Complete Power Point Presentation Betfair – John Bowman

PEST Analysis / Market Analysis BETFAIR PEST Analysis / Market Analysis By John Bowman BETFAIR

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

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

Betfair – snapshot Timeform Betfair Australia Core Betfair All sports betting Betfair offers a portfolio of casino, exchange games, arcade and poker. U.S. TVG customers can bet through an interactive horseracing network TVG Timeform provides horseracing punters with unique and trusted ratings Betfair Australia 50-50 joint venture between Crown Limited LMAX the market for online Retail financial trading

PEST ANALYSIS Factor Trend Evaluation Impact 1 = low / 5 high Rank in terms of importance Political Government Regulation – To ban online gambling Threat 5 1 Economical Economical Recession in U.K. and most of Europe Opportunity / Threat 2 4 Social Responsible Gambling - Society Views of Addictions / Integrity of the Game 3 Technological Hackers Greater Use of Applications iPad / iPhone Opportunity

PEST Analysis - political Date / Country Action taken by Country Action taken by Betfair 2006 /Russia Prohibits Online Gambling Completely None 2007 / India Bombay Wager Act – Bans Online Gambling in Maharashtra 2009 / French Government Outlaws Online betting exchange Betfair Betfair takes legal action 2009 / Dutch Government Dutch Gov. bans Dutch banks from processing payments by Dutch customers to online gaming 2010 / Australia Court rules against Betfair having RNSW and HRNSW race fields 1961 / U.S.A. Wire Act – Prohibits Sports online betting

Pest analysis - economical Cause Effect European Rescission 95% of Sports Betting in Europe Larger number of New Customers to offset Total Gambling $330 Billion World-wide Online Gambling - $25 Billion Need to get more of the Gambling dollars

TOTAL REVENUE - betfair

Pest analysis - social Responsible Gambling - Threat Betfair Customers lose too much money Betfair establishes - Player Protection Customer driven deposit and loss limits Customers online too long Game Session Timers Customers have no self control Self-exclusion tools Customers have a Gambling Problem Betfair establishes Education and Information Links to GamCare and other help organizations Offers 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

Pest analysis - social Integrity of the Game Betfair Too much money bet on sports – concerns about integrity of Athletics Betfair ensures integrity in all Sports where betting is allowed Corruption in sports Betfair 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”

Pest analysis - technological External Problem Betfair Customers Hackers Betfair shuts down operation 15 Aug. 2006 – 16;20 – 1700 And 17:50 – 18.20 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 Technology iPad / iPhone Increase of70% in usage over 1 year period Accounts for 4% of Total Revenue

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

A healthy industry Online gambling Revenue 1996 - $17 million 2010 - $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

Fastest Growing industry Year Online Sites Yearly Revenue 1996 30 $17 million 2000 19,076 $3 billion 2010 44,076 $25 billion 2015 ? Estimated between $42 - $177 billion

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

Threat of New Entrants - strong Results Effects Number of competitors 1996 – 30 2003 – 44,000 Harder to Attract and Maintain Current Customers New Entrants Reduces Profit Potential Small Capital Requirement Ease to Enter Market Tends to Discredit Entire Online Betting Customers Concerns and Ability to Locate Betfair Online

Bargaining Power of industry - Weak Results Effects Sporting Industry Has Little Effect on the Betting Industry Betting Industry Distributes Large Amounts of Resources back into the Sports Industry Horse Racing Industry Poker Has Minor Effect – Ability to Promote Certain Companies Corporate Sponsorship

Bargaining power of customers - moderate Results Effects Customers Demand Best Service / Smallest Fees Smaller Profit Margins Confidence in Website Additional Cost More Betting Opinions Potential More Revenue

Threat of substitutions - strong Results Effects Gambling Industry Many Avenues to Wager Much Harder to Attract and Maintain Relationship with Customers Online Online Betting Makes up 8% of Total Gambling Lottery Larger Than Life Payouts Attracts Customers when Payouts are Large – Making the News Casino Vacation Destinations Away form Home Usually Planned Out Difficult to Compete Spendable Cash is often Saved to Fund Events – less Bet Online

Intensity of rivalry - strong Results Effects Unlimited Number of Same Industry Businesses Must Standout Spend More Money for Name Recognition Online vs. Other Gambling Must compete Market Internal and External Competition Survival Must Heavy Reinvest into the Gambling and Sports Industries High Cost – Low Bottom Line Profits Economical Rivalry Certain Weak Economies Complete for a Already Over Spent Dollar – Spendable Cash

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

conclusion Effects Results Political Strongest Effect on Industry Has the power to make or break Online Gambling Technology Industry Must Stay Current High investment cost to develop and maintain, required for Online Market to compete for Gambling $ Industry Growth No Limits Very young market Fastest growing market Unknown Future – very much Government Regulated Online Betting Must Maintain Customer Loyalty and Confidence Must offer services that can compete with real life experiences and continue to ensure Customers of Security and Comfort

