The Betfair Misconception
The idea for Betfair was conceived by Andrew Black in 1998, and two years later that idea became a reality. It is now the UK’s biggest online betting company and the world’s largest betting exchange. Betfair has over 1,000,000 clients and a weekly turnover that’s in excess of an enormous £50,000,000!
One of the reasons Betfair has become so popular is due to the flexibility it gives to the average punter. Prior to Betfair, punters could only place bets with traditional bookies who priced up events and took bets from Joe Public. Then Betfair arrived and turned the tables giving Joe Public the chance to take those bets himself (lay), and also set his own odds. It’s even possible to price up a whole race (although unlikely you’ll get it priced entirely in your favour). The other attraction of Betfair is that prices tend to be higher than those offered by traditional bookies and this has obvious benefits to the backer.
Betfair claims to offer, on average, 20% better prices than traditional bookies and, for the most part, this holds some water. However, there are plenty instances when backing a selection on Betfair isn’t the cash cow they’d have you believe. Much of Betfair’s income is generated by them charging you a commission on your winning bets – a sort of thank you to them for acting as the middle man between backers and layers. The maximum you will pay on most markets is 5% and with regular bet placing you will be rewarded a discount on this rate.
What people fail to take into consideration when backing on Betfair, is just what effect this 5% will have on their actual winnings. For example, if you were to back a 2/1 horse at a traditional bookie for £50, your winnings (should the horse win) would be £100. At the same odds on Betfair, your winnings would only be £95 (assuming full 5% comm.) Ah, but remember Betfair’s odds are around 20% higher so I’m 15% better off – or am I?? If you look at almost any Betfair market, you’ll often see that the favourite is trading nowhere near 20% higher than the traditional bookies, in fact, more often than not, the first two or three in the betting will be much closer to standard SP than you might expect.
To prove this point I picked the first race from Bangor on Friday (08/02/08) which clearly shows both the favourite and 3rd favourite have lost any price advantage the punter has over the bookie. Even more so, the last race from Bangor on Friday showed the on-course SP as 3.75 and Betfair’s SP at 3.20….think about that for a minute….for that £50 stake with a traditional bookie you’ll have £187.50 placed back into your mitt (£137.50 winnings plus your £50 stake), however, place that same £50 with Betfair and you’ll only get £160 back! But, I’ve even more bad news for you – that £160 is now subject to Betfair’s cut, so you’re only actually going to get back £154.50. Thats a difference of £33! You have effectively just thrown away £33.00!
Now, I’m not for a second suggesting that this will happen with every favourite. In fact on many of them you will be better off backing on Betfair, however, to make the most from your betting, you must be prepared to shop around for the best prices, and never ever assume that Betfair is automatically the best site to place your wager.
So, next time you’re about to put your money where your mouth is – bear that £33 in mind. It could be the difference between a profit and a loss on any given day!
Hah! I’ve known this to be the case for some time Craig. Betfair has its place but when I’m backing market leaders I regularly place my bets with a bookie instead.
Hi Craig
Some thoughts on your comments;
* Very few people only back short price favourites. Looking across the range of betting opportunities Betfair tends to offer significantly better odds because there is no “profit margin” built into the prices.
* If you had placed £10 on every winner (including short priced favourites) since Betfair launched its SP product in December 2007 you would be 33% better off on Betfair than bookmakers SP.
* If you are lucky enough to back a lot of short priced favourites that win you won’t get turned away at Betfair. Betfair loves winners!
Hi Rorie,
Thanks for your feedback. Don’t take this the wrong way because we use Betfair ourselves every day, but Craig is correct in everything he said.
I’ll reply to your comments below:
* Very few people only back short price favourites. Looking across the range of betting opportunities Betfair tends to offer significantly better odds because there is no “profit margin” built into the prices.
No, but the profit margin is built into the commission you charge and when the odds are only marginally higher (sometimes not even that) you are better to place your bet with a bookmaker.
* If you had placed £10 on every winner (including short priced favourites) since Betfair launched its SP product in December 2007 you would be 33% better off on Betfair than bookmakers SP.
I don’t think he was disputing that, but your 33% figure is based on the fact that longer priced runners are closer to their true odds chance of winning on Betfair. When you’re backing outsiders Betfair definitely offers better value, but that often isn’t the case with market leaders.
* If you are lucky enough to back a lot of short priced favourites that win you won’t get turned away at Betfair. Betfair loves winners!
You don’t really need luck to back a lot of short priced favourites. Almost 50% of all even money chances win and close to 70% of races are won by the first three in the betting.
Betfair is marketed as a “freedom to the punter” type website and in many ways this is true, but the fact of the matter is that when you consider the commission factor it often doesn’t provide the best value. The moral of the story is that punters should use their freedom to shop around and place their bets with whoever is offering the best return for their cash.
We actively encourage people to use Betfair – it’s by far the best betting site on the Internet – just not all the time, that’s all
Another thing to remember – commission only applies on net winnings, so if you are backing the top 3 in the market as mentioned above, or simply more than one runner, it’s not commission on that winning bet, but your net position.
Any punter who wants to make the most out of betting should be shopping around. There’d be no such things as arbers if Betfair were better everytime.
I myself have reverted to place most of my bets with a regular bookies instead of BF.
And I personally know many fellow punters who did the same.
The reason is not only the commission.
But also (for instance):
- most bookies do not apply 5p R4
- many bookies pay on both: first past the and official result
- some bookies pay at SP if it’s higher than the price you got
- bookies offer a lot of cashbacks (like if your selection gets beaten by head or gets fallen or lose in some circumstances or even win in some circumstances, you will get your stake back or freebet or bonus) and it DOES really matter in the long time
- some bookies offer bonus on top of your winnings from exotic bets
- sometimes they pay for one more place in the place market or return losing win part of the bet
- etc., etc.
The above could result in really huge difference to your bankroll.
I definitely shop around before striking any bet.
And BF is not the first port of call nowadays.
Also if you want to place your bets in the morning, there could be no liquidity to accomodate some higher stakes.
And, you cannot phone BF and cancel your bet.
If you really made a genuine mistake, you can ask your bookie to cancel your bet or change it. Although it doesn’t work all the time, sometimes they are really very helpful.
Don’t get me wrong, BF is good, just not for everything and not all the time.