The Tech Specialists

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THE CYBERSPACE GAMBLER
BETFAIR | BRITAIN
In 1999, Briton Andrew Black was making a decent enough living as a professional gambler, concentrating mainly on playing bridge and betting on horses. But he was dissatisfied with traditional bookmakers. By the time they build in their margins, says Black, 41, "you've got to be 20% smarter to make money. And if [you] make a mistake, [you] can't trade out of it. I thought, 'There's got to be a better way.'"

He forged it by co-founding, with Ed Wray, London-based Betfair, the peer-to-peer cybercasino that has done for gambling what eBay did for garage sales. On Betfair there's no house; the site's 250,000 registered customers simply post their bets and wait for someone to take them on. Betfair charges a commission on each winning bet; the more you bet, the lower the commission. When the site was launched in 2000, with $1.8 million raised from Black's and Wray's network of contacts, it was taking less than $90,000 in weekly bets. Now it has in excess of $90 million a week in matched bets, about 13% of the estimated annual $35 billion global online sports-betting industry. From April 2002 to April 2003, Betfair's pretax profits rose from $1.9 million to $15.5 million. The site has registered users in 85 countries, with 70% of the bets placed on horse races.

Some traditional bookmakers charge that Betfair's practice of allowing bets on losers as well as winners might facilitate corruption by encouraging competitors to throw events for financial gain. Says Graham Sharpe, spokesman for old-style bookie William Hill: "If you have a bet on an exchange, you don't know who it's with. If [the person] is offering extravagant odds, you don't know why." Black counters that his site makes strange betting patterns easier to identify. He points out that Betfair has signed agreements with, among others, the Jockey Club in Britain and the English Football Association, promising to inform them of any suspicious wagers. And in June the British government said it wasn't necessary to license or regulate those who lay bets — to the chagrin of traditional bookmakers, which had been pushing for such a move.

A big man, Black ambles around Betfair's offices in shorts and a fleece. In his spare time, he still likes to gamble. The next wager he'll need to make is when to take Betfair public, something he insists won't happen for at least 18 months. "We've got to knock the company into shape," Black says. "We want to get the timing right." It's the biggest bet of all, and not something even a seasoned gambler would take lightly. --By Jennie James/London