How bookmakers make money

How bookmakers make money

Top bookmakers have different strategies that they use to make money. These strategies vary but some of them are nearly the same. The techniques they use ensures that they are always at an advantage side no matter what.
To start with, since bookmakers cannot control the outcome of any football match, they can only control the amount they stand to win or lose in that particular game. The odds they set for their bettors enable them to make some profit out of it. They call it the basic principle of bookmaking.

Secondly, bookmakers practice what is called the vigorous odds. What I mean by this is that these firms set the odds in such a way that whatever comes into their account and whatever goes out of their account are not equal. The pay in outweighs the payout. I can illustrate this with an example of a football match that was played between Arsenal FC and Manchester City. Obviously, both teams stood a chance of winning that match and therefore their true odds could have been 1/1 in fractional or 2.00 in decimal. If this was the case, whatever amount goes into their account will equal the amount that goes out of their account. This was not going to be good for their business because business is all about making money and if that does not happen then it is better to shut down that business. So, what bookmakers did, they offered odds that were less than 2.00 in decimal. The odds were 1.76 for a win. If for example, the stake was €15 and roughly 100 punters placed a bet on Arsenal while the other 100 placed for Manchester City, then Bookmaker would have gotten €3000 in their account. But, you see the odds were at 1.76 for a win. Therefore, it means that they would definitely part ways with €1760 once they paid their winners. They would still be left with something like €1240 in their account. Those would have been their profit.

Thirdly, bookmakers employ people called compilers. Their work is to specifically set the odds in such a way that they are able to make profits no matter the outcome. This job they do is called pricing the market. It involves a lot of analysis. The odds they set for any team are close enough to the outcome of that match. This would be best illustrated using an example of a UEFA Europa League Match between New Castle United of England and Bayern Munich of Germany. First of all, the compilers who were assigned this match were well versed with these two teams. What they did, they checked their current forms at that time, their past encounters, their positions at the league tables of their countries, the way the two teams had been performing in UEFA Europa league, and the quality of the players that they were going to play. What they came up with was that Bayern Munich had a 57% chance of winning that match to Newcastle United’s 43% chance of doing the same. So, the true odds in such scenario could have been 1.53 for Bayern Munich and 2.78 for Newcastle United. But, if they left the odds that way, that would not have made them money in any way. So, what they did was to slash 8 percent of the odds from both sides. What was left was 1.41 for FC Bayern Munich and 2.56 for Newcastle United. Whichever team that was going to win was not going to run them into any loss whatsoever.

The best way to calculate the bookmakers’ margin is to add the reciprocals of the odds. In our case, they calculated their profit margins this way:
Profit Margins = ((1/1.53) + (1/2.56)) = 1.099%

Lastly, the compilers do what they call it balancing the bookmakers’ books. If the book is left imbalanced, the outcome of any match will affect the money that they get. In fact, they may run at a loss. The company will have to fire them without blinking their eyes.

Have you, the punter, ever seen why the odds keep changing? It is because what the compilers are doing is to balance their bosses’ books. This is how it leads to that. Take for example the Wagered fee on Bayern Munich at odds of 1.53 is €2000 while that of New Castle United at 2.56 is €1500 and there are 400 punters whose stakes are €10 each, the bookmakers’ pay in will be €4000 and pay out of € 3060 for Bayern Munich to win (Bookmakers’ will remain with a profit of €940), and €3840 payout for New Castle United to win (Bookmakers’ profit will be €160). In both scenarios, the bookmaker is still left with something in the accounts after paying the winners. Another scenario can arise whereby the wagered fee on both teams are equal. Say, at €1750. This way, if Bayern Munich wins, the payout will be €2677.5 (Bookmakers profit will be € (4000-2677.5) = €1322.5). But if Newcastle United wins, the payout to punters will be €4480. Here, the bookmaker will run at a loss of €480. i.e. (€4000 – €4480). When they see this happening, they may try to increase the odds on Bayern Munich so that punters can bet on that team or reduce the odds on New Castle United so as to stop punters from betting on this team anymore. This is why the odds of all teams keep changing whether they are being played or are yet to be played.

All these tricks are the mathematical advantages that the bookmakers use in order to make money. This most of the time land them what they want in the long run even though that advantage can be defeated by those who know how to play their cards well.

And that ladies and gentlemen mark the end of today’s discussion. I hope that you have learned a few tricks on how to capitalize on odds that have been set by the top bookmakers.

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