How do bookmakers work?

When you’re sports betting online, you’re effectively working with bookmakers. These are the guys who are licensed to take bets and these are the guys you’ll get your money from when you win. Understanding how they work is really helpful. It’s that all-important context that lets you make good decisions when you bet.

In this guide, we look at how the bookmakers and sportsbooks operate and explain the things that they consider in the running of their business.

This is perfect for newcomers to the online sports betting world and there’s no harm in brushing up on your knowledge if you’re already an experienced sports better.

Bookies are in business

First off, it’s important to be clear on the fact that bookies are essentially businessmen and women. That might sound obvious to some, but it’s a basic point that’s worth driving home. Don’t forget that what’s a hobby to you is someone else’s business; so whilst you’re there for a good time they’re there to make money.

Now, this doesn’t mean that customers and bookmakers can’t have a great relationship; it’s just to make clear what the underlying dynamic is here.

How sportsbooks make a profit

Every bet that you and other customers make puts money in the sportsbook’s purse. Every pay-out that the bookmaker then makes to the winners, after the race or competition has taken place, takes money back out of the sportsbook’s purse. To make a profit then, a sportsbook needs to take in more money from its customers overall than it pays out.

This is the basic principle for any bookmaker. Since they can’t control the horses, boxers and football players in order to guarantee results, what they must do instead is to give themselves a margin.

The margin for sportsbooks

A margin is what bookmakers use to make a profit. When they set the odds for a competition, they will rarely base them purely on what is likely to happen. Instead, they build the margin into what they offer customers.

For example, if the competition were a coin toss, then rather than offering true odds of 2.00 (50% chance that the coin will land on heads and 50% chance that it will land on tails) the bookmaker will be more likely to offer 1.9091. This way, rather than paying out exactly what they’ve taken in from customers, they’ll pay out a little less than they’ve taken in, thereby making themselves a profit.

Setting the odds

Setting the odds is a very important part of a sportsbook’s business. You could think of it as the equivalent of a shopkeeper setting his or her prices.

Generally, a bookmaker will have what’s known as an odds compiler or trader to take care of this aspect of operations. The job of the odds compiler is to set the odds that you see displayed online, but before they arrive at those figures a lot of work goes on behind the scenes.

Analysing the form of a team or competitor

A huge amount of analysis has to happen before the numbers are displayed. This includes things like looking at the form of the team or competitor over recent matches or races, and over recent years, to try and work out how they are likely to perform in the upcoming event. Little details can make all the difference to the outcome so the more thorough the analysis the better. In fact, for this reason, the big sportsbooks often have odds compilers who specialise in just a small number of sports.

Sportsbooks influence each other

Apart from analysing form, odds compilers look at what the other sportsbooks are offering. To some extent the industry works as one inter-connected machine—the different bookies influence each other.

The mathematics of bookmaking

The odds compilers also bring a lot of technical thinking into their work. An understanding of how statistics and the mathematics of bookmaking works is really important when it comes to setting odds and turning a profit for the bookie.

Aiming for a balanced book

When you hear people talk about a bookmaker having a balanced book, it means that he’ll make money whatever the result of the match or competition. If in a given match Team A or Team B could potentially win, then some of the customers will bet on Team A and others will bet on Team B. As a customer you need either one team or the other to win in order to make money; but, if the book is balanced, then the bookie will make money whichever team happens to win.

The way it works is that the bookmaker will have more customers betting on one side than the other to achieve a balance. This is why odds will sometimes keep on changing—it’s to encourage customers to spend more. This is a bit like when a supermarket needs to sell a certain batch of stock, perhaps because it’s nearing its expiration date, and so reduces the price of each item, or includes it in a buy-one-get-one-free promotion.

As a general rule, a bookmaker will want to aim for a balanced book. However, there are actually occasions on which an unbalanced book is good too, such as when the odds compiler does his or her analysis and decides that there is a very definite favourite in a particular competition.

Sponsorship

Sponsorship is another way that bookmakers make their money. You’ll nearly always see the name of a big sportsbook on, say, the shirts of footballers or in very prominent positions around a venue. By sponsoring teams and major competitions, bookmakers get their name known. In fact, they can become a household brand like this. Appearing at high-profile events in this way also makes customers feel reassured because the brand seems trustworthy: it’s in the limelight, not tucked away operating where nobody can really scrutinise what’s going on.

 

So that concludes our guide to how bookmakers actually work. Next time you make a bet you’ll have more knowledge and you’ll be able to make a good, informed decision about the best way to place your money. If you found this guide helpful, remember that there are lots more articles here full of useful insights to assist you in understanding the world of online sportsbooks and making more money from your betting. Trust our experts here at Gambling Metropolis.