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Complete Power Point Presentation Betfair – John Bowman.

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1 Complete Power Point Presentation Betfair – John Bowman

2 BETFAIR PEST Analysis / Market Analysis By John Bowman


4 Betfair - Snapshot World’s Largest Internet Betting Exchange Launched in June, 2000 HQ: West London, England Over 2,000 Employees World-Wide Steady rise in Revenues Up 27% from 2008 to 2009 Revenue 51% U.K. 49% Outside U.K. Mostly Europe

5 Betfair - snapshot Services Offered in 17 Different Languages Process over 5 Million Transactions Daily Over 3 Million Registered Customers Betting Offered in Over 50 Different Sports Revenues Generated from 2 – 5% of Winner’s Payout

6 Betfair – snapshot Core Betfair All sports betting Betfair offers a portfolio of casino, exchange games, arcade and poker. TVG U.S. TVG customers can bet through an interactive horseracing network Timeform provides horseracing punters with unique and trusted ratings Betfair Australia joint venture between Crown Limited LMAX the market for online Retail financial trading

7 FactorTrendEvaluationImpact 1 = low / 5 high Rank in terms of importance PoliticalGovernment Regulation – To ban online gambling Threat51 EconomicalEconomical Recession in U.K. and most of Europe Opportunity / Threat 24 SocialResponsible Gambling - Society Views of Addictions / Integrity of the Game Threat TechnologicalHackers Greater Use of Applications iPad / iPhone Threat Opportunity

8 PEST Analysis - political Date / CountryAction taken by CountryAction taken by Betfair 2006 /RussiaProhibits Online Gambling Completely None 2007 / IndiaBombay Wager Act – Bans Online Gambling in Maharashtra None 2009 / French GovernmentOutlaws Online betting exchange Betfair Betfair takes legal action 2009 / Dutch GovernmentDutch Gov. bans Dutch banks from processing payments by Dutch customers to online gaming Betfair takes legal action 2010 / AustraliaCourt rules against Betfair having RNSW and HRNSW race fields Betfair takes legal action 1961 / U.S.A.Wire Act – Prohibits Sports online betting None

9 Pest analysis - economical CauseEffect European Rescission95% of Sports Betting in Europe Larger number of New Customers to offset Total Gambling $330 Billion World-wide Online Gambling - $25 BillionNeed to get more of the Gambling dollars

10 TOTAL REVENUE - betfair

11 Pest analysis - social Responsible Gambling - ThreatBetfair Customers lose too much moneyBetfair establishes - Player Protection Customer driven deposit and loss limits Customers online too longGame Session Timers Customers have no self controlSelf-exclusion tools Customers have a Gambling ProblemBetfair establishes Education and Information Links to GamCare and other help organizations Customers have a Gambling ProblemOffers self help and awareness information Betfair est. - Responsible Gambling Policy Society views online gambling as one of the biggest at-home problems Betfair offers money and time limits, help for problem gamblers, ensures no underage gamblers

12 Pest analysis - social Integrity of the GameBetfair Too much money bet on sports – concerns about integrity of Athletics Betfair ensures integrity in all Sports where betting is allowed Corruption in sportsBetfair signs over 40 MoUs – Memorandums of Understanding with Sporting Venues Betfair monitors possible last minute bets or unusual bets to check for possible problems in “real time”

13 Pest analysis - technological External ProblemBetfairCustomers HackersBetfair shuts down operation 15 Aug – 16;20 – 1700 And 17:50 – Customer information at risk – credit card, bank and personal information at risk Not able to bet during Down Time – lose revenue, loss confidence in company New TechnologyiPad / iPhoneIncrease of70% in usage over 1 year period Accounts for 4% of Total Revenue

14 Industry Analysis – Total gambling Online gambling $25 billion annually 8% of total gambling Betfair accounts for 2% of total market share of Online betting

15 A healthy industry Online gambling Revenue $17 million $29.4 billion 2015 – Projected Estimates $41 - $177 billion Make-up of Betting 41% Sports Betting (illegal to bet on Sports in US) 46% Online Casinos and Poker Rooms 13% Other – Mostly Horse Racing Europe – 43% of Entire Market What will happen if US Market opens for Sports Betting What will happen if China, Japan and India open for Online Betting

