This week we spend 10 minutes with Tim Levene, the Commercial Director for the number one betting exchange in the world, Betfair. This UK-based company is poised to not only continue its domination of the betting exchange market, but challenge traditional bookmaking worldwide. With legislative challenges being lobbed their way by conventional bookmakers (notably the big Euro-focused shops William Hill, Coral and Ladbrokes) the betting exchange model has been receiving a fair amount of attention the last couple of years, as it shakes up the wagering industry. We caught up with Tim while he was attending a gaming function in South East Asia for a 10-minuter on Betfair.

Winner's Edge (WE): Hi Tim, first question for you is - what is Betfair?
Tim Levene (TL): The simple definition is Betfair is the leading company in the betting exchange marketplace.

WE: We'll talk specifically about betting exchanges a little further on, but why don't you give us a brief history on the company.
TL: Betfair was launched in June of 2000 by Andrew Black and Edward Wray. It was Andrew's brainchild, a person with a very interesting background, ranging from being a professional gambler, to working for the UK government's GCHQ on a secret project of sorts. While Andrew brought the concept and the product knowledge, Ed brought the business background to the partnership.

WE: Where did it go from there?
TL: Meanwhile, as this was happening, I founded Flutter.com, an exchange company that would compete with Betfair. Flutter raised $25 million pounds in the spring of 2000, seriously impacting on Betfair's ability to go out and raise capital. Both companies went live at basically the same time. It became clear early on that Betfair's execution and model was superior to Flutter's. We made a decision to parallel what Betfair was offering and their business model. The two companies dominated the exchange market in the UK.

WE: At some point the two companies got together.
TL: We did. A merger took place in 2001. It was the right decision. Immediately the merged company grew 25% overnight, above what the two combined companies were previously doing.

WE: Where is the company at now?
TL: We've seen a lot of growth since the merger. Our active client base is at 100,000. The last numbers we released, which was almost a year ago, we had over $50 million pounds a week in matched wagers. On our peak days, we are seeing over one million individual wagers. Tens of thousands of simultaneous wagers and transactions are hitting the system all at the same time. Not even the Nasdaq or the London Stock Exchange carry the load we do during peak times.

WE: What gets most of the attention from your clients?
TL: Horse racing and soccer account for between 70-80% of our turnover. We get a considerable amount of action on major sporting events, such as Wimbledon and the other tennis majors, as well as the golf majors.

WE: What about North American football?
TL: We're seeing a significant increase in this area. Last year for Super Bowl over $5 million was traded - and this is all from international customers (we don't have US clients). There was over $1 million traded on the Monday nighter last week

WE: Maybe this is a good time to give an overview of the exchange, how it works and the differences between the usual player-book arrangement?
TL: Sure. The beauty of a sports exchange is the player is able to both offer a price, or take a price. When you back a bet it is a wager in the conventional way that players are used to; you're betting on a team or person to win. When you lay a bet, you are wagering against the team or individual winning (writer's note: this is an example I have taken from the Betfair website to explain "laying" a bet - For example, if you're betting in a market on which team is going to win the Premiership and you lay Man Utd, you offer odds to other punters who wish to back Man Utd. If Man Utd don't win, then you pick up the backer's stake. If Man Utd win, then you pay out. This is what bookmakers traditionally do.)

TL: All the bets on our system have been placed there by our users. Bets are matched between people with opposing views.

WE: So a player can ask for the price they want?
TL: Exactly. If you want better odds on the Monday night football game, you would go on the website and set the price you are looking for. That price would then be matched by another customer and you end up with the price you want. Across the board this gives the bettor 20% to 30% better value than the traditional bookmakers.

WE: What if your price doesn't attract attention?
TL: Liquidity is the key to this model. You must have the customers to make this work. We are fortunate to have the traffic and volume that result in offers being matched. We have the necessary liquidity.

WE: How do you make your revenue?
TL: We charge a small commission, but only charge that commission on profits. So for example, if you made a handful of wagers throughout a Sunday of NFL football and at the end of the day, you lost $500.00 worth of bets, but won $600.00 for a net profit of $100.00, we only receive a commission on the $100.00 profit. (Note: You can see Betfair's sliding commission chart at their website www.betfair.com)

WE: 10 minutes goes fast; thanks Tim, and good luck to you and Betfair in the future.
TL: Thank you and all the best to you and your readers.

To read more about Betfair, or try the exchange out, you can visit them at www.betfair.com