The 1% Commission Betting Exchange

Punting Ace have have been fortunate to have Ian Davies author an article. Ian Davies is the Founder, Chairman & Chief Executive of the betting exchange, www.backandlay.com In the article below Ian looks at the challenges he has faced starting a betting exchange and the opportunities that lie ahead along with the benefits of using a betting exchange.

My name is Ian Davies. I am a betting exchange operator.

Betting Exchanges have taken the United Kingdom (and parts of the rest of the world) by storm since the originals, Flutter and Betfair, launched in 1999.

Formerly a racing and sports betting journalist here in the UK, I joined Flutter in the autumn of 2000, was instrumental in their move to a betting exchange platform and their attaining of the 30% market share which facilitated the brokering of their merger with Betfair at the end of 2001.

Since then I've set up my own company, BackAndlay.com Limited, and our betting exchange, www.backandlay.com, launched on 5th November 2003.

It's been a long, tough, haul.

Developing the software and bringing it from my requirements document in march 2002 to launch was an often painful, 89-week, ordeal.

But I was lucky to have teamed up with Glyn Wintle, a brilliant IT expert who masterminded the whole technical operation.

Betfair was the overwhelmingly dominant market leader, with first-mover advantage and all the other edges a large staff and budget brings to the table.

All we had was Glyn's technical nous, my nous about the betting industry and my primal strategywhich is this…

Either you're are going to take on Betfair with a massive budget production, spend tens, maybe hundreds, of millions of pounds in trying to unseat them, or you are not.

And if you are not, you must do everything on the ultra-cheap, getting the lowest operating costs of any player in the market, costs you can meet indefinitely without seeing a single penny in revenue and then dig in for what might be a lifelong struggle to reach profitability.

There is no middle-ground - throwing some money at it will simply result in losing that money.

So, what to do - spend a fortune or spend nothing?

Well, I was spared a prolonged ordeal there by the fact I had nothing to spend.

But, in any case, with betting exchanges being essentially low-margin businesses, the minimalist strategy appealed to me anyway, so we went for it, and, two years alter we're still going for it.

A handful (literally) of us run www.backandlay.com, we've amassed a userbase of around a thousand (despite spending literally nothing on marketing) and we've got the makings of a nice little business, though right now it's still at the infant stage.

Revenue isn't yet covering the operating costs (the three shareholders make up the shortfall personally out of their own pockets as part of our ongoing investment in, and commitment to, the company) - though we're seeing 400% growth year on year - but that's not important because, the instant we do cover them, we'll only up the operating costs by expanding the operation anyway, adding servers as required, and adding ops staff to deal with the growing number of users.

But that's enoughh of me talking about me, what do you all think about me?

Well, not 'me' per se, but betting with exchanges generally.

Why would you want to bet with one?

Well, the key words are 'value' and 'empowerment.'

Can you take a price on the TAB?

No.

Can you request a price there?

No.

Can you lay a bet?

No.

Is the take-out 1% (the commission rate at my exchange)?

No.

Are the returned odds generally better than those available on the exchanges?

Generally not.

But can I trust an exchange - I hear an exchange called SportingOptions went bust, with debts of £5.4 million and with £3 million in client funds missing?

Well, what can I tell you - evidently, and sadly, not every gaming operator is high on integrity, but it's a problem more commonly associated with bookmakers (Luvbet and NetBetSports spring to mind).

All money at www.backandlay.com is held in a clients account with HSBC Bank plc and is only administered by us for the purposes of processing deposits and withdrawals and withdrawing our accrued commissions and any accrued interest to our Business Account.

But I'm not going to bull-shit you all with jargon about 'ring- fencing' which has no real legal substance.

The bottom line is you have to trust us the same as you have to trust Betfair and anyone else you deposit money with.

Obviously, Betfair are a far bigger company than us, but big companies have gone bust before now, leaving smaller ones still trading in their wake.

Now I don't blame anyone for making Betfair their first port of call if they elect to try out exchange betting.

They're the biggest, they have the most liquidity.

But it's relflected in their commission charges, which are as high as 5%.

www.backandlay.com charges everyone 1% - and that's our key point of difference and competitive advantage (though we do also offer live streaming, a device of Glyn's that he is as proud of, as we are of Glyn for delivering it).

There are people paying £1,000 a year in commission to Betfair who would only be paying £200 at www.backandlay.com and, for a lot of people, that's the difference between net profit and net loss in the course of a year.

www.backandlay.com doesn't yet cover Australian racing, nor does it cover many other markets which might be of interest to Australian punters.

But that's simply because we haven't yet had demand for such markets and the key to our commercial longevity is we don't devote our finite resources to things we've had no demand for.

Say a number of you opened accounts and started asking for local markets, we'd provide them.

That's the way we do things.

Ian Davies,
Founder, Chairman & Chief Executive,
BackAndlay.com Limited.
www.backandlay.com,
The 1% Commission Betting Exchange.

To go to the BackAndLay website, click here