16 Fastest Growing industry YearOnline SitesYearly Revenue $17 million ,076$3 billion ,076$25 billion 2015?Estimated between $42 - $177 billion

17 Industrial analysis Threat of New Entrants Bargaining Power of Industry Bargaining Power of Customers Threat of Substitutes Intensity of Rivalry

18 Threat of New Entrants - strong ResultsEffects Number of competitors1996 – – 44,000 Harder to Attract and Maintain Current Customers New EntrantsReduces Profit Potential Small Capital Requirement Ease to Enter Market Tends to Discredit Entire Online Betting Customers Concerns and Ability to Locate Betfair Online

19 Bargaining Power of industry - Weak ResultsEffects Sporting IndustryHas Little Effect on the Betting Industry Betting Industry Distributes Large Amounts of Resources back into the Sports Industry Horse Racing IndustryHas Little Effect on the Betting Industry Betting Industry Distributes Large Amounts of Resources back into the Sports Industry PokerHas Minor Effect – Ability to Promote Certain Companies Corporate Sponsorship

20 Bargaining power of customers - moderate ResultsEffects Customers DemandBest Service / Smallest FeesSmaller Profit Margins Confidence in WebsiteAdditional Cost More Betting OpinionsPotential More Revenue

21 Threat of substitutions - strong ResultsEffects Gambling IndustryMany Avenues to WagerMuch Harder to Attract and Maintain Relationship with Customers Online Online Betting Makes up 8% of Total Gambling LotteryLarger Than Life PayoutsAttracts Customers when Payouts are Large – Making the News CasinoVacation Destinations Away form Home Usually Planned Out Difficult to Compete Spendable Cash is often Saved to Fund Events – less Bet Online

22 Intensity of rivalry - strong ResultsEffects Unlimited Number of Same Industry Businesses Must StandoutSpend More Money for Name Recognition Online vs. Other GamblingMust competeMarket Internal and External Competition SurvivalMust Heavy Reinvest into the Gambling and Sports Industries High Cost – Low Bottom Line Profits Economical RivalryCertain Weak EconomiesComplete for a Already Over Spent Dollar – Spendable Cash

23 True Competitive Advantage BETFAIR offers: Company based on Differentiation based on Innovation Based on fair bet I bet against you, not the house

24 conclusion EffectsResults PoliticalStrongest Effect on IndustryHas the power to make or break Online Gambling TechnologyIndustry Must Stay CurrentHigh investment cost to develop and maintain, required for Online Market to compete for Gambling $ Industry GrowthNo LimitsVery young market Fastest growing market Unknown Future – very much Government Regulated Online BettingMust Maintain Customer Loyalty and Confidence Must offer services that can compete with real life experiences and continue to ensure Customers of Security and Comfort

25 BETFAIR Competitor and Market Analysis By John Bowman


27 CompanyBetting LicenseCountries Excluded BetfairUnited KingdomUSA LadbrokesUnited KingdomUSA Bet365United KingdomUSA and Turkey BetssonMaltaUSA, Malta and Hong Kong Paddy PowerIsle of ManUSA BodogAntiguaNone Countries where betting licenses are located Countries that service is not offered Companies that are listed on the stock exchange

28 CompanyActives (customers) Betfair3 Million Ladbrokes799 Thousand Betsson2 Million Bet365unavailable Paddy Powerunavailable Bodogunavailable Revenue in millions Bet365 & Bodog - unavailable

29 How to competeImpact on customersEnd Results Money Returned to Betters Medium – High Most betters do not know the rate of return To maintain long term customers New Customer Sign up BonusHigh – At beginning Has no continued value To attract new business and new long term customers Number of Sports to bet onLow- Most will stay in same betting area To offer more selection – more selection, more opportunity to wager Services OfferedMedium – High- More services = more customers Keep more customers Attract more customers Wider customer base Name RecognitionHigh – Recognizing name of website – increases comfort zone and customers returning to site Spend money to make money - name is recognizable, attract new business and keep excising customer base

30 ODDS - PAYOUT Odds Payout is a Exchange with an average odds of payout – based on 100% This means that for every EURO bet, that percent of the EURO is returned to the betters.

