playing at Texas Rangers. It was announced pre-game that the Rangers (admittedly struggling) closer (Neftali Feliz) would be rested for the play-offs, and a close game went the Angels way in the 11th inning.

The San Diego Padres still have a pulse as the Atlanta Braves dropped a game in the wild-card race, and the Padres won in San Francisco. Two games to go for each team, the Braves with two v Philadelphia, and the Giants with two v Padres. A win for the Padres today, and it all comes down to the final game which, after a 162 game season, is always fun. Not that this has any relevance to today, but in 1996, the Padres were two games behind the Los Angeles Dodgers with three games to play in LA. The Padres swept the series to win the NL West.

Not the best of starts to the weekend football with my first "strong" draw resulting in a 2-0 win for Wigan Athletic - the first time these predictions in the EPL have been decided by more than one goal, but at least the unders came in. I've mentioned before how the ratings can be used in many ways, and the "strong draw / under 2.5 goals" correlation is a good example.

Next in Germany, an 84' goal took away the draw at Nuremburg, but West Ham United and Fulham finished 1-1 (another EPL Under) to take the draw system into positive territory for the day.

Football Elite's selection Mainz '05 won 4-2, while my two away selections of Auxerre and Wolfsburg went 1-1 for a small profit.

Reds In October Hunt

The regular baseball season comes to a close this weekend with the play-off teams all but decided across the leagues. In the American League, the New York Yankees, Tampa Bay Rays, Minnesota Twins and Texas Rangers are through, and in the National League it is the Philadelphia Phillies, Cincinnati Reds, and most likely the San Francisco Giants and Atlanta Braves. The San Diego Padres do have a slim chance, but need to win a couple of games in San Francisco, and hope the cruising Phillies sweep the Braves. Unlikely.

The play-offs begin on Wednesday, continue through the whole month of October, maybe into November, and were quite lucrative last season. However, liquidity has been poor all season, and I'm not confident that'll change significantly in the play-offs.

Ah well, at least the NBA is on the way back, less than a month to go there. The pace and the gentler swings make this my favourite trading sport by far. Although the basic strategy of lay low is profitable in many sports, in the American sports Baseball is too slow, while the NFL can be brutal, with game-changing interceptions and flags away from the play making for some heart-stopping action. Basketball though has steady, but low, scoring, making for the perfect, to my mind at least, trading vehicle.

I wasn't home in time for the Football Elite e-mail for this weekend, and was a little dismayed that one of the short-list selections was in the German Friday Night game between Hannover and St Pauli. When I checked the result though, it wasn't such a bad thing, as St Pauli won 1-0 to go 6th, their third away win in four games.

Just seven 'strong' draws in the top leagues this weekend, and a couple of value looking home winners in Spain; Sevilla (2.26) v Atletico Madrid and Getafe (2.16) v Hercules on Sunday. I have Sevilla at -1, and Getafe at -0.75. Also giving .75 I have Mainz '05 in Germany who are generously priced at 2.34. For aways, Auxerre (2.1) @ Arles-Avignon look the best value, with Wolfsburg (2.2) at Borussia Moenchengladbach close behind.

For the big London derby, the raw ratings have a strong draw, although QPR edge it once form is taken into account...

Turkish Delight

Anonymous argues that

No, the market doesn't need to know your selections. If the price on a certain outcome is consistently incorrect, which you infer by the insistence your picks offer value, then you can expect the market to "correct" over a course of time (the old chestnut of market efficiency, or a form of).

It's an almighty IF to suggest your picks will continue to return 37% or so. Historically speaking, it's almost certain they won't. I don't know your sample size, but that figure seems to be based on just part of last season in which case the sample size is, of course, insignificant.

A big factor in draw expectations is obviously the total goals expected. I don't know for sure, but I suspect your projections fail to take this into account. The lower the goals the more likely the draw - obviously.

