Betfair Case Study
Thanks to Adam for the pointer to this interesting Case Study on Betfair over at Startup Review.
They identify several key success factors:
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Initial product designed for niche (sophisticated gamblers), not mainstream consumer
Tremendous cost advantage over traditional methods
Took steps to develop high liquidity marketplaces
And summarize nicely:
Betfair’s success, particularly relative to their better-funded competitor, Flutter, spurs one topic worthy of further discussion. I find it interesting that Flutter’s initial product was geared towards a mainstream audience, while Betfair was serving a smaller niche of sophisticated gamblers. The VC money bet on the mainstream play (Flutter), but as it turned out, starting with the niche of sophisticated gamblers was the right way to approach the market. In hindsight this makes sense, as targeting the early adopters who are more likely to understand the value proposition feels like a tighter go-to-market strategy. Flutter spent a lot of money acquiring mainstream consumers that didn’t adopt the product the same way that Betfair users did. Is the Betfair approach the right way to launch a consumer Internet service, i.e. build the product to early adopters rather than the mainstream consumer?
As I have been thinking about the common themes across successful Internet companies, Betfair encompasses many of them. First, they offered a low cost alternative to a previously high cost service (bookmakers). Second, they empowered some users to supplement or make a living using their service. Third, they targeted a niche that turned out to be much larger than most people expected. Fourth, they were able to jumpstart user acquisition through a distribution partnership. Fifth, they had a story that lent itself well to mainstream PR. Lots of ingredients at play!
As many of you may know or have guessed, I have followed Betfair from the start and have been inspired by many of their successes and in particular Ed, Bert and David’s transformative application of technology to create a new business model in a traditional and hidebound sector. I am especially interested in the many parallels can be drawn with financial markets (as articulated in AmazonBay and dozens of other posts on this site.) For any budding entrepreneur, it is certainly worth spending the five minutes or so to read the whole case study (and if possible spending several hours studying their site.)
