What Will The Ladbrokes Exchange Mean For Punters And The Industry?

Ladbrokes will offer an exchange betting platform in 2014. But what will the launch of the Ladbrokes Exchange mean for punters and the industry? Today Stephen Harris tells us.

Ladbrokes

The forthcoming launch of the Ladbrokes betting exchange is the first serious competition to the dominance of Betfair for over a decade. It could represent a major change to the betting landscape, with a real opportunity for the "Magic Sign" to challenge Betfair in ways that Betdaq never managed.

The arrival comes at a time when both Ladbrokes and Betfair are struggling to hold their position as dominant performers in the marketplace, with profits slumping dramatically under the stewardship of Richard Glynn at the former, and Betfair faltering in their bid to continue growing into areas where they have failed to make any impact.

Here we look at 5 of the issues surrounding the new venture and the implications for all in the industry.

1 - True competition for the complacent monopoly that Betfair has become

Rarely has such an organisation squandered the goodwill and loyalty that they had built up than Betfair has managed in the past few years. The "winners welcome" slogan lost all of its credibility when the premium charge was introduced, effectively a message that any long-term successful punter was going to be taxed out of trading through Betfair. That, combined with a series of technical issues that have dogged the site, coupled with largely poor customer service and a perceived arrogance that only a monopolist can possess, has led to a decline in liquidity in a number of markets.

They have tried to become a more traditional bookmaker, but the "sportsbook" site, while in its early days, appears to offer very little value and heavily restricts the size available to the backer. The site is littered with roulette, arcade game and casino options and there appears to been a complete turn around in the business plan behind the operation.

In Bet365 tradition, they now seek out mug punters on the football and try to snare victims into profitable games. It is all a far cry from the traditional free and open exchange that the original founders intended.

2 - The seeding of markets will have professionals swarming like bees around honey

Liquidity issues are the main problem for any new exchange. No punter is going to waste his time waiting and waiting for his requested bet to get matched if there are not enough customers on the site. For this reason, it can be assumed that Ladbrokes will be heavily seeding the "new" site, at least in the early days, to ensure a vibrant looking market and attract punters over from Betfair.

This could in itself be a fantastic opportunity for clued up punters. As things stand, Ladbrokes now have a policy of offering some of the most uncompetitive prices in the industry, with their horse racing odds in particular very rarely "top offer" or even close. If they are forced into offering up prices to "seed" these early racing markets, (close to the 100pc mark with liquidity either side), there is going to be a swarm of the "sharp minds" licking their lips.

With operations such as "Spreadfair" perishing having been forced into taking views themselves (matching bet requests because of liquidity issues) there is a clear precedent for this type of thing. Indeed Ladbrokes venture into spread-betting several years ago did not last long for similar reasons.

3 - The impact on Ladbrokes fixed odds offerings

How does the ownership of a new exchange sit with the idea of betting to a bigger margin on their own website and betting shops? It is hard to reconcile that Ladbrokes will be betting to around 107pc on football matches in their shops and online, while running an exchange that offers better prices into around 100pc (plus commission).

So why did they buy up Betdaq (presumably broadly with exactly the same customers on the books that play mainly at Betfair). The reason cannot be to increase the value to the customer and erode their own (already plummeting) margins. It must be that they intend to crush Betfair out of the market altogether, running the exchange as a shop window for more profitable products available under the Ladbrokes banner.

If they out-price Betfair initially in terms of lower commission rates/no premium charge, and manage to provide liquidity in size in a broader range of markets (which must be the aim if they are to succeed) and do so on a platform that is 100pc reliable to the user, then they have a real chance of stealing the entire business that Betfair has so readily built up.

Where Betdaq has failed, despite the backing of some seriously wealthy people, is that it has not ever matched the liquidity available on it's rivals site. With the mighty backing of Ladbrokes marketing team, plus the financial clout of a big corporation, this really could change.

However, one senses the well-being of punters is not the actual long term aim of this new venture, so any "value" for the astute player is likely to be short lived. It will be fascinating to see how Ladbrokes deal with "winning customers" on the exchange, not people who have previously darkened their door for long in the past.

4 - Integrity of sport

There are also serious issues for all sports with a major bookmaker now having access to shrewd, connected people who are playing (and laying) outcomes in substantial size on "their" betting exchange.

How does it sit for instance if the favourite for a big race is laid heavily by a big winner with a connection into that stable and then Ladbrokes offer the top price in the industry. The answer is, it doesn't sit well at all, and it is hard to believe that the shrewd traders (that Ladbrokes employ in their hundreds) are not going to be using the new information available to them to shape their "own prices" available in the fixed odds outlets they would frankly be daft not to.

5 - Is exchange betting already on the way out?

Have Ladbrokes now joined a ship that, if not sinking, has already long since sailed out of the harbour? Certainly, Betfair seems to have reached a point where their growth has dried up. The racing markets have largely withered in the morning, and the lucrative in-running racing betting has steadily declined as people have become aware that their "live" pictures are up to 7 seconds behind reality.

Football still continues to flourish, but firms such as Victor Chandler are already taking on the "Betfair margins" by betting to record low percentages on the Premiership and there is little doubt that the fixed odds firms have made it much harder for any exchange to dominate in the way they used to even a few years ago. The industry has never been more competitive, with smaller fish such as Blue Square falling by the wayside as profitability becomes impossible (without a large retail estate of arcades).

All firms now need to find new markets and territories where punters are not as astute or margin conscious and this is a challenge the new Ladbrokes exchange has to tackle if it is to compete and thrive over time.

Conclusion for punters

All competition has to be good news for punters, and the new Ladbrokes exchange is certainly an exciting development in that regard. There is the clear possibility of a price war over commission and also the "seeding" of markets could well offer some terrific value to the astute.

Longer term there is surely another agenda, and that is to seize back control of prices in the industry. The sharp minds at the top of the industry recognise the present model, where the entire bookmaking profession is driven by the "Betfair price", is an unprofitable strategy in the long term. Therefore they see the setting up of a new exchange, (with a big customer base and the potential worldwide for many more given the Ladbrokes brand), as a means of seizing control once again of the pricing mechanism. In five or ten years time, Ladbrokes aim must be to be the only exchange with full control over margins and profitability again.

Punters have a short period to make hay while the sun shines.

 

 

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