31 New Customer Sign – Up Bonus No sign up bonus for Betsson or Paddy Power Bonus is for new membership Sign – up bonus is a return of the amount the new customer deposits and bets and is then returned to their account Betfair – 100% of first 29 EURO’s bet BET % of the first 100 EURO’s bet Bodog offers 50% of the first 29 EUROs bet

32 What to BET This charts shows the different sports you can place wagers on. Sports that bets are placed on: Here is a partial list – how many do you know? American Football Australian Rules Baseball Basketball Bowls Boxing Chess Cricket Cross Sport Accumulators Cycling Darts Financials - Today's Markets Financial Bets Floorball Football Football - Fixtures Gaelic Games Golf Greyhound Racing Greyhound - Todays Card Handball Horse Racing Horse Racing - Todays Card Horse Racing - Virtual Ice Hockey Motor Sport Netball Olympics 2012 Politics Rugby League Rugby Union Snooker Special Bets Tennis Volleyball

33 CompanyWays to Deposit Ways to Withdraw Avg. Fees per bet Speed per transaction in seconds Number of Languages Currency accepted Betfair Ladbrokes Bet Betsson Paddy Power Bodog

34 BRAND RECONITION BETFAIR EventIndustryCountry Grass signage Super15 RugbyAustralian Sponsors Manchester United FootballUK TVG sponsors United Nations Stakes Horse RacingNew Jersey - USA

35 OVER ALL RATINGS Based on the following factors Financial Security Odds Payout Betting Selection Service Test Site Statistics Money Trans. Bonus

36 True Competitive Advantage BETFAIR offers: Company based on Differentiation based on Innovation Based on fair bet I bet against you, not the house

37 Indirect Competition Over $330 billion bet each year Online reported gambling is $25 billion – Betfair has 2% of total Is the fastest growing gambling industry

38 Products Offered Sport betting – football Horse Racing Online Poker rooms Online gaming – casino All offer same services No real difference on product offered Must compete elsewhere

39 YearOnline Gambling Sites Revenue Generated $17 million ,076$3 billion ,076$6 billion $25 billion 2015$177 billion Growth rate is the fastest growing industry of any industry Much of revenue is unaccountable, unauthorized betting sites How much is really bet Illegal to bet in US

40 Key Trends Football – cash cow Sport bets Horse Racing Poker Poker – a thing of yesterday? Sport bets up 11.7% same period last year, mostly due to world cup Horse racing up 1.4% same period last year, poor weather cancelled racing Poker continues downward, losing 6.5% of same period last year.

41 Trends – How to place a bet Revenue is strong from mobile channel Up 70% over one year Accounts for 4% of total revenue Leader is iPad and iPhone Android Apps Ease and discretion of use

42 Market Actives (ooo)A Growing Market Actives – a customer who has a bet or plays real money during a given period UK is 17% over one year Europe up 52% Rest of world up 46.3% What will happen when US market opens?

43 Rest of the World CompanyBusinessDirection TVGRacing channel largest legal online wagering in the US 35 million homes Have foothold in US Horizontal – Horse racing LMAXEnter the market for online retail financial trading Expand Services Offered to all Customers Betfair Australia50-50 joint ventureHave foothold in Australia TimeformHorseracing ratings, form guidesEnsure Product and Name Recognition Betfair TVMore Avenues to Wager Keep and Attract New Customers Product Development

44 Target Market – Gambling $ Old target market No technology Knowledge Mostly casino and horse players Misinformed players New target market Knows technology 50% of new actives –football players UK and Europe Well informed players

45 Conclusion Gambling has always been among man and will continue. Betfair has found a new channel to bet (same as it always has been – man to man) only now through technology. They must keep their name recognition by sponsorship and advertising. They must keep current with technology and even help shape it to stay ahead. They must help regulate legislation and be at the door step when new and emerging markets are ready for the picking. These are the factors that will ensure that they keep their market share and enhance the market for online gambling.