BETFAIR Competitor and Market Analysis By John Bowman BETFAIR

HOW IT ALL WORKS http://www.youtube.com/watch?v=d05joU_FSYo

Direct Competition Online Gambling Company Betting License Countries Excluded Betfair United Kingdom USA Ladbrokes Bet365 USA and Turkey Betsson Malta USA, Malta and Hong Kong Paddy Power Isle of Man Bodog Antigua None Countries where betting licenses are located Countries that service is not offered Companies that are listed on the stock exchange

Competitors Revenue in millions Bet365 & Bodog - unavailable Company Actives (customers) Betfair 3 Million Ladbrokes 799 Thousand Betsson 2 Million Bet365 unavailable Paddy Power Bodog Revenue in millions Bet365 & Bodog - unavailable

Compete ? How to compete Impact on customers End 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 Bonus High – At beginning Has no continued value To attract new business and new long term customers Number of Sports to bet on Low- Most will stay in same betting area To offer more selection – more selection, more opportunity to wager Services Offered Medium – High- More services = more customers Keep more customers Attract more customers Wider customer base Name Recognition 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

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.

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 BET365 100% of the first 100 EURO’s bet Bodog offers 50% of the first 29 EUROs bet

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

What services are offered Company Ways to Deposit Ways to Withdraw Avg. Fees per bet Speed per transaction in seconds Number of Languages Currency accepted Betfair 12 7 1.78 .438 17 10 Ladbrokes 13 9 .276 14 Bet365 16 1.70 .474 29 Betsson 8 6 1.85 .374 Paddy Power 1.363 2 Bodog .300 1 3

BRAND RECONITION BETFAIR Event Industry Country Grass signage Super15 Rugby Australian Sponsors Manchester United Football UK TVG sponsors United Nations Stakes Horse Racing New Jersey - USA

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

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

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 Over $330 billion bet each year

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

Growth Rate - Unbelievable Year Online Gambling Sites Revenue Generated 1996 30 $17 million 2000 19,076 $3 billion 2003 44,076 $6 billion 2010 --- $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

Key Trends Football – cash cow Poker – a thing of yesterday? Sport bets Horse Racing Poker 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.

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

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?

Rest of the World Company Business Direction TVG Racing channel largest legal online wagering in the US 35 million homes Have foothold in US Horizontal – Horse racing LMAX Enter the market for online retail financial trading Expand Services Offered to all Customers Betfair Australia 50-50 joint venture Have foothold in Australia  Timeform Horseracing ratings, form guides Ensure Product and Name Recognition Betfair TV More Avenues to Wager Keep and Attract New Customers Product Development

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

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.

Internal Analysis / Overview BETFAIR Internal Analysis / Overview By John Bowman BETFAIR

Business Model Make up of Betfair Group The Betfair Group Make-up Core Betfair Group Sports Online Sports Betting Games Online Casino Poker Online Poker Management of customer funds Investing held funds Other investments US Funds TVG Horse Racing LMAX Online retail financial trading Other Investments Misc. Investments Timeform Betfair TV Horse Racing Information Betting widget

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

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

5 Year Performance

Betfair Revenue Last 6 months of 2010 Betfair Group Dollar Amount (000,000) % of Total Betfair % of change form prior year CORE BETFAIR Sports $124 58.4% +11.7% Games $30.5 14.3% +17.6% Poker $11 5.1% -6.5% Management of customer funds $1.5 .7% +32.8% OTHER INVESTMENTS US Market $20 9.4% +16.5% LMAX $3 1.4% +63.2% Other Investments $23 10.7% +24%

Betfair Revenue 2010

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

SWOT - STRENGTHS Strengths Effects Results Brand Recognition Brings in New Customer Loyalty New customers converted to use other services Customers’ wants and needs are met Diverse Portfolio Able to offer several services to customer base Able to keep cost low Maintain all services – even non-profit entities Innovative Offer new options to customers Attract new customers Stay ahead of competition

SWOT - WEAKNESSES Weaknesses Effects Results 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

SWOT - OPPORTUNITIES Opportunities Effects Results 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

SWOT - THREATS Threats Effects Results Competition Lose 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

Entering Foreign Markets US China India Japan 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

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

SEGMENTATION STRATEGY Porter’s – Generic Strategy SEGMENTATION STRATEGY NARROW MARKET SCOPE DIFFERENTIATION STRATEGY COST LEADERSHIP BRAND MARKET SCOPE UNIQUENESS COMPETENCY LOW COST COMPETENCY

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

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

Conclusion Business Model Situation Positive Effect Negative 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 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 Sports Betting Main Revenue Cash Cow Lose focus of core of business model

Conclusion Business Model Situation Positive Effect Negative Effect Share Holders Return on Investment Showing a consistent profit Not enough dividends – difficult to raise addition capital On-line Poker Decline 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