Online Bookmakers vs. Betting Exchanges: Pros and Cons
Betting exchanges are all too often touted as better than online bookmakers in every way. While it is true that betting exchanges do offer some advantages in certain situations, it is a gross oversimplification to just call one or the other “better” without stipulating better at what. Betting exchanges and bookmakers both have their strong points.
Rather than just telling you which is better, I’m going to lay out the advantages of each so you can decide for yourself which form of betting best suits your needs. And if you end up finding each has advantages you like, remember there are no rules that say you have to anchor yourself to one or the other.
Advantages of Betting Exchanges
If you need a quick refresher on how betting exchanges work, please see our page that explains the basic idea behind the betting exchange business model. We will be covering some of the basics in today’s post, but that’s the page to visit first if you are completely unfamiliar with exchange betting.
You can get better odds, sometimes
The number one advantage and biggest selling point of the betting exchange is the chance to get better odds on your bets. With thousands of punters all backing and laying bets, the free market works its magic to bring the odds to a point where gamblers on both sides of each bet are satisfied.
You also tend to find significantly better odds on long shot underdogs. This is especially prevalent in horse racing where there may only be a couple of favourites and then a long line of outsiders with little chance to win. Online bookmakers are loathe to set the odds too high on those long shots in order to put a limit on their risk. On an exchange, you can often find someone willing to pay much better on those same long shots.
However, it is unfair to bookmakers to say that betting exchanges always offer better odds. A betting exchange must have liquidity in order to bring the market forces into effect and create optimal prices. Liquidity means the market has enough people putting money on each side of the bet (backing and laying).
If there is a shortage of liquidity, bets will not be matched at odds that make sense. Likewise, those laying bets in an illiquid market can offer poor odds because there is little or no competition in that market. Betting exchanges can offer better odds, but this is not a guarantee.
You should also keep in mind that betting exchanges charge a commission on all bets. They may not build a commission into their lines like bookmakers do, but they still take anywhere from 2-5% off the top of all winning bets. This commission adds up over time and works to effectively bring the odds down closer to what is found at regular bookmakers.
Additionally, big winners are subject to even larger commission charges. Betfair is notorious for its complicated “premium charges” policy, but fortunately most punters never have to worry about it.
With all that being said, betting exchanges do tend to offer better odds in busy markets. You just need to keep your eyes open and consider comparing the prices between your exchange and a quality betting site to make sure you are really getting the best value for your money.
You can take either side of any bet
The second key advantage offered by betting exchanges is they give you the ability to be the bookie. At a traditional bookmaker, you can only bet on events to happen, as in “bet on Team A to win” or “bet on Team B to win.”
Betting exchanges give you the option to bet against events happening. This is called “laying” a bet. When you lay a bet, you are predicting that the outcome will not happen and you get to name your own price. If another user likes your price, your bets will be matched. If you are especially familiar with a certain sport, laying presents a unique opportunity to make money.
Just know that you need to be careful when naming your own price. When you lay a bet, your losses can be significant if you’re offering high odds on a long shot. For example, if you offer 10/1 on a bet and lose, you’ll be paying someone 10 times the amount they bet against you.
You compete against other gamblers, not against the betting site
Betting exchanges do not care who wins any given bet because the exchange simply acts as a matchmaking service. The exchange collects its commission from every bet and gets paid no matter who wins. Betting exchanges do not mind if you find a mispriced bet and take advantage of it because it is the other gambler who pays you, not the exchange.
By comparison, online bookmakers set the odds and strive to do so in a way that ensures a profit. Online bookmakers do attempt to make the odds attractive to both sides of every wager, but they also price in their own profit when setting the odds. This is not an issue with exchanges because it is the gamblers who set the odds.
Exchanges do not cut off winning punters
Both high street and online bookies are likely to severely limit or outright close the accounts of big winners. Big winners are an expense for the bookmaker because their winnings come at the expense of the bookmaker.
An exchange does not care if you win too much because the exchange does not pay you, other players do. You can win all you want and you will never wake up one morning to find your account closed. However, even exchanges will increase your commission rates if your net profit vastly outpaces how much commission you pay.
You can hedge your bets and guarantee a profit
The ability to lay bets at exchanges unlocks a world of hedge betting which can be profitable if you have a sharp eye. To put it simply, you can lock in a profit by laying a bet at one price and then backing that same position at a different price in order to win no matter the outcome of the match.
