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Betfair pioneered the online
use of so-called exchange betting. This method differs from
normal bookmaking in important ways -- calculation of the
"odds," who the parties to the bet, are and the amount charged
as a commission, also variously referred to as the "juice", the
"vig" or vigorish and the "pc."
In exchange, or peer-to-peer, betting, a party makes an offer to
back or lay a bet. A second bettor then accepts the other side
of the proposed wager on the terms offered by the first party.
So, the parties to the bet are the two bettors rather than the
bettor and the bookmaker in the traditional form of sports
wagering. (Exchange betting can also include similar wagers on
the outcome of non-sporting events, such as political
elections.)
The first bettor sets the "odds" in posting his offer to back or
lay a bet. This also differs from the traditional bookmaking
operation where a line or "spread" is established by the
bookmaker and is kept in place until the bookmaker decides,
after receiving an imbalance of wagers on one side of the line,
to increase or decrease the line or spread in order to more
closely balance the betting book. Betfair claims that matching
up the players rather than having a bookmaker establish the line
results in about 20% better, or tighter, odds for the bettors.
Traditionally "straight" bets made with bookmakers carry a
charge, or commission, of 10% paid when the bettor loses. In
that situation a losing bettor pays 110% of the amount wagered,
while a bettor who wins receives 100% of the amount he stood to
lose as his profit. There are numerous other ways in which
traditional bookmakers charge fees. In exchange betting,
companies like Betfair charge a maximum of 5% of the net win.
Betfair offers the equivalent of "frequent bettor" discounts,
which can reduce the charge to as low as 2% of the net win for
very high volume bettors. |
