Most Web sites started in the late 1990s have either gone public, been acquired or are defunct. Wired has a rather harsh cover story on one of the most famous ones that isn’t, Craigslist. But there’s another one that could rile up even more attorneys generals and socially conservative figureheads: Betfair.
The London-based online gambling company is seldom written about or mentioned in the U.S. despite its gargantuan size. It employs 1,800 people around the world, generates more than $500 million in annual revenues and is profitable. Oh, and those revenues have grown nearly 30% in the last year. What world-wide recession?
Of course, there’s a reason we rarely hear about Betfair: Its core betting exchange is illegal in the United States. In fact, Betfair has gotten to this size despite being locked out of the three of the largest gambling markets in the world: the U.S., China and Japan. That first one is slowly changing.
In January Betfair paid $50 million for U.S.-based TV Games Network. TVG produces 17-24 hours of programming per day all about betting on horse racing. On the weekends, that programming reaches into 72 million homes. TVG’s site also takes bets. A lot of bets. It racked up more than $500 million in wagers last year.
Wait, what? That’s right, apparently betting on the ponies is one of the only legal forms of online gambling in the United States, although TVG only operates in 16 states. Since the acquisition, Betfair has moved fast to capitalize on this legal niche, already adding 30% more races and tracks around the United States. Last Friday, it offered $400,000 to sponsor a New York race between the two of the most successful female runners in horse racing history, Rachel Alexandra and Zenyatta.
While the TV studio is based in Southern California, Betfair’s U.S. operations are now headquartered out of San Francisco, and the CEO David Yu—who holds degrees from Stanford and University of California at Berkeley— is looking to capitalize on Silicon Valley’s tech talent. He’s looking to hire at least 30-50 people in the next year, not only to support TVG’s operations, but to help develop the entire company’s betting platform. Betfair is already a remarkably technology-centric company, handling the scale of loading billions of pages a day and matching and processing bets within seconds. It employs 70 people who watch for fraud and money laundering and takes payments via 20 different payment systems. It employs more than 400 engineers.
To be sure, horse racing is just a toe into the lucrative $100 billion-plus U.S. sports betting market, and Betfair isn’t going to push it. The company is well aware that legislation is making the rounds that could legalize online poker, and while it doesn’t want to be one of those lobbying for changes, be sure the company will be ready to throw a ton of money at the U.S. should the laws change.