Some people call this “scalping” and it is an art form all of its own. If you’re interested in learning more, there’s a nice guide here. Just beware; successful hedging is not as simple or easy as it sounds.
Advantages of Online Bookmakers
Online bookmakers are often maligned by fans of exchange betting, but the truth is online bookmakers offer advantages that make them a better choice for some people. The following advantages are why some people choose to stick with traditional betting sites.
Online bookmakers are better about covering niche sports and offering niche markets
Betting exchanges always need two people for any bet to take place. Furthermore, those two people must agree to take opposite sides of each bet and they must both agree to the price. Betting markets on exchanges need liquidity. That is, they need lots of interested punters and lots of money flowing around in order to function properly.
If certain markets fail to attract enough attention often enough, the exchange is likely to remove that market in the future. This is not a huge problem for the vast majority of punters, but it’s something to keep in mind if you follow lesser-known leagues, niche sports or like to place uncommon types of wagers.
Online bookmakers never suffer from liquidity issues and can therefore offer greater coverage of niche markets and a wider range of bet types. You can place these bets at any time, and usually for a larger amount, at a regular bookmaker. At a betting exchange, some bets go unmatched because there is no one willing to take the opposite position.
However, both Betfair and Ladbrokes have traditional bookmakers attached to their websites. If you can’t find the market you want in the exchange, the bookmaker is just a click away and you won’t even have to make a new deposit.
Online bookmakers are easier to understand
Whether or not you really consider this an advantage depends on your goals as a punter. Are you interested in having fun and hoping to make a little money or are you more interested in taking a serious, do-your-homework-and-build-spreadsheets approach?
Seriously, there is nothing wrong with being a casual gambler as long as you keep it under control and understand this will probably not be a moneymaking venture for you over the long run. The fact of the matter is most of us are casual gamblers whether we like to admit it or not.
If you don’t have the time or inclination to learn the ins and outs of exchange betting, you would be better served keeping it simple and sticking with an online bookmaker. Placing bets in a format you do not understand as well is a recipe to lose more money than sticking with what you know.
Online bookmakers offer better promotions
Betting exchanges do not offer as many promotions for their customers because they do not earn as much in commission as bookmakers do on average. If you sign up at an exchange, you are signing up to take advantage of efficient markets and the ability to lay bets, not to get a large signup bonus and frequent special offers.
Online bookmakers offer bigger welcome bonuses and more frequent special offers such as enhanced odds. Bookmakers target recreational punters with these offers because recreational punters are their bread and butter. Likewise, bookmakers have no incentive to target highly skilled players because as we discussed above, skilled players cut into the bookmaker’s profit margin.
Online bookmakers offer better accumulators
The betting exchange business model does not work well with accumulators. Each bet placed in an exchange must be matched with another user and that simply doesn’t work well if you want to roll up multiple selections into one, higher-paying bet.
Exchanges do offer limited accumulators, but bookmakers have a much greater selection and variety of accumulators. Most bookmakers will even let you build your own accumulators from scratch, allowing you to combine completely different bets from entirely different sports if you wish. If you’re a fan of accumulators, an online bookmaker is the way to go.
So, are bookmakers or betting exchanges better?
It depends on what type of punter you are. The simplest answer is bookmakers are better for recreational punters and betting exchanges are better for serious punters. This is a bit of a generalization, however, because both types of betting site can be useful to both types of punter.
I recommend traditional online bookmakers to recreational punters because bookmakers are easier to understand and use. You do not need to invest any additional time learning how it works and you don’t have to worry about liquidity.
Also, the special offers provided by bookmakers are better for recreational punters. Recreational punters stand to benefit the most from such promotions because of the small amounts of money involved.
Serious punters who bet large sums of money month after month win or lose so much money that any promotions have little impact in the big picture. As such, serious punters can ignore promotions for the most part and should mostly just pay attention to the odds being offered and commissions being charged.
Exchanges are better for serious punters because exchanges offer more opportunities to find value, take advantage of laying and put hedging strategies to use. If you’re able and willing to put in the work required to fully understand exchange betting, you will most likely have the best results at an exchange.
Wes Burns has more than a decade’s worth of experience as a writer, researcher, and analyst in the legal online betting industry and is co-founder of OnlineBettingSites.com. Wes approaches his work from the viewpoint of players.