Face to Face
As one of the founding fathers of Betfair, Mark Davies had a key role in an organisation which has transformed the betting industry. In his first major interview since he left the firm back in mid-June, Davies reflects on his ten years with the exchange with Betview's Richard Preen.
It came as something of a surprise when the 'face of Betfair' Mark Davies, the firm's managing director, tendered his resignation after ten years at the helm last month. Perhaps something of a bigger surprise was the identity of Davies' first well-wisher who called the minute the news broke. A strong Glaswegian accent greeted Davies and proceeded to heap praise on the work of one of Betfair's founder members and wished him well for the future. The fact that the caller, Ralph Topping, CEO of William Hill, had spent many of the preceding years in the role of Betfair nemesis puts into context the respect Davies garnered throughout the industry.
Betfair's positioning in the betting industry has changed dramatically from its inception in 2000. The company now boasts a customer base of over three million and achieved total revenue of over £300 million for the year ending April 2009. The Queen's Award for Enterprise winner employs over 2,500 people worldwide, a far cry from the original team of eight that launched the firm. Admittedly it would have taken a mindset of Nostradamian proportions to have predicted Betfair's rapid rise but surprisingly most of the early feedback of Andrew Black and Ed Wray's grand betting vision was quite dismissive.
Davies, at his Barnes home, just a stone's throw from Betfair's Hammersmith headquarters, recalls the firm's first run-in with William Hill: 'Ed went on 5Live with William Hill's Graham Sharpe on Derby day,' he says. 'Graham admitted it was a great idea and it would make people think about pricing and bookmaking. But he went on to say that it would be a shame as it would never work as you need liquidity to make it work. That was the view most people took.'
Fortunately not everyone was quite as flippant. Davies had been struck immediately by the simplicity and effectiveness of the interface. 'It's easy to romanticise it but I do remember looking at the product in a little attic room in Putney and thinking it would be a big success,' he says. 'I remember Bert (Andrew Black) showing me this prototype and me thinking "Oh my God, that is so simple and it's so well executed, why on earth didn't I think of that?" I thought that if one in 100 people reacts to this as I've just reacted then this will fly.'
Davies was so taken by the product that he immediately wanted a piece of the action. At the time he was working as a trader for JP Morgan but was already working on his exit strategy: 'I was in the mindset that I wanted to get out of JP Morgan. I had gone from being hero to zero as a result of the Russia crisis (when Russia defaulted on its bond repayments). The markets gapped out and I held bonds that absolutely collapsed in value. My boss at the time told me that they wouldn't pay my bonus, when just six months earlier he had told me what a great job I was doing. I resolved that day I was going to quit, but I wasn't going to quit for nothing; so I spent the rest of the year thinking of a good exit, and Betfair eventually became that good exit.'
Unbeknown to Davies at the time, the NASDAQ had peaked ten days after his resignation, and within months the dot-com bubble had burst. His former work colleagues politely taunted him over his decision to jump ship, sending mock P45s in the post, while his future father-in-law assumed he was completely barking bearing in mind that Davies was getting married six months later. But they launched the product successfully, and despite a period of technological uncertainty 18 months in, they completed a merger with rival firm Flutter in December 2001. The deal signalled a real upturn for the fledgling venture.
'We'd been watching with great excitement as our matched bet volume ticked up with every week that passed in the first year or so, but we probably didn't think we were home and dry until the Flutter merger completed,' he says. 'As we went into 2002 we started to appear on other people's radars. I appeared on The Morning Line from Lingfield representing the firm alongside John Brown from William Hill. It was the first time that we went head-to-head on the legality of our system. John came on and said that we "drove a cart and horse through legislation". We explained why we didn't and a lot of kind people, after watching the programme, said it was very much a case of old against new and had put us on the map.'
Of developing the Betfair brand, Davies is distinctly modest about their approach. 'It was really just a case of establishing our story and telling it to people,' he says. 'When we explained it to them we ensured that they understood it and were prepared to get up and tell people themselves why it was good news. People look at PR as "how can we spin this story?" For me it's not about that at all, it's about getting third parties to tell your story for you – so by definition you have to get your story right in the first place.'
Quite clearly the Betfair model revolutionised betting but continued to raise questions over its legality from all quarters. The most obvious basic argument was whether individuals that laid horses on the betting exchanges were effectively acting as unlicensed bookmakers and therefore unlawfully foregoing costs such as the horse racing Levy. It is this argument which followed Davies throughout his tenure and continues to circle Betfair to this day following the Levy Board's recent announcement of a betting exchange consultation.
