Betfair Looks to Social and Mobile for New Gambling Horizons

Despite its $2 billion market cap, Betfair isn’t a widely known name locally. The company’s main gambling business is illegal in the United States, and gained little notoriety from its minority-share investment in Kabam, back when that company was called Watercooler and built a wider range of apps. But Betfair is coming to Silicon Valley anyway, drawn by new technologies and the possibility of changed regulation.

Betfair’s big business is an online betting exchange, meaning that gamblers bet directly against one another, with its focus on sports and events like horse racing. It’s a hugely profitable business, with each customer sending about $600 a year to the company through betting commissions.

One reason it’s setting up shop locally is an upcoming change in California law. Starting in May 2012, Californians will be legally allowed to bet on horse races, thanks to a recent change in law.

It’s not clear exactly how social game developers could take advantage of this new law, or how Betfair could use social for its new US subsidiary. But CEO David Yu says he’s looking for partnerships to help figure it out. “Ideally we could make social products for territories where gambling is not legal,” Yu told us, giving consumer education on betting terminology and gameplay as a possible use case for an app.

Other states could add carve-outs for horse racing, or the Federal government could decided to re-admit online gambling companies to the US — a measure that is getting a push in the current lame-duck session of Congress. If anything passes, it makes sense for BetFair to be ready.

The company also plans to hire from the social game industry, and is looking for mobile app developers to build apps for other countries on its open platform.

If new gambling laws did pass in the US, the social game industry could be in for a shock; some industry watchers have opined that social games wouldn’t be nearly as successful if online gambling were allowed. Zynga, with its popular Zynga Poker, could probably cash in, while others might suffer. But passage of a new bill isn’t terribly likely for now, so Betfair will be just one more big fish in the pool.