Weaving winners on the web

IF you have an important phone call to make at Royal Ascot this week, make it while the horses are running. If this year's race week in Cheltenham was any guide, the mobile networks will be jammed between races as punters rush to place bets.

It is a symbol of the revolution taking place in bookmaking. Although Ascot will see the usual scrum at the rails bookies, a growing number of gamblers choose to bet by phone with firms where they have an account. That way they can bet and collect any winnings without queuing, or indeed without leaving the bar.

Wally Pyrah at spread-betting leader Sporting Index said: 'The mobile phone, along with the internet and interactive TV, have transformed betting.'

He says they have brought in gamblers who had never before set foot in a betting shop. People can now bet on anything, anywhere - a football game watched in a pub, a Test match while sipping Pimm's in the grandstand or the US Open golf championship from their living rooms at 2am.

New technology has broken down barriers into an industry dominated for decades by a few big betting shop chains. And there is big money to be made for the new gambling tycoons.

Shares in Irish bookie Paddy Power have doubled since floating two years ago, valuing the 15-year-old firm at £260m, and co-founder David Power's stake at £19m. The group's phone-based betting volumes are rising 60% year-on-year, and online betting is rising 150%. It broke into the UK market nearly two years ago, thanks to new technology. Sales have nearly doubled since 2000, to £485m last year.

Index is another operation that has coined it from the betting revolution. Launched 11 years ago, it invented spread betting on sports. In the past three years, fuelled by the internet, customer numbers have doubled, and sales quadrupled to £64m. Its chairman, Compton Hellyer, was among the big beneficiaries last year in a management buyout of the firm for a thumping £53m, backed by Duke Street Capital.

The fabulously wealthy Michael Spencer has been one of the most successful new kids on the block. The bespectacled multi-millionaire hit the headlines this week after picking up £7m in pay and dividends from his financial group, ICAP - and making 27 of his colleagues into millionaires.

He is also part-owner of spread betting firm City Index, and until recently of online fixed odds bookmaker Blue Square. He sold the latter in January to Rank for £65m, personally landing £27m. He said: 'Blue Square is totally web-based. It would have been impossible to create it without the internet revolution.'

Robin Chhabra, analyst at Evolution Beeson Gregory, said web-based betting is growing at more than 30% a year in Britain.

But the traditional bookies are fighting back. Ladbrokes, the world's biggest bookmaker and part of Hilton Group, says it spent just £20m setting up its online operation two years ago. Last year it made £11m operating profits, up 450%.

The big firms have the money, the know-how and the contacts to fight their corner. The technology revolution forced the Government to swap betting duty for a profits tax, to tempt offshore operations back to Britain. The tax change has boosted betting across the board.

The industry has grown so fast that the new and established players have been able to win business simultaneously. But it cannot last. Eventually the industry will settle down, and the strong will buy - or crush - the rest. But for now, a state of permanent revolution seems to reign.

A ten-year veteran of spread betting group IG Index, who had done very well on his share options in the float, was recently bemoaning his fate. He wailed: 'I had the chance to put £50,000 into Betfair when it was first set up. I didn't take it. One of my mates did and now he's worth a fortune.'

Dream becomes reality for Black

IT'S going to be a good Royal Ascot for Andrew Black - even though his sizeable, slightly Bunterish figure will not be enjoying a picnic there until Friday.

For the rest of the week, he will be locked away in the west London headquarters of Betfair, the company he founded three years ago, which he claims is the world's most successful online betting exchange.

It enables clients either to place a bet or to 'lay' one - in other words, to act like a traditional bookmaker, offering odds to fellow punters. Formed with backing of £1m from family, friends and contacts, Black's firm handles £2.6bn a year of bets on its website. And he is still only 40.

His success would have stunned and probably appalled his grandfather, Sir Cyril Black, a Tory MP, lifelong non-smoking teetotaller, sworn enemy of gambling and friend of Mary Whitehouse. Each Christmas, he would inspect his 15 grandchildren's school reports and reward them accordingly. Nearly all received £1 - Andrew got 10p.

This week, Betfair will match £20m on Ascot alone, taking commission of between 2% and 5% on each bet. Other business will take the week's total figure to more than £50m.

There was little hint of business acumen in Black's early adulthood. He was ejected from Exeter University for failing a maths exam and has twice been sacked from jobs.

The idea for Betfair was conceived five years ago while daydreaming in bed in a Cotswold farmhouse. 'I knew immediately it was a barnstormer,' he said.

Two years later, in June 2000, Black and his chief executive, Ed Wray, a 34-year-old former City trader, launched the company. A year later, they took over US rival flutter.com.

Black, who lives with wife Jane and their two daughters in Wimbledon, south-west London, was encouraged in his business ambitions by his late father, who died from an infection after an operation. Although his father did not live to see Betfair launched, he had seen the prototype. Black said: 'All he said was: 'Go on, do it'.'

That tragedy followed an earlier one in 1986, when Black's younger brother was fatally crippled at 19 by a brain infection. Black nursed him for the remaining two years of his life.

And when, at one point in the early days, there was enough cash to survive only three more months, Black kept his nerve.

It is not known how much his 17% stake in Betfair is worth because the company is privately owned. There is talk of a stock market float next year, valuing the business at up to £1bn.

But without a longer track record - and published accounts - some in the City remain wary of the hype. Betfair is likely to face tougher challenges ahead. So far, though, it looks like Black's bet is paying off.

All change for the Tote

NOT even the venerable Tote can avoid the winds of change. Steps to privatise it are expected in the next Queen's Speech, bringing the biggest upheaval in the bookmaker's 70-plus year history.

Change was long resisted under its former chairman, the late Lord Wyatt. Before the Government can privatise the Tote, it must first nationalise it.

The bookmaker said: ' Technically, no one really owns us. We're a sort of quango - the main board reports to the Government.'

The Tote was set up by the State in the late 1920s to provide extra competition for bookmakers, and to support horse-racing with a slice of its profits.

Its core business is the exclusive licence for on-course pool betting. Veteran punters argue it usually offers the best value bets for long odds outsiders.

The Government will claim ownership by Act of Parliament. It is then expected to sell the bookmaker to a trust backed by the British Horseracing Board.

Rival bookies claim the Tote will become an industry monopoly. Others believe it could fetch up to £200m in an open sale.

It will be a significant new independent player. Sales last year rose 26% to £643m. Despite accusations that it is hidebound, it managed £148m in telephone sales.