A salient point you make is "Draws will continue to hit overall at the rate that they have hit over many years". Yes, pretty much true, unless a big factor in the game were to change (e.g. extra points for goals scored or no points for a draw (ain't going to happen but I remember in the 1980s when the equivalent of the Conference, the Gola League I think it was called, offered 3 points for an away win and 2 points for a home win which should have changed the dynamics of a game. As did the introduction of three points for a win - which saw a pronounced increase in home advantage and, probably (haven't checked) an increase in goals and hence decrease in draws. Anyway, the point I was going to make is that the draw should indeed continue to hit at the same (well, similar) rate. And that rate sure as hell ain't 37%, even in the type of match you are predicting the draw in.

It's almost unthinkable that you can consistently hit at a % equivalent to a price of 2.66 on an outcome generally priced in the 3.3 - 3.5 range you mention. Sorry, but the market is never going to be that wrong in the modern age, at least not consistently.

Now, I'm not saying the draw isn't ever value. I think it is. But rarely is it the enormous value you make out. There are certain match situations - not confined to dodgy Italian results - which contribute to a likely (relatively) higher probability of a draw. But, in the main, this would probably involved getting a price of 3.25 or so on a 3.00 shot. Nice value for sure.

An important point which you haven't addressed is how you price the draw when your system predicts a draw. You can't simply back an outcome blind without looking at the price and, to the best of my knowledge, your system has shown no price sensitivity whatsoever.

Hope that helps.

I am unfortunately old enough to remember the introduction of three points for a win. It was introduced in England in 1981, but the number of draws there remained constant. However, in other countries, notably Turkey's top division when it was introduced there in 1987, the number of goals did increase quite significantly, (see picture at top), and draws decreased as a result.

I also do not intend to suggest that the ratings will continue to predict draws at anywhere close to 37.84%, (although I hope they do), but that percentage has a long way to drop before the strategy becomes unprofitable. I mentioned before that some draws are 'strong' and others 'weaker', and this is the number for the 'strong' draws only.

Drawing Hope

The draw debate continues, although it is spilling over into a broader criticism of Peter Nordsted’s book Premier Football Betting Handbook 2010/2011 which I haven’t actually read, so I can’t really make any comment about.

I do find it interesting though that some people are missing the obvious, which is that however he finds them, these draw selections of Peter's are value if backing them is consistently profitable, which his method appears to be.

When it comes to the draw price in matches “involving vaguely similarly matched teams” the price is in a fairly narrow range, with slight differences between leagues, so if the Elo ratings continue to predict draws at anywhere close to their current strike rate (37.84%), then a draw price in the 3.3 to 3.5 range is clearly huge value.

It is suggested that “If there has been value on these selections over this long period of time then you can be (fairly) sure the market will be, and has been, reacting”. Doesn't this rather presume that the market would somehow know what my selections were? Only my spreadsheet knows, and it only tells me when I enter in the appropriate numbers each week. Draws will continue to hit overall at the rate that they have hit over many years. Generally speaking, the price will not move unless the overall rate of draws increases for some reason.

Also, the draw price is arguably more stable than prices on individual teams, and is almost a pivot around which the home and away prices adjust. It's also been said that the draw is unpopular with backers, and although that may have been the case a few years back, I doubt that it is true now, especially on the exchanges. The percentage of drawn games has remained constant over the years, but even if the draw price on my spreadsheet’s selections were to drop, it would need to be a significant drop in price to make it a losing proposition.

Anonymous says "Your method of selecting draws is never going to select a draw in a "mismatch" or anything approaching a mismatch".

This is, of course, correct. Any objective ratings system that predicted a draw between two mismatched teams, after accounting for form and home advantage, would be one strange rating system. Maths doesn't work like that.

But having said that, by comparing the expected margin of victory with the prices available, the spreadsheet does often suggest that an expected winner isn’t value, so while not actually predicting the draw, we can infer that the draw and underdog prices are value, and lay the favourite. There is more than one way to skin a cat.

Looking ahead to tonight's big games in the Conference, and there is one draw predicted - Eastbourne Borough v Rushden and Diamonds at 3.55. Draw predictions in this league are hitting at exactly 33.33% this young season, up from last year hopefully the result of more accurate ratings!

