How I went from punting PCs to betting a quarter billion on Betfair

But failed to convince Warren Buffett...

Webb won't say how much profit he makes on his Betfair trading, but stresses that each trade is only netting tenths of a per cent profit, and the line between making money and losing it is very fine. But he himself suggests £40,000 a month wouldn't be unreasonable for some top Betfair traders. Another reason to be cagey around money is that gambling profits aren't taxable in the UK – but profits from trading activity can be.

Webb is also behind a Betfair trading product called BetAngel and says he doesn't want anyone thinking that using this is route to getting rich quick. “You have to work at it,” he says.

BetAngel acts as a Bloomberg-type information screen for the betting exchange with a touch of the eBay sniping technology, says Webb. “It's a trading tool and allows you to place orders quickly. We borrowed ideas and technology from financial markets, and it allows 'fill kill', stop losses, and charting.”

Webb funds its development through subscriptions. He also runs courses in Betfair trading, which engenders the classic get-rich-quick suspicion of "Why tell anyone else, if you're making so much money?", he says.

Webb says he just enjoys meeting people and talking about his business. “I'm a social person and trading is a lonely business. When I first started doing courses, they came off the back of the software. I didn't think trading would last very long – I thought I had three or four years in it – so software and training was a bit of an insurance policy.”

Gambling and the gaming business is afforded quite a low status by many people (Reg readers among them), and at the heart of Webb talking up his business is that he wants his performance to be recognised.

“Having worked so hard and so long on this, I just want some legitimacy added to it,” he says. “Spread betting is considered normal and what we do here is exactly the same. Rather than the price of oil to go from here to there, we're looking on the price of Yojimbo [a horse racing on the day of the interview] to go from here to there."

In 2006, Webb did some financial shows with Betfair. The betting exchange's name wasn't proving a draw and Webb says he only got any attention when he started putting up financial-style market charts and explaining how he would trade the position. “The next slide would say the 14.10pm at Wolverhampton,” he says.

“I consistently get people saying what I do is not possible. I've been doing it for 10 years and still get that.”

Webb is also a financial investor and a big fan and shareholder of billionaire Warren Buffett's Berkshire Hathaway business (a single share of which is currently priced at $120,000). The backbone of Buffett's business is insurance. At one shareholder get-together, Webb asked Buffett how he reconciled his anti-gambling views with his risk-related business.

“When I look at the insurance industry I see an industry based on probabilities and people not knowing those true probabilities. Money is being made for the house in the same way I see it being made in the gambling industry,” said Webb.

“Gambling involves creating risk that doesn't need to be created,” replied Buffett. “If you want to go out and gamble on a where little ball is going to fall on a wheel that's revolving, that's a created risk. You can watch a football game without betting on it, but you can't live in a house on the Florida coast without having a risk that your entire investment can disappear. But I hope that you're right and that the house wins in both cases.”

Webb does have his battles with the Betfair house and thinks he should be treated better by them than he is. He doesn't have an account manager, which he thinks strange, and the business has introduced premium charges for customers placing or editing more than 1,000 bets an hour, or making large numbers of data requests within the same second. Which is exactly what he does.

“Betfair's argument is that people like me, who make money consistently, should help fund acquisition of new customers,” says Webb. “But I'll put through millions a week, all at my own risk.”

The newly floated business has changed a lot since he first joined. “It's much more like a traditional bookmakers now. The Utopian dream has faded,” he says wistfully. A bit like the channel perhaps?®