Although a bookmaker and betting exchange are both betting platforms, they operate slightly differently when it comes to bets, odds and returns. A bookmaker only allows you to place one type of bet, i.e. a back bet, whereas an exchange enables you to trade bets, i.e. allowing you to place back and lay bets. Below we discuss the differences in more detail.

Bets

There are two general types of bets: a back bet and a lay bet.

Back Bet

A back bet is a bet on an outcome to occur. For example:

• If we bet on Arsenal to win for Arsenal vs. Chelsea, Arsenal must win for our bet to win
• If we bet on Horse A to win in a race where 10 horses are participating, Horse A must win for our bet to win

Back bets are usually placed at a bookmaker, but they can also be placed at an exchange.

Lay Bet

A lay bet is a bet on an outcome to not occur, in other words, it’s a bet against a specific outcome. For example:

• If we bet on Arsenal to not win for Arsenal vs. Chelsea, we will win our bet if Chelsea wins or the match ends in a draw
• If we bet on Horse A to not win in a race where 10 horses are participating, we will win our bet if any of the other 9 horses win

The outcome does not matter as long as the specific outcome we bet against does not occur.

When we place a lay bet, we are effectively ‘selling’ a bet; in other words, we are effectively acting as the ‘bookmaker’ where we are accepting someone else’s bet, and we either win their stake or pay out their winnings, depending on the outcome of the bet.

Unlike back bets, lay bets can only be placed at an exchange.

Odds

There are two types of odds: back odds and lay odds.

Back Odds

Back odds are the odds you receive when placing a back bet. So if you place a £10 bet at back odds of 5.0, you’re risking £10 for the chance to receive a £50 return including your stake (i.e. £40 in profit) if your bet wins.

Lay Odds

Lay Odds are the odds you give someone else when placing a lay bet. So if you place a £10 bet at lay odds of 5.0, you risk paying out £50 including their stake (i.e. £40 in liability) for the chance to win their £10 stake if your bet wins.

Bookmaker Odds vs. Exchange Odds

Bookmaker odds are determined by the bookmakers themselves. Exchange odds, to an extent, are determined by the exchanges; but for the most part, are reflective (much like the stock market) of the demands of the betting market, specifically, the trading activity on the exchange; and are therefore a more accurate representation of the ‘true odds’ of any given bet, compared to the bookmaker odds.

Returns

A return is the potential win for a bet.

Back Bet Returns vs. Lay Bet Returns

A return differs between a back bet (BB) and a lay bet (LB). To help explain this difference, let’s use a bet of £10 at odds of 5.0 as an example:

When placing a BB, we are acting as the customer and a return usually refers to the winnings plus the initial stake. So if you bet £10 at odds of 5.0 and your bet wins, then your return is £50 including your initial stake (£10 stake x 5.0 = £40 in winnings + £10 stake). We tend to regard this as a full return.

When placing a LB, we are acting as the ‘bookmaker’ and a return usually refers to the stake you accepted and won. So if you accepted someone’s bet of £10 at odds of 5.0 and your bet wins, then your return is £10.

It is important to remember that:

• With a BB, the stake is your stake: if your bet wins, you receive your winnings plus your stake; but if your bet loses, you lose your stake
• With a LB, the stake is someone else’s stake: if your bet wins, you receive their stake; but if your bet loses, you pay out their winnings (also known as liability)

Margin vs. Commission

A return can differ between a bookmaker and exchange, as each betting platform employs a different business model.

Bookmaker Margin

As mentioned above, bookmaker odds are determined by the bookmakers themselves, and are typically priced lower than the ‘true odds’ of any given bet. So if the true odds of a bet is 6.0, a bookmaker may price their odds at 5.0. Your return will be at the odds offered; so if your back bet of £10 wins at 5.0, then your return is £50. Bookmakers make their money from the margin between the true odds and their odds, and so their margin is already priced into the odds that they offer.

Exchange Commission

As mentioned above, exchange odds are a more accurate representation of the true odds of any given bet, compared to the bookmaker odds. Instead of a margin, exchanges charge a commission on winning bets. So if your bet wins, whether it’s a back or lay bet, your return is minus the commission. For example:

• If your back bet of £10 wins at 5.0, then your return is £50 minus the commission of the exchange
• If your lay bet of £10 wins at 5.0, then your return is £10 minus the commission of the exchange

The industry standard commission is 5%, although some exchanges like Smarkets only charge 2%. Even better, Smarkets charge 0% for OddsMonkey Premium members!

Please note that all of our calculations shown in the Matched Betting Guide factor in 0% exchange commission – that’s because as OddsMonkey Premium members, we benefit from 0% commission on Smarkets. However, if you are using a different exchange or are not yet an OddsMonkey Premium member, then you are likely to be paying commission on your winning exchange bets, and so any calculations you make would need to factor this in.

Winnings

Winnings usually refers to the return minus the initial stake. So if you place a back bet of £10 at odds of 5.0 and your bet wins, then your winnings is £40 ((£10 stake x 5.0) – £10 stake).

Winnings and full return (as described above) are exactly the same result, only viewed differently. For the purposes of matched betting, to maintain consistency and accuracy across our calculations, we tend to view it as the former.

Free Bet Returns

We already explained that with a bookmaker, a return usually refers to profit + your stake. However, when it comes to free bets, a return simply refers to profit. This is because free bets are not real cash and hold no cash value, and so you will not receive the value of free bets in cash, regardless of whether your free bets win or lose.

For example, let’s assume that you have placed a £10 bet at odds of 5.0 and your bet wins:

• If the £10 bet was placed with real money, then the return would be £50 (£10 stake x 5.0), because the return includes your £10 stake which is returned to you when you win
• If the £10 bet was placed with a free bet, then the return would £40 ((£10 stake x 5.0) – £10 stake), because the £10 free bet holds no real cash value, and so the return is simply the profit

Liability

We have provided a detail explanation of liability here.

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