46 BETFAIR Internal Analysis / Overview By John Bowman

47 Business Model Make up of Betfair Group The Betfair GroupMake-up Core Betfair Group SportsOnline Sports Betting GamesOnline Casino PokerOnline Poker Management of customer fundsInvesting held funds Other investments US FundsTVG Horse Racing LMAXOnline retail financial trading Other InvestmentsMisc. Investments Timeform Betfair TV Horse Racing Information Betting widget

48 Business Model Build on leadership in sports betting Expand product portfolio cross-selling to sports customers Proliferation and convergence of new channels Continue geographic expansion Develop platform to address new markets and new verticals

49 Betfair – CEO – David Yu Aggressive 3 yr. plan Heavy re-investment New software Buy New Markets – TVG – USA Key Sponsorship in many different sporting events

50 5 Year Performance

51 Betfair Revenue Last 6 months of 2010 Betfair GroupDollar Amount (000,000) % of Total Betfair% of change form prior year CORE BETFAIR Sports$ %+11.7% Games$ %+17.6% Poker$115.1%-6.5% Management of customer funds $1.5.7%+32.8% OTHER INVESTMENTS US Market$209.4%+16.5% LMAX$31.4%+63.2% Other Investments $2310.7%+24%

52 Betfair Revenue 2010

53 SWOT Emerging markets New Technology Expand customer base to other avenues Competition Government Bans Loss of Customers Easy to enter market Government dependent Same type of services offered Brand Recognition Diverse Portfolio Innovation StrengthsWeaknesses Opportunities Threats

54 SWOT - STRENGTHS StrengthsEffectsResults Brand RecognitionBrings in New Customer Loyalty New customers converted to use other services Customers’ wants and needs are met Diverse PortfolioAble to offer several services to customer base Able to keep cost low Maintain all services – even non-profit entities InnovativeOffer new options to customers Attract new customers Stay ahead of competition

55 SWOT - WEAKNESSES WeaknessesEffectsResults Easy to enter Market No limit to number of competitors Must stand out to attract and maintain customer base Government Dependent / Regulations Hard to enter new Markets / Expand Markets Must stay current with laws Try to influence changes Offer same basic services as competitors Must be innovative to offer and attract new and current customers Potential customers could join other online betting sites

56 SWOT - OPPORTUNITIES OpportunitiesEffectsResults Emerging Markets 4 Largest Gambling Markets Betfair only has a small presence in one of the four - US, not in China, India, or Japan New Technology Draw in new Customers Get current Customers to use services more APPS applications up 70% makes up 4% of total revenue Betfair TV – more opportunity to make wagers Expand Customer Base More customers More opportunity to bet with each other Stronger customer base will result in more wagers, generating more revenue

57 SWOT - THREATS ThreatsEffectsResults CompetitionLose current customers / potential customers Must maintain customer base, customers are wagering against each other, requires large base to meet needs Government Bans Could stop operations in certain countries or territories Could cause large loss of revenue and customer base Loss of Customers Less customers to wager against each other No customers to accept wager – no percentage of win for Betfair – no Revenue

58 Entering Foreign Markets USChinaIndiaJapan All have strict legal Restrictions Betfair in US with TVG What will happen if Markets Open ??? The Four Largest Markets of Gambling TVG Horse Racing - only No Presence Of Betfair

59 Boston Consulting Group Matrix Stars Sports Betting (football) Games Cash Cows Management of customer funds Other Investments Cash Cows US Market LMAX Dogs Poker High Low HighLow


61 Grand Strategy Betfair - first successful Betting Exchange Betfair TV -betting widget allows live betting on TV remote Innovation Increase sports betting customers Customers use other services Focus Expand Markets Expand Products Strategy Directions

62 Grand Strategy New customers through Sports Betting Convert customers to use other services offered Market Penetration US Market – TVG Australia Horizontal Integration Betfair TV APPS – iPod / iPhone Product Development

63 Conclusion Business ModelSituationPositive EffectNegative Effect Strong Brand Name Attract and Maintain Strong Customer Base Ensure Name Recognition– build Loyalty High Cost Name associated with unfavorable situation Cutting Edge Technology Attract and Maintain Strong Customer Base More Avenues to Wager High cost Potential technical issues Horizontal Integration Acquire Businesses Poised for Opening in New Markets New Customer Potential Larger customer base High cost Sports BettingMain RevenueCash CowLose focus of core of business model

64 Conclusion Business ModelSituationPositive EffectNegative Effect Share HoldersReturn on Investment Showing a consistent profit Not enough dividends – difficult to raise addition capital On-line PokerDecline in Revenue Options for customer base Not profitable Betfair is a very young company, in an industry that is still in its infancy They need to keep their focus on what is their core business Betfair needs to be ready to enter into any new markets They need to ensure their presence in the current ones

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