How do bookmakers make money?
When it comes to sports betting, one question is often asked by both novice and experienced bettors: how do bookmakers make money? In this article, we will walk you through this subject.
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Table of contents
How does a bookmaker make money?
In order to remain profitable despite the millions of sports bets placed on their sites every day, bookmakers have a few tricks up their sleeves. Here are the main source of profit for bookmakers:
- Losing bets
- Margin on the odds
- Fluctuating odds based on bets
- Risky accumulator bets
- Cash out
These factors in online betting ensure this business remains lucrative, despite the huge jackpots that punters can win from time to time. Let’s talk about them one by one.
Losing bets
As you know, it is often very difficult to win a bet with the bookmakers. Surprises in the match scenario, injured players, growing uncertainty in all leagues...there are many factors that can make you lose your bet nowadays. So it's not surprising that there are far more lost bets than winning bets, and that's how bookmakers make money in the first place. Take a look at this example:
At Bwin, let's imagine that two out of 10 bets win. Often, these winning bets are simple singles (with more probability of winning than accumulator bets) with decent odds available to the gambler. This gives :
- eight losing £20 bets = £160 won by Bwin
- two winning £20 bets, at odds of 2.00 = £80 lost by Bwin (£40 each)
In total, for an average bet of £20 per bet, the bookmaker in this example will have made a profit of £80 - £160 from the losing bets minus the £80 given to players for the two winning ones. This is only an example but it is close to what actually happens.
Margin on the odds
Another way for bookmakers to make money is through odds margins. After the operators evaluate the value of a bet and set the odds, they would usually lower the value after estimating the odds. So when you see odds of 2.00 at a bookmaker for your bet - a 50% chance of winning - you should know that in reality these odds are slightly lower, for example 42%. Instead of odds of 2.00, the odds offered should be 2.38. The UK Gambling Commission regulates the betting companies and will act if they believe margins that are being set are too high and unreasonable behaviour towards their players. This is why it is always best to bet with a licensed bookmaker. It's up to you to put yourself in the best position to be smarter and beat the bookmakers. See our article How to beat the bookmakers?
The fluctuation of the odds according to the bets
Third lever: the fluctuation of the odds. As you have probably already noticed, the odds offered by bookmakers change frequently for the same bet on the same match. This is due to the factors surrounding the match (e.g. a key player getting injured), but also to the volume of bets collected over time. The principle is that the more bets there are on a given bet, the more the odds will be devalued. Where the first bettors will have benefited from odds of 2.00, for example, the last bettors may only find odds of 1.80, because the operator has devalued these odds to limit its financial losses.
The impact will then be twofold: in the case of a favourable scenario for the bookmaker (losing bet), the jackpot will be huge for him, while in the case of an unfavourable scenario (winning bet), his financial losses will be limited. And the bookmaker will balance his accounts with the losing bets on the other bets. As we mentioned before, losing bets happen much more often in the long run.
Risky accumulator bets
The fourth point is the temptation of high odds from accumulator bets. In line with the first factor mentioned, namely many losing bets, the tempting yet very risky accumulator bets allow bookmakers not only to win money, but also to avoid losing money by increasing the chances of failure for the bettor. Let's look into it.
Bookmakers often have special promotions that give additional winnings to successful accumulators, depending on how many legs are in the bet. This can be a case of bookmakers simply encouraging players to place bets that have high odds and therefore reduced chance of success. The thought of a massive win can see players placing bets that they really shouldn’t be making. Consider this: where a 1N2 bet has a one in three chance of winning in absolute terms (1, N or 2), an accumulator of two bets has only a one in eight chance. Now you can understand why these accumulator bets remain great profit levers for bookmakers.
Cash Out
Finally, the last way for bookmakers to make money: the use of cash out. As you know, the cash out allows you to end a bet before its natural conclusion if you have any doubts about your success. Well, it also allows operators to limit the risk of a very high winnings for punters.
Let's say you bet £10 on a combination of 10 matches (overall odds 3500.00), and by chance you have already placed seven winning bets out of the 10. In fact, you are only three games away from winning the £35,000, but you are afraid of losing it all because the remaining games are the most difficult to win (e.g. Barcelona and Villarreal to draw).
The bookmaker judges that the risk of losing £35,000 is too great and offers you a nice cash out amount, for example £8,000, in exchange for you "stopping" your bet. If you accept, and the three remaining bets are successful, the bookmaker will have avoided a loss of £27,000, which is 77% of the amount they were initially supposed to pay you. This is a great way for bookmakers to limit the damage when the bettor is in doubt. This is still a good feature though because if one of the final three selections were to be losers and the bet had carried on, you would have had no return at all from your accumulator.
So there you have it, you now know the main methods available to bookmakers to win money. As you can see, it's still much more fun and exciting to be on the other side of the business, and to enjoy betting on the various betting sites. Especially when you know how to win a bet and manage your sports betting funds.
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