As the horses came around the final turn of Tuesday’s Melbourne Cup with favourite Deauville Legend poised to take the lead, Matthew Tripp would have been feeling ill.
Tripp is the founder of online betting start-up Betr and had offered odds of 100 to 1 on every Melbourne Cuprunner – meaning it would pay gamblers 100 times as much as they bet if their horse won.
At least 300,000 gamblers had responded, downloading the app and selecting their horse at these extraordinary odds. Bets were limited to one per person and A$10 each, which would still amount to A$1000 for any winning gambler.
So many gamblers had piled on to the short-priced favourite Deauville Legend that Betr stood to lose between A$30 million and A$50m if it won.
As it happened, outsider Gold Trip took the lead and won the race, saving Betr and Tripp from disaster. About 16,000 gamblers had selected Gold Trip, meaning a payout of A$16m, but it was a lot better than the alternative.
In the month leading up to the Cup, Betr had aggressively promoted its 100 to 1 offer, with gamblers responding enthusiastically and jumping onto social media to spread the words about the extraordinary offer.
(In fact, Betr is subject to a Liquor & Gaming NSW inquiry after the watchdog issued the bookmaker a show-cause notice after the company ran advertisements for its promotion in News Corp’s tabloid newspapers, which the regulator believed could be inducing people to gamble. The company is 30 per cent owned by Rupert Murdoch’s News Corp).
It had stopped taking bets on favourites Deauville Legend and Loft a few days before the race and had laid off about A$10m worth of bets on Deauville Legend with gaming giant Tabcorp. (When bookmakers are holding large bets they will sometimes place some of those bets with rival bookmakers to limit their potential losses.)
On Monday night before the race Betr tried another tack and offered gamblers who had backed Deauville Legend a A$150 voucher with the company if they rescinded their bets. Most refused.
Even with those precautions, Tripp would have been very nervous when the starting gates opened at 3pm on Tuesday.
As it happened Tripp’s gamble paid off handsomely.
It has generated enormous free publicity, as it became a hot topic on social media and news stories were written about the offer. There would hardly be any Australian with even the slightest interest in gambling or sports wouldn’t have been aware of the start-up only a few weeks old – no mean feat in Australia’s very crowded online gambling marketplace.
But more importantly, 300,000 people had downloaded the app.
You can bet that the promotion wasn’t just some crazy idea thought up by the company on a whim. Tripp is an experienced wagering company executive and chairman and part owner of the Melbourne Storm rugby league team.
The executives are sure to have carried out extensive mathematical modelling ahead of the promotion to determine how many of the winning gamblers would take their A$1000 and run and how many of the winners and losers would continue to use the app.
They would also have good insights into the lifetime value of a customers, how much they’re likely to lose over the coming years against the cost of customer acquisition.
Most of the wagering apps make it very easy to put money in, but a lot more bothersome to get money out. And when customers delay withdrawing their winnings and leave the case in their wagering account, they’re more likely to dip into it and keep on gambling.
It would be a very safe bet indeed to assume that Betr will come out ahead.
Rate pain
Thirty minutes before the Melbourne Cup got underway on Tuesday, the Reserve Bank of Australia lifted interest rates.
It was the seventh interest rate rise in a row and there are likely more to come with signs that the rate rises are yet to bite the consumer and start to bring down inflation. Retail sales rose strongly in September, the seventh consecutive monthly rise, and consumers are continuing to increase their savings.
Philip Lowe, Governor of the Reserve Bank of Australia. Photo / File
Although there is more to do, RBA governor Philip Lowe is taking a cautious approach. Tuesday’s rate hike was the second quarter of a percentage hike in a row, following four 50 basis point rises in the previous months.
It’s a sign that Lowe is slowing down the rate hikes to give them a chance to take effect and to give him a chance to assess their impact on the economy.
The approach is a stark contrast to US Federal Reserve chair Jerome Powell, who seems determined to beat the US economy into submission with successive 75 basis point rate rises.
As such, Australia looks to be in a better position to avoid a recession than the US.