Drawing Fire

As I mentioned on Saturday, quite independently, both Peter Nordsted and myself have arrived at a similar system based on backing the draw. Whereas Peter picks three matches every weekend from the Premier League, I am somewhat less restricted, looking for value draws across the top five leagues and with no target number of selections. Pete's system gave him a healthy profit last season, with an impressive ROI of 26.3%, and despite being ahead on this season so far, he has apparently come in for a fair amount of criticism.

Obviously I realise that anybody putting themselves up is going to get shot down but I wasn’t prepared for the comments I received shortly after landing a treble. I was being called a con artist. Lucky only because I had the treble and even claiming the method I was using to make my selections was wrong.

It seems to me that there are just people out there who for whatever reason just take great delight in critiscising every movement. I could understand all of this if I was losing money hand over fist but to be showing a nice profit and still to be criticized is bizarre.

However I will carry on giving my selections once a week and am open to any criticism just please come up with a viable alternative or argument as to why what I am suggesting is wrong.

Now admittedly, Pete is trying to drum up business for his subscription service, and indeed anyone who airs their thoughts and ideas in public is fair game for criticism, but there does seem to be a number of people who are far happier to criticise and find fault, than to offer up their own ideas and suggestions.

Take this comment as an example from the draw post:

As far as I can tell, both yours and PN's method of choosing draws simply involves finding two vaguely similarly matched teams and betting the draw at any price? You say your system is good at finding value on the draws - but what are you defining as value? You simply appear to bet them whatever the price when they meet your loose criteria.

I haven't compared my draw selections with Peter's other than for last weekend, but it would hardly be a surprise if the majority of draws came from matches "involving two vaguely similarly matched teams". That statement in itself is too simplistic, certainly vague, and not even accurate. A team's recent form has to be a factor, as does it's home or away record. For example, are Birmingham City and Liverpool "vaguely similarly matched teams"? Most people would probably say not, (although since all matches used are league matches, arguably ALL matches involve two 'vaguely similarly matched teams') but Liverpool's poor form, and Birmingham with home advantage made the draw, to my mind at least, a value bet at 3.35 a couple of Sundays ago.

Was this a value price? We can never know for sure. The match will not be played over and over and enable us to determine more precise probabilities, but what we can do is look at the bottom line after a period of time, and if we are ahead, we can be confident that the selections are value, and if we are in the red, we are not finding value.

As for 'loose criteria', the rules for me are actually extremely tight. A draw is predicted when the Elo ratings for both teams stay closer to their pre-match values if the match is a draw, than they would after any other result.

Some draw predictions are 'stronger' than others, but all are profitable, at least for now.

There does seem to be an abundance of draws in the EPL this coming weekend, the strongest being the early game between Wigan Athletic and Wolverhampton Wanderers and the London derby between West Ham United and Fulham.

Defensive Indifference

Very little trading this weekend due to social commitments.

The draw hunting system again proved profitable in England with Fulham and Everton playing out a goalless draw. The other two came matches close with a 1-1 scoreline broken up with late away goals, but these things happen. One out of three guarantees a profit. France was also profitable, but no success in Italy or Spain which meant a small loss on the weekend overall.

Laying the odds-on favourite was a losing strategy in France, but profitable in Germany and Italy. It was extremely profitable in England, with Birmingham City, Liverpool, Manchester United and Newcastle United all failing to win. Arsenal of course also lost, but at 1.24 were excluded, although I did trade this game, making a small profit.

The other trading opportunity was the late NFL game between the New York Jets and Miami Dolphins. This game offered an interesting example of how the scoring of a touchdown, even late in the game, isn't always such a good thing to back at the prices on offer. The Jets led by one point with 2:00 left in the game, and one yard away from another TD. The price was around 1.05 at this time, but I figured that it might actually be better for the Dolphins to call 'freeway' (weak defence), and concede the almost inevitable TD sooner rather than later, which would leave them with close to two minutes for a final drive with the possibility of a TD and a two-point conversion to tie the game. It was a smart play to give up the early TD and preserve time.

