When too many bots are competition they eventually lose their edge and other bots replace them.

They are good for turnover. Which for betfair increases their revenue. Betdaq will have the exact same problem. (I had access to their API and its just as easy to write a bot for them as betfair).

In regards to the share market, yes it can cause issues. And yes I agree with evajb that they have an unfair advantage with the way they pay brokerage. Make them pay the same brokerage as mum and dad investors (or the other way round) and a lot of that advantage disappears. Bots generally compete at a timeframe most investors are not playing at though (micro seconds) but can put some volatility into the higher timeframes.

I'll watch that link later today or tomorrow and comment again.