This was going to be a one-part blog, but I’ve split it into two after questions I got when I posted up an image related to this. The next post will follow this one.
Back in 2008, I was banned from Betfair, but thankfully just the forum on their website. What heinous crime could I have committed to earn a ban? Just two words, premium charge!
Back in 2008, the premium charge was a new thing. Before introducing the premium charge, you would only have to pay the commission within the market you were betting on.
When the premium charge was introduced it was an additional charge on top of this commission. The premium charge meant that if you were consistently profitable, then you would face an additional commission that took you up to 20%
Betfair the disruptor
The new charge was a bit of a shock. Many people felt it was against Betfair‘s ideology. The Betfair brand up to that point had been very clear, it was a platform where you could bet, fair.
Your account would not be limited, there were no restrictions on how much you could bet and finally, after centuries of traditional bookmaking, here was a platform where your ability to win was not dictated by the terms on which are engaged with a bookmaker, but by the ability to be able to place good bets!
If you knew more than the person on the other side of the bet, you would win money, if you didn’t you would lose. For many years that was all people wanted, a fair chance to win at betting and exchanges suddenly gave you that opportunity.
So the introduction of a charge that penalised winners did not go down very well!
The Phone call
I remember getting the initial phone call about the new charge in 2008. After the initial outrage in the wider community, things calmed down, the debate then started on exactly why the charge has been introduced.
It was explained to me at the time that there was a net imbalance in the system the winners were draining the pool faster than they could be sensibly replaced and the premium charge was a way of addressing this balance and pushing funding toward the marketing efforts.
The idea was to spend the money that the premium charge generated, to gain new customers to ‘refill the pool’.
The harsh reality
Over the years, there has been a lot of discussion about the nature of the charge and why Betfair did it.
Years later I would listen to an interview with one of the founders of Betfair, where the nature of the charge was exposed for its harsh reality. Here is an exact transcript of that interview: –
“I think we got to a point where we realised that there were certain people who were making very large amounts of money from Betfair just simply because they were very, very good at what they did. And, and somebody somewhere realised that if we charged them a lot more money, they’re not going to go anywhere”
To be completely fair to the founder, he was opposed to the charge, but ultimately the board prevailed. To quote: –
“I was the last person to vote. And I, it came down to me, and I’m just like, No, I just really don’t want to do this. I don’t know why we wouldn’t want to go to war with our biggest customers at this time.”
The number of people affected by the charge was small. So actively engaging with customers, would have been a good move for Betfair. That way they would have been able to pacify objections and also learn a lot more detail about what customers were doing and avoid a lot of mistakes. It sounds like Betfair were surprised by the backlash.
“It did cause a problem. People made an enormous amount of noise about it, they were very unhappy about it. But most of those people who weren’t happy about it, were at the time making plenty of money anyway, they just weren’t making as much. And some of those people were incurring quite a lot of cost and making that money. Perhaps we didn’t realise that. But it was it was a difficult time for the company because we were at war with some of our customers. And it created a lot of bad publicity, which I guess continues to this day”
It was ironic that the then-independent, Paddy Power were quick to jump on the opportunity.
Why I got banned
The reason for my ban from the Betfair forum was that on the introduction of the first premium charge I speculated on how, if the charge stuck, it would almost certainly be followed by higher charges in the future. Somebody at Betfair took umbrage at the suggestion and I was banned from the Betfair forum for suggesting that such a thing could be possible. I was assured there was no such prospect.
But my worst fears came true on 28th of June 2011.
I didn’t even get a phone call this time, instead, I just got an email from Betfair. I was advised that the premium charge would no longer be levied at 20%, but in fact, would be levied at 60%!
It pretty much seemed like my time on Betfair had come to a complete end. I couldn’t see how I could continue with such significant changes, but the fact is I did find a way forward which is why I’m still here today. But that’s for another time.
I’ll continue this blog next week, where I’ll reveal more about what happened next and what I learnt about the scope and scale of the charge and what I think needs to happen now.
After all, this blog post ‘celebrates’, 11 years since the higher race was introduced.
It’s time for a change.