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Ukrainian team from Lviv behind Polish Betegy (now backed by a German investor) has invented a pretty reliable algorithm which can predict outcome of the national league football games with 80 percent certainty. Alex Kornilov who ran then a web agency just a few months ago from its headquarters in Warsaw, tested the algorithms by putting 50 Euros on a betting account. The value of the account grew to 360 Euros within two months.

How “Back to the Future”, I thought.

German investor BMP must have thought the same, as it promptly bought 30 percent equity in Betegy for a 6-digit sum, closing the deal within about a month of the initial contact. Stefan Bielau, Polish business angel, the mobile expert and the co-founder of Zapstreak has also backed the team.

Yet, instead of putting the investor money on the betting account and getting rich quietly, Kornilov and his team decided to concentrate on what they do best, and that is to build the web service. So Betegy was formed to offer gaming tips for amateur betters online at an affordable 30 Euro or so, per month.

It is not the first time I came across a company which uses clever algorithms to create a crystal ball. Nearly 10 years ago Valery Tsurikov, the founder of Belarusian outsourcing company Science Soft, invented an algorithm that predicted share price peaks. It worked this way: if a certainty was high enough, the software would send a signal to the trader to buy or sell. However, if the probability were lower (than 70 percent? I don’t remember exactly), then the trader was left to his own devices. Instead of using this not quite perfect technology to trade on its own account, Science Soft licensed it out, as the Belarusian investment banking industry at the time was and, I believe, still is non-existent.

Fast forward to 2009, and Derwent Capital Markets made headlines when the hedge fund teamed up with Johan Bollen of Indiana University to use Twitter sentiment signal for trading securities. The research established a very close correlation between the sentiment on Twitter and the Dow Jones Industrial Average Index. The hedge fund dubbed “The Twitter Fund” was reportedly significantly oversubscribed.

I thought this was the right move: who wants to offer tips to others when one can make his own fortune by trading instead? Yet last month DCM Capital pivoted in offering real time sentiment analysis as a service, and launched a trading platform. Here is their newly released infographics about correlation between Facebook sentiments and its share price. So DCM founder and CEO Paul Hawtin does see more potential in offering their know-how to the trading community rather than trading.

Similarly Betegy enters the betting tips industry, which, unlike betting industry, is not regulated. It aims to deliver tips on Premier League football games in England, Germany, France, Spain and Italy to the unsophisticated casual gamblers, and offer the white label service to other industry players as well as sponsors. It will also “bet” on  a fresh, social media-enriched web design, which gives a facelift to the whole online betting tips industry, which got stuck back in time.

To further improve its algorithms the company will incorporate news feed that will account for about 30 percent of the prediction, 70 percent remaining with historical data analysis. This means, taking into account events such as a key player injury, which will be done completely automatically.

Of course, if the service becomes wildly popular, the stakes will drop, as more gamblers will bet on the same favorite, similar, to a hedge fund industry, when an advantage of a particular trading strategy fades, as more competitors discover and adopt new prediction techniques.

A fun fact: Betegy folks are planning to set up a public betting account, and report daily about its status to its website visitors to demonstrate that algorithms do work. Let’s see how high they will grow it.

If you do want to find out how weill the service works, the new season of Bundesliga starts today. Go Werder Bremen.

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