I put up a lay for a few thousand at 1.03, hoping that the Jets would score quickly, and that some people would be unaware of the strategy, and sure enough the Jets scored immediately, and with the extra point, led by 8 with 1:55 left in the game - a long time in the NFL especially with a couple of timeouts remaining. The 1.03 was duly taken, (greed driving the price too low) but the price almost immediately went up to 1.07, as if the realisation had sunk in that the game was not over, (fear kicking in), at which point I traded out for a nice bit of green all over. The Dolphins started their drive very positively, and the price went as high as 1.2, but ultimately they came up short.

The SBP came up with a 1-2 record in the NFL this weekend, and still in the NFL, I was asked if I could recommend any books on trading the NFL. I don't know of any, but if anyone does, please let me know.

Back to real football, and a good weekend for Football Elite, with their one selection, Espanyol, winning at 2.28, and two from four short-list winners, at prices of 3.8 (West Ham United) and 2.04 (Mallorca) for a profit.

Drawing Encouragement

A busy football weekend got off to a good start with a draw between Koln and Hoffenheim backed at 3.5. The Elo ratings are particularly good at finding value on the draw, with a strike rate last year in the Premier League of 38.67%, although that figure includes cup matches between teams, something I am not tracking moving forward. I'm now backing the draw in the top European leagues, and only eight games in, but so far so good. Fifteen more selections this weekend. I like hunting the draw. Except for the occasional end of season Italian game, the price is always over 3.0, which means of course that if you can hit a draw every three matches, a healthy profit ensues.

Pete Nordsted is having some success with a similar strategy in the Premier League, and has so far found at least one winner from three draw selections each weekend of the season. Of his three selections this weekend, two match mine (Blackpool v Blackburn Rovers and Fulham v Everton) but he has Newcastle United v Stoke City whereas my third selection is Wolverhampton Wanderers v Aston Villa. I should add that I don't look for three draws - that's just how it worked out this weekend. Some weeks I might have none, other weeks 10. Not likely, but I think it's a mistake to set yourself a specific number of bets. In France I have 5 (of 10) selections, in Spain 3 (of 10), in Italy 3 (of 10) and in Germany (including last night) 2 of 9.

Back to Peter's strategy, and the article says

The strategy uses a past history of team’s results to provide a series of matches likely to draw from the English Premier League. Each of the teams in the Premier League has been graded from A-D with A containing the Champions League hopefuls and D being the relegation fighters. Grouping the teams in this way allows the strategy to reduce the number of variables and account for promotion/relegation without interrupting the collection of his vital statistics.

Having grouped the teams into these categories, he will look for patterns and previous results from similar graded teams when it comes to the upcoming fixtures.

Although I don't take past results directly into account (they are in there as an adjustment to the ratings of course), the strategy sounds very similar to something I wrote about almost exactly one year ago!

Scientific Bullshit

Great news! From the SBP today -

Guess what? I'm an author now! That's right, I've got a brand new book being released on Amazon soon called How To Beat The Bookie: Scientific Betting In An Uncertain World.

My life is complete (well ok, not entirely) but it's still pretty cool. Even cooler?
Since you're a subscriber of mine I want you to have a free copy. Just click
the link below and follow the instructions and it's yours.

http://richallensports.com/land/optin/

Pretty simple, huh? In the book I share all the inside information I've picked up from being in the sports betting industry for over 15 years. Grab it for free before Oprah recommends it and I have to start charging mega bucks for it ...

If anyone is interested in a free copy, just shoot me an e-mail.

In the Chapter "The Future of Sports Betting" - It Just Got Easier, he has this to say about Betfair (spelling mistakes not mine, by the way)

In May of 2000, Irish betting firm Flutter brought the idea of a betting exchange to the United Kingdom.

They soon merged with another competitor Betfair, and together under the Betfair umbrella the company has risen to become the world’s large st betting exchange.

Betfair’s premise is pretty simple: two counter parties bet directly with one another and the winner pays a commission on winnings — typically 5% but sometimes lower. The company claims 20–40% better odds for bettors than traditional sports books. Again democratization takes place here.

