Sports betting has always held a certain appeal for passionate sports fans, and it’s easy to understand why – it adds a new level of excitement to watching the game. However, successful betting requires a deep understanding of the various techniques and strategies involved, and even at that, you’re never guaranteed a win.
With many bookmakers sometimes paying out £100s or £1000s on winning bets, you might be wondering how they actually make money. At the end of the day, bookmakers are businesses and they need to stay in profit, so they employ specific tactics that give them an inherent advantage.
Whether it’s local establishments or the best online betting sites, they all use the same techniques to give themselves an edge over punters.
How Do Bookmaker Businesses Make Money?
The Essence of Bookmaking
In order to understand the art of betting, it’s important to explore the methods that bookmakers employ to secure their percentage. Of course, the main goal of bookmakers is to generate a profit by taking in more money than they have to payout. The concept is simple: bookmakers make money every time a losing bet is placed and lose money when a bettor wins. While they cannot control the outcomes of sporting events, they can ensure profitability by setting the odds and planning accordingly.
Vigorish or The Overround
When setting odds, bookmakers include a commission known as vigorish (vig, sometimes referred to as “the overround” in the UK). Vig is built into the odds and ensures that the bookmaker makes a profit regardless of the outcome.
For example, in a coin toss scenario with true odds and a 50-50 probability, if you bet £10 and win, you would expect to receive £20. However, due to vig, the odds are adjusted so that the bookmaker always has an advantage. This represents the bookmaker’s margin built into the odds to ensure they operate at a profit.
In this 50-50 situation, a bookmaker will offer slightly less than even odds to ensure they turn a profit. Instead of getting £10 in winnings, you might only receive £9. This means if you win, you’d get your original £10 stake back plus £9 in winnings, for a total of £19.
In this scenario, if you lose the bet, the bookmaker keeps your entire £10 stake. But if you win, they only pay out £19 instead of £20. Over many bets, this £1 difference (or vig) ensures the bookmaker has a consistent advantage and can generate profit, regardless of the actual outcome of the coin tosses (or sporting event, the concept is the same).
The Role of Odds Compilers
These professionals set the odds for bookmaking firms. Their job is to determine the odds for sporting events, taking into account statistics and real-world knowledge about teams and players. A target margin is often set, ensuring the odds have a built-in profit.
When setting odds for a tennis match, compilers take into account various factors such as the players’ past performance, current form, and individual strengths. Based on this analysis, they determine the odds while also incorporating the desired vig.
Creating a Balanced Book
Bookmakers aim to achieve a balanced book by adjusting the odds. This ensures that they make a consistent profit regardless of the game’s outcome. To achieve this balance, bookmakers may encourage betting on one outcome while discouraging betting on another. The fluctuation in odds reflects these adjustments made to create a balanced book.
Bookmakers continually adjust the odds to ensure they have a balanced book, which means they make nearly the same profit regardless of the game’s outcome. You’ll notice this just before a horse race starts, for example—the odds will fluctuate rapidly in this period.
However, there are instances where compilers intentionally create an imbalanced book. This may occur when they have a strong belief in a particular outcome and can potentially gain substantial winnings from it.