When the news broke on 14 October that Matchbook had acquired Betdaq, it was close to my heart, having worked at Matchbook for nine years and at Betdaq for close to two years. I believe I am one of four people who have sat on both sides of the fence, and I am also the most recent person to do so.
I started working in betting exchanges in 2014, when the whole industry was in a very different place. It is an amazing place to build experience, and I am extremely grateful for the wealth of experience I gained. However, as I became more senior, I faced the realities of trying to run a low-margin product in a race to the bottom on commission, under a regulatory body that does not differentiate between an exchange and a high-margin sportsbook.
The reality is that an exchange like Betfair, with no internal market making, will make £0.80 in gross profit on a £100 bet. That does not leave much of a marketing budget to acquire and educate potential customers.
During my time working in exchanges, the four players were Betfair, Betdaq, Smarkets and Matchbook. Betfair was always the dominant force in the market – and by a wide margin. The reality is that the other exchanges need to have almost identical rules to Betfair. If the Betfair site went down, a challenger could never capitalise on it because its liquidity would disappear, with market makers using Betfair as their pricing source.
Who are the players that make up the UK exchange ecosystem? At a high level, we have internal and external market makers, syndicates, sharps, and API and trading tool users, who might be seen as the winning side of the ecosystem. Then we have on-course bookmakers, arbers and retail customers, who make up the losing side. Betfair allows all the sharps to compete with one another, and its API is openly available, as Betdaq’s was. Smarkets and Matchbook have different internal policies on who can access their liquidity pools, and access is considered more on a case-by-case basis.
Rationale of the deal
This brings us to Matchbook’s acquisition of Betdaq and the motivation behind it. The first standout point was that it was a brand acquisition, with no players moving with it. I think I can say with some confidence that on-course bookmakers were the only motivation behind the acquisition. Matchbook’s horseracing market making expertise is a perfect match for this flow.
On-course bookmakers talk on social media about big bets and business booming on a daily basis. This customer base is attractive because it sends significant losses from on-course betting into the exchange ecosystem, and its customers almost never churn. The on-course bookmaker community was historically split in two: customers using Elite technology, where Betfair and Matchbook were available, and customers using RDT technology, which also offered on-course support and was exclusive to Betdaq.
In 2022, Matchbook had no on-course bookmakers, but it undertook an acquisition drive, using its ability to undercut Betfair and Betdaq by offering 0% commission. This proved very successful, and Matchbook quickly became the dominant player on the Elite technology. However, it failed to make significant progress in attracting RDT customers to switch. This deal will give Matchbook around 90% of the market share for this segment.
Winners and losers
This brings us to the winners and losers in this deal. The clear winners will be Matchbook’s market makers, who will now have a very significant losing flow all to themselves. The big losers will be the sharp horseracing groups and individuals who were extracting these losses. There may also be a knock-on impact on Betfair, as almost all these groups would have traded between Betfair and Betdaq.
However, as discussed earlier, a weaker Betfair ecosystem will also make the other exchanges weaker because of their dependence on Betfair. I would also speculate that on-course bookmakers who have become accustomed to not paying commission may see that change over time, as competition will be reduced with Betdaq out of the picture, unless Betfair decides to get aggressive in this segment.
As for the outlook for UK exchanges, I think it has to be pretty negative, unless there is major regulatory change to help differentiate them from sportsbooks. I think all the challenger exchanges saw the US market as the big opportunity, along with the prospect of their proprietary technology being acquired by a US sportsbook. However, an unexpected opportunity has now arisen with prediction markets and Commodity Futures Trading Commission regulation.
While all the UK exchanges are entering the US space, I do not really see how they can compete with the giants already operating in that market. However, the prediction markets boom might open doors in less competitive markets. I look forward to monitoring the space over the coming months.
Enda Kendrick held senior roles at Matchbook and Betdaq between 2014 and 2024. He then joined London-based Moon Intelligence, a service provider to market makers, before most recently moving to Veltium, which provides operational, marketing and regulatory services to sharp bettors and market makers.
The post The impact of Matchbook’s acquisition of Betdaq on the UK exchange ecosystem first appeared on EGR Intel.
Enda Kendrick, who has held senior roles at both companies, says on-course bookmakers were the main motivation for the deal and that the “clear winner” will be Matchbook’s market makers
The post The impact of Matchbook’s acquisition of Betdaq on the UK exchange ecosystem first appeared on EGR Intel.