Marginless — how does the bookie make a profit? (2 of 3)
This is the second article in our 3 — part series. Today we would like to talk about bookmakers, also known as “bookies” and tell you how they make profit, also, in this article, we will explain the methods bookmakers use to give themselves the advantage. We also look at the other main reason why they make money: most bettors just make bad bets.
The basic principle of bookmaking is straightforward and pretty obvious. A bookmaker takes money in whenever they lay a bet to a customer, and they pay money out every time one of their customers wins a bet. The idea is to take more money in than pay out. The art of bookmaking is in making sure this happens.
Bookmakers can’t control the outcome of sports events, but they can control how much they stand to win or lose on any particular result. They set the odds for all the wagers they lay, which ultimately enables them to ensure a profit.
Odds compilers set the odds at bookmaking firms. They are also known as traders, and their role is absolutely essential. The odds they set eventually determine how much in wagers a bookmaker is likely to take in, and how much money they are likely to make. The act of setting the odds for a sports event is known as pricing the market.
There are a number of aspects involved in pricing up markets for sports events. The primary goal is to make sure the odds accurately reflect how likely any particular outcome might be, while also ensuring that there’s a built-in profit margin. Determining the likelihood of outcomes is largely based on statistics, but very often a certain amount of sports knowledge must be applied as well.
Compilers therefore have to be very knowledgeable about the sports for which they are pricing markets; thus, they often specialize in just one or two. They also have to have a solid understanding of various mathematical and statistical principles.
When a bookmaker has a balanced book on a particular market, he stands to make approximately the same amount of money regardless of the outcome. With an imbalanced book, the outcome would affect how much is made, and it could even result in a loss. A balanced book is usually the preference, for obvious reasons, and is what odds compilers typically aim for.
In this scenario, the bookmaker has an imbalanced book. He will make a profit if Djokovic wins, but will lose money if Murray wins. It’s usually a scenario to try and avoid.
Odds compilers will continually adjust them to make sure their book is balanced. For example, in the above scenario, they could increase the odds on Motiejūnas to encourage more bets on his winning, or they could reduce the odds on Sabonis to discourage further bets on his winning. They could even do both.
There’s no guarantee that adjusting the odds will always create a balanced book, but it usually helps. This is one reason why the volume of bets is so important to bookmakers. As a general rule, more money coming in means they are more likely to get the balance right. It’s actually quite rare to get markets perfectly balanced; the goal is simply to get as close as possible.
It’s worth noting that sometimes odds compilers will actually want an imbalanced book. If they have confidence in a particular outcome, they will try to create a situation where they stand to make the most profit if it happens. If they are very confident that Djokovic could win the match against Murray, for example, they might decide to push the odds out on Murray to get more action on that side of the book.
It should now be clear why bookmakers have a mathematical advantage over their customers. They don’t always win money on every single market they price up, but this advantage does help to ensure they win money in the long run.
The advantage can be beaten, however. It’s not like casino games where the odds are always stacked against you no matter what you do. That being said, the mathematical advantage isn’t the only reason why bookmakers make money. Their success also comes down to the simple fact that most bettors place more bad than good bets.
To avoid being one of those bettors, you need to understand what actually makes for a good bet. Contrary to what many believe, a good bet isn’t simply betting on what you think might happen. Although this approach can be successful if you are accurate often enough in predicting the outcome of sports events, but the reality is that most people are not, so don’t forget to take that into consideration.
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