Davies' viewpoint remains unchanged. 'There isn't a new argument and I don't believe that the world has changed since we first won this debate with government,' he says. 'A lot of people express a view that reflects perception as opposed to a view that reflects the reality of what is happening. People will talk about professional punters and then say bookmakers – well, they're two different things. If what we're trying to do here is tax, licence or levy people that make money betting on horse racing then we should say so, because that's a totally different thing from claiming that people can operate as bookmakers on Betfair alone.
'The reason [racing's leaders] don't make that argument is because no-one else is tracking who's making money. So what they're effectively saying is that there are people making money out there and Betfair know who they are so we would like to get Betfair's customers. It seems a bit unfair to me that you can single out one operator by virtue of it having a better audit of its customers' positions. If they wanted to tax across the board then I wouldn't argue with it. But the issue is consistency.'
The BHA's torrent of attacks on the betting exchange over who should contribute and what should be contributed have incensed Betfair to the extent that they've withdrawn their voluntary Levy contribution obtained from their international business. However, the exchange will continue to invest the money in the sport of horse racing by simply skirting the Levy mechanism for their voluntary contributions. Davies believes this is the only way forward.
'We started the business with a fundamental belief that we would support horse racing and hopefully that will continue,' he says. 'But supporting horse racing while just getting hit on the head by the people that run horse racing is ridiculous. No bookmaker in the world, before us, was paying Levy on business that they got internationally. We made the decision of taking ten per cent of it and giving it to racing. We did that by sending a cheque for £1.5 million, only to receive a one-line letter thanking us for the cheque. Then throughout the year we've had nothing but, "Betfair do this wrong, Betfair do that wrong, etc".'
He continues: 'We wanted to keep on supporting racing, but we didn't want to fund a campaign by its leaders against us. So I spent six months speaking to racecourses and other racing stakeholders asking for their vision for racing in 2020 and chatting about how a pot of money might help achieve that vision. If money that was "international levy" can help fund that, it will in my view be a better use of the cash than having it disappear into a pool or being spent on legal fees aimed at disrupting Betfair.'
Much of Davies' PR and regulatory work has focused on positioning of the firm in relation to competition, sports governing bodies or political bodies. However, September 2008 brought about a feeling of unrest from Betfair's own consumers with the introduction of the much-maligned premium charge. The charge (20 per cent of gross profits) was introduced to target those bettors whose winnings were deemed to be disproportionately high when compared to the amount of commission they paid. Davies admits this was a difficult period.
'We took a lot of flack over the premium charge,' he says. 'I can understand why some of our customers were unhappy but the reality is that it affected 0.5 per cent of our customer base. A lot of people who would never get hit by it got very focused at the time on the fact that we had somehow taken away the dream of being able to win, and people still collar me about it today.'
Towards the end of his tenure, Davies found that his role within Betfair was changing and there were fewer opportunities for him in areas in which he felt he had expertise. 'I was more limited in what I could do for Betfair recently. I think I've got a broader range of stuff to offer and my real expertise is media and what makes a story and why. My recent role at Betfair has been limited to regulation, and I said it wasn't as easy to do that narrower job as effectively as I had without being able to use some of the tools I had with a wider role, and it would probably be easier to advise and advocate external to the company than internal to it.
'I've agreed to work a certain number of days per month advising them if they want advice and potentially advocating if they want me to advocate. I'm pleased that they still think I have a role to play and they've been very supportive of my decision to go and do something new.'
A month on from his Betfair departure and Davies' diary is bulging with appointments, many seeking public relations expertise under his new banner of Camberton. The new venture will provide Davies with the opportunity of branching out beyond the betting industry, something he's looking forward to.
'I don't want to pigeonhole myself with my new company,' he says. 'The corporate affairs role at Betfair was quite wide in that it went from event management at one end to government relations at the other with media relations, training and strategic communications in the middle. My aim is to offer the full suite as that makes it a compelling proposition. Camberton will work with companies who are interested in their long-term reputation and the management of their reputation.'
Clients are unlikely to be in short supply given Davies' work establishing the Betfair product and its brand, an achievement that has not gone unnoticed and continues to be respected by his fiercest rivals.
Since its arrival in June 2000 Betfair has expanded at an unequivocal rate and continues to do so. What that means for the industry going forward, who knows, but Davies is clear of Betfair's contribution thus far: 'I think the industry is perceived much better than it was,' he says. 'It is increasingly a leisure industry and people don't look at it with the same slightly negative view that they did ten years ago. We can't solely take the credit for that but what we did when we came along was to revolutionise betting. The industry as a whole has significantly upped its game and I think Betfair was a catalyst for that.'
