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Betfair Tackles Tazmania

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Betfair Tackles Tazmania

Launched in the UK in June 2000 by co-founders. Andrew Black and Edward Wray.  Betfair now employs over 630 staff and last year had revenues of more than £ 100 million.  So why choose to set up the company’s second global hub in Australia?  There are two simple reasons and they revolve around risk management and business development.


      Betfair is a 24/7 business and has customers all over the world.  Notwithstanding £ 30 million invested over the past five years to boost the power and stability of Betfair’s core technology, things can, and sometimes do, go wrong.  During busy periods, when Betfair might match more than 12,000 bets per minute, the company (and its customers ) can ill-afford any downtime.  It therefore made complete business sense to set up a second global hub somewhere in the world – and what better place than Australia.  With its strong technical infrastructure, support, advanced regulatory environment and about as far away from the UK as you can get, a base in Australia would enable the business to virtually “follow the sun.”


      What enhanced Betfair’s aspirations of making Australia the site of its second global hub were the opportunities to grow the business in that market and in neighboring South-East Asia.  What Australia lacks in population, it makes up for in internet penetration, GPD per capita and the general love of a punt.  In time, Betfair believes its Australian business could amount to at least half the size of the UK business.
      Soon after targeting Australia as the site of its second global hub, Betfair decided to seek out a local partner.  It quickly settled on Publishing and Broadcasting Ltd as the right partner to help it build the business in Australia because of its expertise in the gambling sector, its vast array of media properties and the almost unparallel levels of respect it commands in the Australian business community.  PBL and Betfair have a 50:50 joint venture for the Australian and New  Zealand parts of the business, which crystallizes when Betfair obtains a license in Australia.

      Betfair has faced huge opposition in its endeavors to set up in Australia.  No other international business of similar standing could possibly have faced such a vitriolic campaign of scaremongering and misinformation.  Fortunately for Betfair, no amount of power and influence exerted by vested interests within the racing industry has been capable of masking the flaws in their arguments.

      Betfair’s opponents in Australia have used the concept of integrity, punctuated by the “bet to lose” catch cry, to influence media, politicians and the Australian public to ridicule the concept of betting exchanges.  In presenting a misleading picture.  Betfair’s opponents have undoubtedly succeeded in turning many people off.  However, as was the case in the UK, the persistent, open and well- reasoned approach taken by Betfair has won the day – at least in Taqsmania, which is the first State (but by no means the last) to pass legislation that will allow betting exchanges to operate in Australia.
      The reality is that the integrity argument used against Betfair in Australia is as hypocritical as it is misconceived.  In Australia, racing has been dogged by allegations of corruption and race-rigging for decades.  The transparency brought about by Betfair’s method of operating will act as a beacon for forward –thinking regulators in their efforts to improve integrity on other wagering platforms.
      The true motivation for the opposition to Betfair in Australia is the desire segments of the racing industry and their monopolist cohorts, in the totalizator industry, to prevent competition.
      Competition in any industry is good for consumers – just look at what it’s done for air travel and telecommunications in recent years.  The wagering industry is no different Make no mistake; the competition that Betfair will bring will be good for punters.
      Betfair is popular with punters, in part, because it is a low margin operator.  Schoolboy economists suggest that lower margins means less revenue to Government and less revenue to racing.
      Not true.  The simple economics of wagering are that low margin operators return more to Government and more to the industry than high margin operators- just ask the Productivity Commission, who reached this conclusion very clearly in its 1999 Report into the Australian gambling Industry.
      Will Betfair take customers from the TAB and bookmakers?  Sure, some punters will undoubtedly shift their business to Betfair but the overwhelming majority will not – mainly because they want to continue betting in cash (which Betfair does not offer ) or they want to enjoy the social experience of going to the TAB, the race track, or the pub to place their bets (which Betfair cannot match).
      Racing around the world is under threat from more competitive products.  Take Hong Kong for example, where betting exchanges are licensed.  Turnover on racing there is down for the 7th year in a row and is now at its lowest level for 12 years.  Soccer betting was introduced in Hong Kong to 30%of the total wagering market.  Why?  Because the take out rates on soccer are lower than horse racing –offering better value to the punter.
      The best evidence about the likely impact of properly regulated betting exchanges can be seen by looking at the UK, where Betfair has been operating for nearly six years.  Guess what, confidence in the integrity of the industry has never been higher and its finances have never been healthier – there are more horses in training than ever before, prize money is up 40%, all major wagering operators have reported record profits and racetrack attendances are at post-War highs.
      Betfair’s is the first to disclaim the credit for the prosperity of UK racing but, quite fairly; it does use the metrics to rebut suggestions that the sky is going to fall in when it starts operating from Australia.
      The Australian racing industry will suffer long term and irreversible damage if its administrators do not embrace the opportunities that betting exchanges present.

