Ancelotti laments Real's defending
New signing Isco popped up in the 86th minute to grab the winning goal after Karim Benzema cancelled out Jorge Molina's opener for Betis.
Ancelotti lamented the team's defending and singled out two of his attacking stars for not contributing their share of defensive work.
"If we want to play quality football, we need players like Isco and (Mesut) Oezil to do defensive work," Ancelotti said.
"Right now it is a normal problem, but they are generous players and we need to find the balance.
"This was the issue and there was a lot of space between our defence and midfield and Betis played very well in this area.
"I think we can improve, which is normal, and we had many chances to score and a lot of good combinations, especially on the wing."
Following predecessor Jose Mourinho, Ancelotti made the decision to drop captain Iker Casillas in favour of Diego Lopez between the posts.
"I took this decision for the match today and it was decision made on fine details and we will see what happens in the next match," Ancelotti said
"I spoke with Iker, he is very professional and wanted to play which is normal and good."