Betfair Acquires Poker Room Technology

1 November 2005

Online gambling giant Betfair dropped a bomb Monday by announcing the purchase of Malta-based poker platform Pokerchamps and Denmark-based Aglet Technologies, the company that set up the Poker Champs site. With the move, the British group is on its way to becoming a self-sustaining force in the Internet gaming industry.

Antonia Sharpe, senior communications executive at Betfair, said the deal had been in the works since spring.

"What we like about Poker Champs is that it's got a fairly small legacy," Sharpe said. "What we think is really exciting is that we're buying an overseas poker site that's got scalable technology; it's user-friendly; it's slick, it's fast and it's based in Malta, where we also have a license, so that's good."

Betfair's new software development division will operate under the name Betfair Development Denmark. It will inherit eight developers who are currently working for Aglet, and the business will remain in Denmark.

Plans for full integration are not yet concrete, but the recent extension of Betfair's license with CryptoLogic (its current poker software supplier) through June 2006 gives the company plenty of time to move into this next phase.

Betfair CEO Steve Ives said the new Betfair poker platform will be launched before January 2007.

"In the meantime," Ives said, "there is much games- and poker-related work that our Danish development team will be working on."

Betfair, which controls around 90 percent of the worldwide betting exchange market, has long expressed its desire to boost its market share in the poker space, and acquiring a proprietary software solution was a necessary first step.

"We already have a significant poker business which has one of the leading market shares of the non-U.S. market." Ives said. "And we will seek to continue building this franchise with an emphasis on innovative product development in terms of both games and poker."

Prior to the Poker Champs acquisition Betfair developed and launched an exchange poker game that enables participants to play automated poker hands against each other in four-round games of Texas Hold'Em. In addition giving Betfair a new product, the unique game, which launched in mid October, should enable the company to boost its player base in preparation for the split with CryptoLogic.

"[The exchange poker site] has been very successful for us so far, and we plan to launch more games in this category," Ives said. "There is a significant overlap between betting exchange users and poker players and our success with Betfair Poker (whose players are wholly owned by us) is testament to this."

David Shore, software and services analyst for Desjardins Securities, questions whether Betfair is up to the challenge of flying solo in the poker space.

"Owning their own platform means they lose the liquidity of the rest of the CryptoLogic platform," Shore said. "And then they're going to try to build that (customer base) up themselves? It's going to be tough."

Betfair is stepping into a huge market with big contenders, such as Party Poker and Sporting Bet, Shore said, and might have a hard time keeping up with them.

"Just because they have a platform and a product," he said, "doesn't make them a top-five poker site."

Betfair's executive team is nevertheless thrilled to be entering this new territory and feeling very much up to the challenge.

"CryptoLogic has been a fantastic partner to get us going in poker," Sharpe said, "but we've stated recently we want to have it in-house. All of our sports software is being developed in-house. We have 120 engineers, and now we're very lucky to have another eight in Denmark to focus on the game software."

Now Betfair turns its attention to Australia, where the company will learn in a matter of days (possibly as early as Thursday) whether it will receive a license to operate out of Tasmania. The granting of a license would give Betfair a foothold in Australia, creating yet another opportunity for the company to establish itself in a new market.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.