James Moore: New boss Corcoran is facing long odds to turn Betfair into a real winner
Outlook Welcome to the toughest job in gambling, Breon Corcoran. That might seem like a rather strange thing to say given yesterday's sprightly trading statement from Betfair, where Mr Corcoran will soon take over as chief executive.
After all, Betfair has dug out a winner in the smartphone, a device tailor-made for gambling however much some of the more po-faced (read American) technology firms might wince. Smartphone gambling helped to charge up the company's numbers yesterday, as it did for Paddy Power (Mr Corcoran's previous employer) on Monday.
But the exchange was upbeat in general. Stephen Morana, the interim chief executive, has steadied a ship that looked to be wobbling.
The shares have been showing some signs of life too, having risen by nearly 50 per cent from their nadir last August.
But they are still a long way from the £13 they were floated at, and it would take a courageous punter to back them to reach that level anytime soon. There are storm clouds on the horizon which could more easily send them into a tailspin.
The first is regulation. Investec's gambling guru Paul Leyland notes that as much as 45 per cent of the exchange's core revenues come from unregulated jurisdictions.
Change is coming to a number of those countries, including Germany, Spain and Greece. The controversy that dogged Betfair in its early days – when the bookies cried foul against the grubby City types who founded it and broke their monopoly by enabling punters to lay horses to lose like they do – is no longer an issue. At least in this country. But the company might need some smart lobbyists to plead its case on the continent.
The other problem is the cost base. The aforementioned Paddy Power should generate revenues of about €280m (£234m) from its remote gaming operations by the end of its financial year, through the efforts of around 650 staff who used to be led by Mr Corcoran.
Betfair, by contrast, is set to bring in about £350m. To get that it employs 2,600 people. It isn't pleasant to be raising questions about anyone's job right now. But a company like Betfair cannot escape the cold business logic of those numbers. Right now, Paddy Power looks a much more efficient operation. And its shares are a bargain compared to the lofty multiple Betfair enjoys.
Mr Corcoran will be aware of this. But if he's smart he will also be aware that if he goes in as an axe man he'll be asking for trouble. During its best years Betfair positively fizzed with innovation. Some of its ideas were better than others, but at least it was willing to try.
If half the workforce disappears overnight, its luxurious Hammersmith offices will feel like a well-appointed morgue. The spark will be extinguished. Perhaps for good.
Mr Corcoran's challenge is to re-establish some of the zing that made Betfair such an exciting proposition when it burst onto the scene, while at the same time addressing that cost base.
If he can pull off the trick, they'll be writing MBA theses about him and he'll be one of the few chief executives who are worth their money.
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