Author:
David Genge
Last Updated on:
29/07/2021
Topic:
Betting Guide
Topic:
Betting Guide
How Bookies Make Money 2021
Table of Content
- Do Bookies Make a Lot of Money?
- What is a bookie?
- Why do we need to know how bookies make money?
- Our Favourite Operators
- What is an Overround?
- A balanced book
- Value bets and how they can work to your advantage
- Bookmakers and betting exchanges
- Current Best Bonuses
- Betting.net has other resources to make you a savvier bettor
- Conclusion – now you know how bookies make money
- How do bookies make money FAQ
Do Bookies Make a Lot of Money?
If you have been betting for any amount of time, you may have already formed an opinion about the sportsbooks or bookmakers sites you use, and will have questions about how it all works and how do sportsbooks make money?
When you set out, you might think the answer to how bookies make money is that they make their money from the losing bets that are placed with them. However, as you continue your journey, you will soon realize it is not as simple as that. For that reason, we have created this guide to how do bookmakers make money.
What is a bookie?
To answer the question of how bookies make money, we need to first define what we mean when we talk about a bookie in the context of this guide. A bookie (bookmaker, or sportsbook operator depending where in the world you happen to be) is a person, group of people or company that sets and sells odds on the various outcomes possible in an event or more usually a sporting fixture.
This is not to be confused with a betting exchange (if you have not come across one of those before check out our betting exchange explained guide) which is a peer to peer betting platform where the odds are set by the users of the site. As you will see later on, this is a different concept entirely and it is incorrect to refer to bookmakers and betting exchanges as the same thing.
Why do we need to know how bookies make money?
As a bettor, you may have wondered, ‘how do bookmakers make money?’ and also ‘do bookies make a lot of money?’ And while it would be interesting to find out, what you might not be aware of is why it is important to know these two things.
After all, whether you win or lose your bet isn’t governed by the bookies, so why does it matter how they make their money? The answer to this question is that how bookies make money can affect the amount you could win from your bet, and this is because of something called an overround.
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Highlights
What is an Overround?
In short, the overround is the margin created by bookmakers by pricing the various outcomes of an event in a way that does not reflect the true probability of the possible outcome. While this is perfectly legal, knowing how it works can help you place smarter wagers.
When you look at a horse racing racecard, it is almost impossible to see any clues to how bookies make money in this way, and it is still difficult to spot when looking at just the three different results in a soccer match (check out our what does 1×2 mean in betting for more information). However, when you look at it in the context of a simple coin toss, it becomes much more apparent.
A balanced book
Of course, this is a simplistic example, but it does provide a demonstration of how an overround works and how bookies make money. This strategy, however, is dependent on another factor that governs how bookies make money, and that is the bookmaker getting their numbers right and balancing their book.
And, when it comes to answering the question of how bookies make money, the factors that affect that balance, how they compensate for those changes and even how they come up with the odds in the first place are all key factors to consider.
Value bets and how they can work to your advantage
This brings us back to the concept of a value bet. The term ‘value bet’ is used when the price of a certain event is much higher at a bookmaker than expected in either your opinion or the rest of the market. This can be due to an oversight or as an attempt to balance a book.When this happens, there is more than one way to take advantage of this.
Firstly, by simply placing the bet, and if successful, reaping the extra profit. Secondly, if the bookmaker’s prediction is out of sync with not only other bookmakers but also a betting exchange, because you now have a mathematical edge, it is possible to lay the bet off at a betting exchange for a guaranteed profit, regardless of the outcome.
Bookmakers and betting exchanges
Another variable in the question of ‘how do sportsbooks make money’ is the issue of betting exchanges, which are very common in the UK but have yet to catch on in the US. As already explained, while a betting exchange site may look a lot like a sportsbook or bookmakers from the outside, how they work is very different.
Betting exchanges are peer-to-peer betting platforms, which means bettors bet against each other, albeit anonymously. With bettors effectively deciding the odds themselves, how does this change the answer to the question ‘how do sportsbooks make money?’ and their efforts to keep a balanced book.
‘Keeping bookies honest’
More experienced bettors might tell you that betting exchanges ‘keep bookies honest’ by creating an alternative to their services. In principle, this means that if you don’t like the odds offered by your bookie, you can simply go and see what the prices are at Betfair, Smarkets or Betdaq.
Of course, this added factor means that bookmakers have to be very attentive to movements in prices to stay competitive with not only other bookmakers but betting exchanges where, in theory, the odds do not have to include any allowance for the overround. This situation can again create many opportunities for savvy bettors and is part of more than one betting strategy.
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Betting.net has other resources to make you a savvier bettor
By now, you’ve probably realised that there is a lot more to Betting.net than just this guidebook on how bookies make money. We have reviews and ratings of all of the casino and sportsbook operators, as well as a growing section on the various betting strategies available that can help you become a more savvy bettor, whether you are new to betting or have years of experience.
Conclusion – now you know how bookies make money
Now you’ve read this guide, you should be aware of how bookies make money, and all of the factors that affect their ability to do so. There are three main takeaways in the answer to the question ‘how do sportsbooks make money?’
First of all, how bookies make money isn’t necessarily from losing bets, as many people might think, but from calculating the odds to give them a margin regardless of what happens.
Secondly, this margin is called an overround, and calculating this effectively is subject to many factors that a bookmaker needs to respond to, in an effort to balance their book. A balanced book is the ideal situation for a bookie, where their liability is roughly equal no matter what happens and they get their guaranteed profit for the overround.
Last of all, because of the odds movements needed to achieve this state, and the additional competition from bookmakers, price discrepancies can occur regularly and present opportunities for savvy bettors to take advantage of. Now you can take off to greener pastures and apply your newfound knowledge!
How do bookies make money FAQ
