Sports betting » Bookmakers’ profit margin
Bookmakers make profit

With the very broad arsenal of tools (online) bookmakers possess, they are able to give themselves a clear mathematical advantage enabling them to make a very, very big amount of money, day after day. In this article we will explain how. Hereby, we distinguish European (soft) bookmakers and Asian (sharp) bookmakers.

Bookmakers’ profit margin

This is where their way of profiting comes in. Instead of the probability of winning and losing being 50/50%, it’s actually more like 56/44% in favor of the bookmaker. In this way, the bookmaker has an edge over the bettor and will get a steady profit in over the long term. This is also known as bookmakers’ profit margin (vig).

The same principle applies to roulette

You can compare this principle with the house edge in a casino. For example, the roulette table. When you put your money on red or black you will double your money by winning (just like an odd of 2.00 would). So a fair probability should be 50/50%. But, the chance of winning is smaller than 50% because of the green number zero (European wheels) and sometimes double zero (American wheels). This is also known as the house edge. In roulette, this edge is about 2.70% and 5.26% respectively. In sports betting, the edge ranges from about 2% (Asian bookmakers) to as blatantly big as 10% (European bookmakers). Shameless, we know.

Bookmakers’ profit margin in practice

A simple and realistic example for exposing the respective edge and corresponding unjust odds is a tennis match in which the chances for both players to win are mathemetically equal. So, fair odds should be 2.00 for both players. However, European bookmakers open with odds of 1.83 – 1.83 or 1.85 – 1.85 and Asian bookmakers set their odds at 1.96 for both. As mentioned before, the house (be it the casino or the bookmaker) will make a profit in the long term because the odds are in their and against the player’s favor. They are able to effectuate this principle and thereby make a profit by accepting the equal amount of bet volume (in money) on all of the outcomes of a certain bet.

Asian (sharp) bookmakers versus European (soft) bookmakers

Bookmakers' profit margin

The Asian bookmakers achieve this by accepting enough bets to make their odds very efficient. This means that their odds reflecting the probability of a certain outcome really well. Because their odds are very efficient and they have a very high volume, they can afford a lower profit margin. Asian bookmakers realize a turnover which rises in the billions.

On such turnover, a margin of 2% is still very profitable for them. However, the European bookmakers’ odds are not that efficient. Although their average profit margin is about 10%, they can not realise this on each odd. This is because they do not have the knowledge and statistical background over each bet. Therefore, false odds in favor of the bettor are quite common by European bookmakers.

Luckily, every bookmaker makes mistakes

As we mentioned earlier, the main task of each bookmaker and their primary goal is to equalize the number of bets (or better, the volume of money) on all of the outcomes of a certain event. However, bookmakers never actually succeed entirely. That is the reason for them insisting on parlay and other forms of multiple event betting which is more profitable for them than anything else.

Profit margin

The main reason why they do not always succeed with this is because of professional bettors and tipsters who are able to calculate when an odd is wrong and profit from this, which is essentially what Transparent Bets does!

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