Platform competition: Betfair and the UK market for sports betting

• Date: 01 January 2019
• Author: Neil Campbell,Ramon Casadesus‐Masanell
• Published date: 01 January 2019
• DOI: http://doi.org/10.1111/jems.12310

Received: 20 August 2018

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Accepted: 20 August 2018

DOI: 10.1111/jems.12310

Platform competition: Betfair and the UK market for

sports betting

Ramon Casadesus‐Masanell

1

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Neil Campbell

2

1

Strategy Unit, Harvard Business School,

Boston, Massachusetts

2

Group Director of Strategy and

Performance, Majestic Wine PLC,

Watford, UK

Correspondence

Ramon Casadesus‐Masanell, Morgan Hall

213, Harvard Business School, Soldiers

Field, Boston, MA 02163.

Email: casadesus@gmail.com

Funding information

HBS Division of Research and Faculty

Development

Abstract

We examine two episodes of strategic interaction in the UK betting industry:

(a) Betfair (an entrant multisided platform, or MSP) versus Flutter (also an

MSP), and (b) Betfair versus traditional bookmakers. We find that although

Betfair was an underfunded second mover in the betting exchange space, it

was able to attract punters at a much faster rate than the better‐funded

first mover, Flutter. Moreover, while Betfair and traditional bookmakers

competed aggressively for market share, they also developed a highly

complementary relationship that favored all parties. We discuss implications

for research in the economics and management of MSPs. Specifically, we

argue that the literature would benefit from work that endogenizes platform

design and that considers the possible competitive and cooperative

interactions between the business models of traditional incumbents and

those of potential innovative MSP entrants.

KEYWORDS

betting, competing business models, complements, co‐opetition, entry, network effects,

platform design

JEL CLASSIFICATION

D21, D43, L13, L83, L86

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INTRODUCTION

In the early 2000s, online betting exchanges entered the British market for sports betting. These exchanges had adopted

a new relationship to their customers—rather than laying bets for punters, like traditional bookmakers, they provided a

platform to match individuals willing to lay and back the same outcome.

1

Betfair was the firm most successful at

implementing this business model innovation. Despite competition from better‐funded rival exchanges, such as Flutter,

and political attacks from traditional bookmakers, such as Ladbrokes or William Hill, Betfair managed to create and

capture substantial value, turning a handsome profit.

We analyze two episodes of platform competition in Betfair’s history: (a) new platform (Betfair) versus new platform

(Flutter), and (b) new platform (Betfair) versus established one‐sided business (traditional bookmakers, such as

Ladbrokes or William Hill) and find two surprising results. First, because betting exchanges exhibit strong network

effects, we would expect that a first mover would become the dominant betting platform. However, although Flutter

entered the market first and was better funded, Betfair managed to quickly become the betting exchange of choice and

ended up cornering the market with a market share of nearly 90%.

J Econ Manage Strat. 2019;28:29–40. wileyonlinelibrary.com/journal/jems © 2019 Wiley Periodicals, Inc.

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ORIGINAL ARTICLE