Iconic US dot coms such as Google and eBay may grab the headlines across the world, but the UK's obsession with betting is paving the way for some exciting hi-tech players of our own.

In the next month, spread-betting firm IG Group will re-list on the stock exchange, and speculation is rife about a possible £700m float for online betting exchange Betfair.

The listings come on the back of a huge rise in the popularity of online gambling, which allows punters to place bets on the outcome of anything from England's Ashes series this summer to the movement of the pound against the dollar, as well as to play games such as high-stakes poker.

According to Nielsen//NetRatings, more than 16 per cent of Britons visit a gambling site each month, and the market has grown 566 per cent since 2003, making the UK the fourth largest gambling nation in the world.

Entertainment industry analyst Christiansen Capital Advisors estimates that online gaming will expand from a $5.7bn (£3bn) global industry in 2003 to nearly $17bn (£9bn) by 2009.

This summer, World Poker Exchange, an Antigua-based online poker site, will host its first London Open, with a guaranteed minimum prize pot of £1m, as it seeks to capitalise on the local popularity of the game (see below).

Behind the scenes, technology plays a key role in the growth of the market, with powerful but relatively inexpensive IT systems allowing smaller firms to build robust exchanges able to handle thousands of transactions every minute.

David Yu, chief technology officer at Betfair, says technology is being used in increasingly innovative ways across the market.

'People are really surprised when they realise the kind of transactions and volumes we have to handle, which are more in line with the big boys such as a stock exchange or an airline reservation system,' he said.

Betfair's exchange betting system uses the internet to allow punters to bet at odds set by other gamblers rather than by a bookmaker.

At the Cheltenham Festival last month the exchange experienced its highest ever demand, with more than a million page requests in a five-minute period.

Betfair, which has already invested more than £30m in technology, recently launched a simplified person-to-person betting exchange on Yahoo's UK portal, with the aim of making its system accessible to a mass-market audience.

'This will extend the brand much further and will appeal to customers who are perhaps less experienced or sophisticated betters, so it's based on traditional odds, but feeds into our system,' said Yu.

One of the primary challenges is simply coping with demand.

'We've found that if we double our capacity it's immediately snapped up, because the users get a better experience and they eat into it very quickly,' said Yu.

'Not long ago we were serving 10Mbit/s, now it's over 100Mbit/s. Our bandwidth is probably quadrupling every year, as are our page impressions.

'Latest figures show that on peak days we're getting well over three million bets placed over a 24-hour period, which is equivalent to orders placed on a stock exchange.'

The real pressure point is the database, which has to match these millions of daily bets - which equates to 12,000 a minute - from more than 300,000 registered customers.

'Unlike other databases, our usage patterns are very unevenly distributed as people jump from one race to another rather than betting evenly over a range of events,' said Yu. 'Oracle says we're one of the most active single database sites it has in the world.'

Just as the site relies on matching individual betters against each other ' in the same way that eBay provides an open market for people to find buyers for their goods ' much of the firm's technology innovation relies on people.

The company has copied some of the HR innovations popularised in Silicon Valley startups, notably by giving its engineers time to develop their own ideas.

'It's a gaming company, but it's also a technology business. Getting engineers to be really innovative and come up with product ideas is a big thing,' said Yu.

To encourage such developments, the firm allows its engineers to spend up to 25 per cent of their working time on engineering innovation and testing out new technologies.

Just as Google's staff put together the search engine's news aggregation service in the free time they're given each week to develop their own ideas, Betfair's programmers have also come up with some useful applications.

'We've built a lightweight version of the site that runs on any HTML browser and a Betfair toolbar for Internet Explorer, both of which were done by engineers in their spare time,' said Yu. 'We're very lucky about that. We have very low attrition and that attests to the environment, which is relaxed and entrepreneurial.'

The primary challenge is finding the right people.

'We've traditionally doubled our technology group size every year,' said Yu. 'We started 2004 with about 60 people, and ended with about 120. But there's a limit on how fast we can absorb new people.'

To help cope with this growth, the company has launched a graduate recruitment programme, visiting universities to sign up promising young developers. Two people were signed up last year, and Yu hopes to bring in four or five more this year.

'A couple of years ago people were not thinking of Betfair; they would look at the banks and Yahoo and so on as the places to work,' he said.

'But when we tell them about what we do, they say that they had no idea how core technology is to the business and how challenging it is.'