Bettors are paired directly with each other and now face more friendly odds because they are paired with other bettors online. Betfair isn’t taking a side as did the Las Vegas Casinos in Steven Levitt’s study, they are merely playing match maker.

Established sports books have come out in force against Betfair for the company’s concept of “laying” horses. Horse bettors, or “Punters” as they are known in Europe, can bet on specific horses to win or lay (not win). Unfortunately, this takes the barriers to corruption down a few notches as it is much easier for a jockey to lay his own horse in silence and not win than it is to devise a conspiracy involving multiple horses.

Betfair counters this criticism by pointing out that it doesn’t take cash bets from clients and no one is allowed to have anonymous accounts — bettors need to produce identification in order to bet. In 2007, Betfair voided all bets on a tennis match between Martin Arguello and Nickolai Davydenko when rumors of fixing surfaced.

Betfair has established a strong presence in England and is expanding throughout the world. They also have a poker product with better odds, and even operate a site called Zero Lounge where table games offer a 100% payout — no house edge. It’s easy to see why Betfair has, in a fairly short time, become the largest betting house in the United Kingdom, where betting has existed for hundreds and hundreds of years.

The firm has simple become a matchmaker, and through technology has paired bettors with one another allowing for better odds than the previous betting model. This model will certainly continue to proliferate throughout the world. This is all very good news to the skilled bettor. The reduced odds in this democratic model make it almost a certainty that a skilled bettor, following a solid betting model and smart bankrolling, can win.

There are actually a few interesting snippets in there, although I find spelling mistakes very distracting. I'm not immune to them myself, but you would think that a real 'author' would proof-read his stuff and have another set of eyes review it before publication. "11–13 pioint favorites..."?

Betfair's Future

Some interesting comments in this article from the London Standard including comments about rival exchanges, and Betfair's future: First the bad news: customers who love the Betfair website and want a stake in the company's future success will not be allowed to buy shares in the float.

Chief executive David Yu says they thought about allowing retail punters a slice of the pie but decided the “logistics” of such an operation made it not worth the hassle. So while large institutions will get to buy into the company, the rest of us will have to wait until the shares start trading before we can place our bets.

For a consumer-facing business, one that can reasonably claim to have shaken-up a tired industry in the public interest, this is a disappointing call.

Doubtless it would be expensive and fiddly to set aside shares specifically for small investors but not impossible. Google, another internet company with which Betfair would doubtless like to be compared, managed it with seeming ease, earning kudos along the way as an outfit willing to defy Wall Street in favour of the little man.

Betfair's decision suggests a slight lack of care for the customers that have made it the undoubted triumph it is.

In turn, this is how the company could be weakened. Asked what was to stop a rival — Ladbrokes, say — from hiring a bunch of computer whizzkids, devising copy-cat technology and launching a service called, let's say, GambleSmart, the Betfair bosses more or less replied: nothing at all.

They reckon that over the course of the past 10 years many such rival ventures have tried and failed to eat Betfair's lunch.

Yu told me: “We've seen about 50 exchanges come and go. Every single one of them copied the format. The brutal reality is that it is incredibly difficult to do.”

Perhaps. But one side effect of the float is that Betfair now has to make available a huge amount of information about itself that it could previously keep under wraps.

That information — including numbers about sales and profits — is likely to prove mouth-watering to wannabe competitors.

Somewhere in the mind of a net entrepreneur exists the company that will do to Betfair what Betfair did to traditional bookies.

The company is perfectly aware of this. Indeed, one purpose of the float, albeit of just 10% of the shares, is to give Betfair a currency to retain and attract talent. In an industry moving as quickly as this one, it may well need it.

In the meantime, where is the growth coming from?

The company was today flagging a move into online financial trading via an exchange platform called LMAX.

Punters will be able to take positions on financial markets via contracts for difference.

It might work, but this is already a well-populated field for the present size of the market.

A whole new customer base needs to appear for it to thrive.

Such gripes aside, Betfair has clearly been a huge success story. The future is harder to predict.