Betfair
BETFAIR
Leyland F. Pitt Faculty of Business Administration Simon Fraser University Richard T. Watson Terry College of Business University of Georgia rwatson@terry.uga.edu Daniel M. Shapiro Faculty of Business Administration Simon Fraser University
ABSTRACT Many industries are being changed fundamentally as entrepreneurs discover how to use the Internet to create higher customer value. Betfair turned the gaming industry upside down with its exchange for gamblers. It found a very efficient and effective way to match those who want to make and take bets, and also made these gamblers 10 percent better off compared to betting via traditional channels. The case describes the development of Betfair, its business model, and addresses the problems it faces as it expands beyond the boundaries of the United Kingdom. Keywords: gambling, globalization, entrepreneurship, Internet Editor’s note: A teaching note is available to faculty who are listed in the MISRC-ISWorld Faculty Directory (http://www.isfacdir.org/ ). Contact the second author at rwatson@terry.uga.edu. I. INTRODUCTION It’s an age-old story. Two men in a bar arguing about the outcome of the U.S. presidential election. One believes the Republicans will win, and the other thinks the Democrats will do it this time. If they simply bet against each other, one will be at a disadvantage and the other will enjoy an edge, because the reality of the situation is that the outcomes of events such as elections are very rarely akin to flipping a coin. If they were in the United Kingdom, they could go to a high street bookmaking firm such as Coral,1 William Hill,2 and Ladbrokes.3 On October 26th 2004 the best odds that they could obtain from any of these would have been 8/11 on the Republican Party
1 2
www.coral.co.uk www.willhill.com 3 www.ladbrokes.com
www.Betfair.com: World Wide Wagering by L.F. Pitt, R.T. Watson, and D.M. Shapiro
150
Communications of the Association for Information Systems (Volume 15,
Leyland F. Pitt Faculty of Business Administration Simon Fraser University Richard T. Watson Terry College of Business University of Georgia rwatson@terry.uga.edu Daniel M. Shapiro Faculty of Business Administration Simon Fraser University
ABSTRACT Many industries are being changed fundamentally as entrepreneurs discover how to use the Internet to create higher customer value. Betfair turned the gaming industry upside down with its exchange for gamblers. It found a very efficient and effective way to match those who want to make and take bets, and also made these gamblers 10 percent better off compared to betting via traditional channels. The case describes the development of Betfair, its business model, and addresses the problems it faces as it expands beyond the boundaries of the United Kingdom. Keywords: gambling, globalization, entrepreneurship, Internet Editor’s note: A teaching note is available to faculty who are listed in the MISRC-ISWorld Faculty Directory (http://www.isfacdir.org/ ). Contact the second author at rwatson@terry.uga.edu. I. INTRODUCTION It’s an age-old story. Two men in a bar arguing about the outcome of the U.S. presidential election. One believes the Republicans will win, and the other thinks the Democrats will do it this time. If they simply bet against each other, one will be at a disadvantage and the other will enjoy an edge, because the reality of the situation is that the outcomes of events such as elections are very rarely akin to flipping a coin. If they were in the United Kingdom, they could go to a high street bookmaking firm such as Coral,1 William Hill,2 and Ladbrokes.3 On October 26th 2004 the best odds that they could obtain from any of these would have been 8/11 on the Republican Party
1 2
www.coral.co.uk www.willhill.com 3 www.ladbrokes.com
www.Betfair.com: World Wide Wagering by L.F. Pitt, R.T. Watson, and D.M. Shapiro
150
Communications of the Association for Information Systems (Volume 15,
References: Communications of the Association for Information Systems (Volume 15, 2005) 149-161 161