How Bookmakers Make Money

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How bookmakers make moneyBookmakers have been around for many centuries in one form or another, always being one step ahead of the gambler by always being the ones who make a profit. Bookmaking in the early days was a one man operation, a far cry from the global organisations we see today, however the way that these businesses make money hasn’t changed at all – just on a much larger scale.

In this article I start by explaining how a bookmaker incorporates a profit margin into a market, giving a straightforward example of this. I then delve into bookmakers percentages, explaining how you’ll work them out and what they actually mean. I finish by looking at other ways in which a bookmaker will make additional money at their site.

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This very slick site offers top-rated odds; a huge range of bets and a big list of player promotions (really, check the latest before you bet elsewhere). This now includes an excellent 100% profit boost offer for all new players.

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Planet Mark's Top Rec:

32Red are giving the old 'High Street Bookies' sports betting brands some real trouble in 2019.

This very slick site offers top-rated odds; a huge range of bets and a big list of player promotions (really, check the latest before you bet elsewhere). This now includes an excellent 100% profit boost offer for all new players.

32Red are my go-to betting site, you’ll quickly find out why once you see www.32red.com/sports for yourself - check them now!

 

30181

 

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The Bookmaker's Profit Margin

Example One

Consider a simple toss of a coin where you’ll land heads 50% of the time and tails 50% of the time. This is a clear ‘even money’ bet, meaning that if you were placing a bet with a friend on the outcome of the toss, you’d double your money if you won, and lose your money if you lost. However, if placing a bet on this outcome with a bookmaker you’ll see a very different scenario…

There is upcoming cricket match between England and Australia and you can place a bet on which team will win the toss (for non-cricket fans, this is a coin-flip between the team captains that decides which team gets to choose whether to bat or bowl first in every match). Here are the odds:

England 1.90 (in fractional odds this would be 9/10)

Australia 1.90

As you can see, if you were to place a £10 bet on this outcome, you’d only win £9 if you were correct.

Now consider this market from a bookmaker’s point of view. Upon offering this market, they have taken £10,000 on both England and Australia to win the toss. They will pay £19,000 out in total to all of the winning bets, but they have collected £20,000 worth of bets – meaning there is a guaranteed £1,000 profit for the bookmaker.

Example Two

The toss of a coin is a very basic example, so let’s take a look at something a little more complicated. Here I’ll look at the odds of an upcoming football match:

Tottenham 1.57

Draw 3.75

Leicester 5.0

Without it looking obvious, there is a profit margin incorporated into these odds in exactly the same way as there was with the toss of the coin betting.  Let’s look at a situation where a bookmaker will pay out the same £20,000 for each winning scenario.

Here they will have taken in £12,738 on Tottenham to win (£20,000/1.57)

They will have taken in £5,333 on the draw (£20,000/3.75)

Finally they will have taken in £4000 on Leicester to win (£20,000/5.0)

As you can see they have taken in a total of £22,071 (£12,738+£5,333+£4000) and will only be paying out £20,000 in winnings – meaning a profit of £2,071.

Obviously, in both of the above markets, the bookmaker will have to receive exactly the right amount of bets on each outcome to guarantee that profit, and this is not realistic in real life. They will generally find uneven amounts of money coming in – so if the general public is not betting enough money on one of the selections, they might lengthen the odds to make that selection more attractive, which will even up their books somewhat.

The Bookmakers Over-round

There is a quick method to work out the profit margin a bookmaker is making on a market – called the bookmakers over-round. You simply divide 1 by the decimal odds of each selection and then add them all together – before turning the number into a percentage. Here is a calculation of the bookmaker over-round on the above football match:

1/1.57=0.637

1/3.75=0.267

1/5.0=0.2

0.637+0.267+0.2=1.104

1.104 in percentage terms is 110.4%. Any number over 100% will show the profit margin for the bookmaker, in this case 10.4%, meaning in an ideal world the bookmaker will make a 10.4% profit on all of the money they receive on the market.

Go ahead and do the same calculation on the coin-flip example above. It should show that the bookmaker over-round is 105.3%.

This calculation is quick and easy and with the use of a spreadsheet you can quickly work out the over-round, even on markets with a great deal of selections like horse racing or even a golf tournament. You’ll quickly realise that in some cases this over-round is incredibly large (don’t be surprised to see in excess of 30% or even more in some markets).

How else do Bookmakers Make Money?

The Bookmaker's Profit Margin

Many of the larger sites have a number of other income streams. Many will have online casinos alongside the sportsbook where the house edge is actually incorporated in a very similar way to the over-round (especially when it comes to Roulette or Blackjack). They will also have poker sites, where the income is generated for the site by the tournament fees paid by the player and the 'rake' generated at the cash tables. Other income streams include Bingo and Arcade games.

How Can the Punter Fight Back?

The first thing you can do is understand that picking winners is not enough to turn a profit in the long run. Even if you are good at this, most people are not good enough to overcome the percentage profit which the bookmakers build into their odds.

Once you 'get' this concept, you are on the road to becoming a profitable gambler. Next you need to understand concepts such as value betting, bias and how to make your own market and use this to find profitable betting opportunities. The best place to start is the Betting Strategy main page, which links out to both beginner and expert level articles covering these subjects. 

Planet Mark's Top Rec:

32Red are giving the old 'High Street Bookies' sports betting brands some real trouble in 2019.

This very slick site offers top-rated odds; a huge range of bets and a big list of player promotions (really, check the latest before you bet elsewhere). This now includes an excellent 100% profit boost offer for all new players.

32Red are my go-to betting site, you’ll quickly find out why once you see www.32red.com/sports for yourself - check them now!

 

30181

 

Planet Mark's Top Rec:

32Red are giving the old 'High Street Bookies' sports betting brands some real trouble in 2019.

This very slick site offers top-rated odds; a huge range of bets and a big list of player promotions (really, check the latest before you bet elsewhere). This now includes an excellent 100% profit boost offer for all new players.

32Red are my go-to betting site, you’ll quickly find out why once you see www.32red.com/sports for yourself - check them now!

 

30181

 

Planet Mark's Top Rec: There are a lot of good reasons why Bovada are the number #1 US friendly sportsbook. Look beyond the big welcome bonus and you'll find the real magic...

Bovada have a huge range of markets (especially when it comes to the bigger events), competitive lines and super-easy deposits / withdrawals.

The killer reason is the promos – you’ll find their list of offers for regular bettors unrivalled anywhere online. Check out www.bovada.lv to see the latest deals for yourself now!

Bovada Sportsbook

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