When bettors place bets on sports, they have the option to either use a traditional bookmaker or a betting exchange. Traditional bookmakers and betting exchanges use different ways to make money, which affects how much bettors can win. Understanding these differences can help bettors choose the best option for their betting strategy.
How Bookmaker Margins Work
Traditional bookmakers are responsible of setting the odds for each possible outcome in a sporting event. In order to secure an income, they build a margin into these odds. This way they ensure they profit no matter what happens in the game.
How to Calculate the Margin
In the example of a tennis match between two players, there are two possible outcomes. If the game is even, each player would have a 50% chance of winning the game. The odds in this scenario would be 2.00 for both. In the same game with even chances for both players to win the game, a bookmaker might offer odds 1.91 for both outcomes instead of 2.00.
So, the 100% that both outcomes represent in a fair tennis game is split in 50% and 50% for each.
Fair Odds: 2.00 – 50% chance each.
The bookmaker adds a margin in the odds and the total percentage of the game possibilities becomes 104.72%. This 4.72% is the profit that the bookmaker ensures regardless of what happens in the game.
Bookmaker Odds: 1.91 – 52.36% chance each.
What is the Impact of Margins on Bettors
The odds that the bookmaker sets are lower than the true odds, because a margin is always there. This means that bettors will get lower returns compared to those they would get if the odds were true. With a bookmaker margin always involved in each bet, the odds are not in the bettors’ favor and it is harder to find bets that offer good value.
How Betting Exchange Commission Works
Betting exchange commission works differently. Betting exchanges do not set the odds. They let bettors bet against one another and they leave it up to them to determine the odds. Bettors can place a back bet – bet for an outcome- or place a lay bet – bet against an outcome. The betting exchange is just responsible for matching bets with opposing views.
Betting exchanges make money by charging a commission fee on all winning bets. This commission can range from 3% to 7% depending on the exchange. Bettors need to deduct the commission percentage from their net profit in order to view their final earnings.
How to Calculate a Betting Exchange Commission
The commission fee can be calculated if bettors multiply their net profit by the commission rate which is expressed in decimal. If the commission rate is 5%, bettors would multiply their net profit by 0.05 to find how much commission they owe.
For example, a bettor uses a betting exchange that charges 5% commission fee on winning bets. The bettor places a bet and wins 100€.
Net profit = 100€.
Commission Rate = 5% = 0.05.
Commission fee = net profit x commission rate = 100 x 0.05 = 5€.
This is the amount the bettors has to pay out the exchange. In order to calculate the final profit, the bettor needs to subtract the commission from their net profit.
Profit after commission = net profit – commission = 100 – 5 = 95€.
What is The Impact of Betting Exchange Commission on Bettors
Betting exchanges offer better odds than traditional bookmakers because there is no embedded margin. Bettors might find more favorable odds due to the competitive nature of peer-to-peer betting. While commissions reduce the net profit of winning bets, the overall impact is often less than the margin applied by bookmakers. This means that even after paying the commission bettors can end up with higher returns.
Betting exchange commission vs Bookmaker Margin
In traditional betting a margin is always applied to secure a profit for the bookmaker regardless the outcome. This makes it harder for bettors to make consistent profit because of the overround. Commission is not paid on every bet. It is paid only on winning bets. This can lead to better long-term profit, especially for skilled bettors who win more frequently.
With traditional bookmakers bettors are limited to the odds and bet types offered by the bookmaker. They have no control over the odds they receive and they can place only back bets. With betting exchanges bettors can place back and lay bets and they have more betting options. They can also offer their own odds which makes them have more control over their bets.
In traditional betting the odds are set by the bookmaker who uses well calculated tools in order to ensure a profit from each bet. This would typically lead to more accurate odds, but this is not the case because of the margins applied. In betting exchanges the odds are determined by the market which reflects what all participants think of the odds. This can lead to more accurate prices especially in highly liquid markets.
Strategic Use of Betting Exchange Commission
Bettors can use their understanding of the commission to set more favorable odds when offering bets on a betting exchange. They can calculate the commission impact on their net profit and adjust the odds they offer in order to ensure they will make their desired profit.
Bettors can look for value bets where they believe the possibility of an outcome is higher than what the odds imply on the exchange. After calculating the commission they can adjust the odds they offer and maximize their returns.
Bettors can also compare commission rates across different betting exchanges to choose the platform that offers them the best combination of odds and commission fees for their betting strategy.
In Conclusion
Betting exchange commission and bookmaker margins impact the potential returns for every winning bet. Bookmakers offer a straightforward betting experience applying margins. This is usually less profitable for bettors. Betting exchanges offer better odds and more control over the bets but they require bettors to be active and engaged in the betting process. Understanding the differences can help bettors make better decisions and increase their betting profits.