The Evolution of RNGs

Critical to the success of any gaming operation, Random number Generators (RNG) are not becoming more accurate and reliable of late, but are also becoming start attraction themselves.

The face of RNGs as changing, and the brain behind the face is changing too.  Years ago, gaming operators needed only to worry about attackers predicting the outcomes of their RNG, or other technical exposures of the like.  Today, the counter measures to these exposures are only the minimum requirement for safe and secure operations.  The next logical step has come, as gaming operators are now competing for market share with creativity and marketability of their RNG design. Over the years, RNG technology has advanced in leaps and bounds.  To understand the their origin.

     
Software RNGs are using increasingly advanced sources of external random events.

The first RNGs were simple physical devices.  A pair of dice, or even a coin tossed into the air actually constitutes a Random Number Generator.  It was only a matter of time before these physical devices would inspire the invention of mechanical gambling system, such as the poker machines and slot machines of the late 1800s.  The reel stops on these machines were determined by notches on a wheel could also be biased by filing down the notches.
      Over time, skilled players learned tricks to manipulate the spinning reels of these older slot machine to favour preferred outcomes.  Magnets, vibration, and even an accurately timed pull of the handle could yield the desired results. Manufactures of slot machines were eventually driven to more advanced technologies for their RNGs.  There were then, as there remains today, two basic types of RNGs: software and hardware.


      At the heart of every software RNG  is an algorithm.  Software RNGs are also known as pseudo-RNGs because these algorithms generate outcomes that only appear to be random.  Some would argue that the pseudo-random behavior of software RNGs makes them inferior.  This is a not necessarily correct.  When implemented correctly, with proper seeding and background cycling software RNGs can be sufficiently random to thwart even the most expert and informed attacks.  Conversely, when designed poorly, software RNGs can put you out of business.
      Hardware RNGs are a whole different ball game.  Hardware RNGs are comprised of a physical hardware device, such as an electronic circuit board, coupled with special interface software.  Hardware RNGs are capable of truly random output.  Since hardware RNGs do not depend on an algorithm, such factors as seeding and background cycling simply do not apply.  However, Hardware RNGs are far from perfect.  Hardware components can fail, introducing a bias that cab be exploited.  Consider how component failure on an electronic circuit board can introduce bias.  This is analogous to a roulette wheel that is off balance.


      This leads us to the latest evolution in Hardware RNGs, where numbers are based on taking samples of external random events.  This is where things get interesting.  External random events can be found almost anywhere, from the smallest atomic particles to the vastness of time and space.
      Hardware RNGs are using increasingly advanced sources of external random events.  Such unassailable sources of entropy as radioactive decay and atmospheric noise have already been utilized successfully in many Hardware RNGs operating today.

      As technological and physical barriers are systematically overcome, we will see RNGs based on all the more astounding forces of natural chaos in the universe.  An Environmental RNG © developed by Sky 2 uses events such as solar flares and the Aurora Borealis.  Although these new techniques may produce outcomes that there are no more random than properly implemented traditional methods, public perceptions often favour reality over the abstract.

Hardware RNGs are using increasingly advanced
sources of external random  events

 It is easy to see that many players will be drawn to gaming websites that advertise such amazing sources for their random numbers.  Furthermore, by coupling the sources of random numbers with the overall theme of the website, gaming operators can rope in players that are inherently attracted to their particular theme.


      When it comes to the bottom line, more players means more profits.  So next time you’re faced with a decision about what RNG to implement on your new site, remember that a little creativity could go a long way.. straight to the bank!

 

 

 

 

 

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