A flutter on the World Cup may have hit David Soskin in the wallet, but it also provided some rich lessons on how entrepreneurs can capitalise on the weak spots in the economy
Gambling is not one of my vices. But, recently, after a lunch with an old school chum, I succumbed. A football fanatic, my friend had correctly predicted the outcome of the 2006 World Cup. So I asked him if he intended to wager on the South African tournament, to which he replied that he had just placed £100 with 13 bets. Consumed by the excitement of making money more easily than through an early stage dot com, I said that I would match his stake. And we duly crossed the road to the betting shop opposite.
I was not prepared for what I saw. Despite its famous brand, it was a sad, lacklustre place that had last been remodelled in the 1970s. The waiting time made the Post Office seem like Starbucks. There were a couple of old computers and paper everywhere. The punters looked bored and miserable.
When we finally got the assistant’s attention, she was well-meaning, but poorly informed and slow with the computer. For my £100, I received a betting slip, which, when I returned it a few days later, had worn through.
It caused consternation not just because it was largely illegible, but also due to the fact that it contained five errors. Not surprisingly then, a few days later The Evening Standard carried a pithy piece entitled: ‘Bookies must go online or go bust’.
Betting shops seem to be a bricks-and-mortar operation totally without merit. I can see the need for specialist bookshops (you can’t get me out of Daunts, for example), butchers, fruiterers and even perfumers. But why do we need betting shops?
I am, of course, aware of Betfair’s extraordinary success. I asked my friend if he knew about Betfair and he explained the advantages of online betting through that website. There is no margin for error as the odds are clearly stated before you confirm. Your potential gain or loss is quantified. The odds are better. You can ‘back’ or ‘lay’ (bet against something to lose). What’s more, there is a running profit-and-loss account on your bets.
Betfair is actually a betting exchange not a bookie, as it matches gamblers. If I bet on Holland to win, for example, my bet is matched with another punter backing Holland to lose for the same amount.
Betfair takes a commission on the trade. Simple, and all from the comfort of your living room. My friend told me betting shops initially tried to put Betfair out of business as it had no betting licence. Now they are playing catch-up.
No wonder Ladbrokes, with 2,700 shops, recently appointed Richard Glynn, the former chairman of spread betting company Sporting Index, as its new chief executive. Sporting Index claims to have launched the first truly interactive sports spread betting website, and now, apparently, takes 80% of all its bets online. But Glynn is an exception. There are 51 directors on the main boards of the six leading gaming companies. According to well-known technology entrepreneur Charles Cohen, writing in eGaming Review, they include at least 14 accountants, eight bankers, three bookies, two lawyers and “precisely no one who has run the technology function of a single company at any point in their career”.
The internet does not necessarily destroy businesses, but in the case of betting shops, it will. The lesson for entrepreneurs is simple: look at the traditional economy and find out where the weak spots remain (and there are still plenty). Therein lies a business opportunity.
Oh, and in case you were wondering, my World Cup payout was just £28.11. So I’m sticking to my day job.
David Soskin is the co-founder of Howzat Media LLP and sits on the boards of several internet companies, including Cheapflights Media, of which he was CEO from 200 to 2008. His book Net Profit has been published by John Wiley & Sons.