Sports betting » Bookmakers’ profit margin
Bookmakers make profit

Successful (online) bookmakers  build margins into their odds: the bookmakers’ profit margin. So no matter who wins, the bookie will always make a profit. Odds are not just set to reflect the probabilities of an outcome; they also reflect the bookmakers own exposure.

In this article we will explain everything you need to know about the factors that go into setting the odds, distinguishing between European (‘soft’) and Asian (‘sharp’) bookmakers. 

Bookmakers’ profit margin

Instead of the probability of winning and losing being 50/50, it’s actually more like 56/44% in favour of the bookmaker. This way, the bookmaker has an edge over the bettor and will get a steady profit over the long term.

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

The profit margin in practice

For example, let’s have a look at a tennis match in which the chances for both players to win are mathematically equal. So, fair odds should be 2.00 for both players. However, European bookmakers open with odds like 1.83 – 1.83 or 1.85 – 1.85, while Asian bookmakers open with 1.96 for both. The casino or the bookmaker will make a profit in the long term, because the odds are in their favour and against the player’s. They are able to effectuate this principle and make a profit by accepting the equal amount of bet volume (in money) on all of the outcomes of a certain bet.

Asian bookmakers versus European bookmakers

Bookmakers' profit margin

The Asian bookmakers achieve this by accepting enough bets to make their odds very efficient. This means that their odds reflect 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, so 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’t realise this on each odd. This is because they do not have the knowledge and statistical background over each bet.

Bookmakers make mistakes…

The bookmaker’s primary task is to equalize the number of bets (or better, the volume of money) on all of the outcomes of a certain event. However, bookmakers actually never succeed to do so entirely. That’s the reason why they insist on parlay and other forms of multiple event betting which are more profitable for them.

Profit margin

The main reason why they do not always succeed doing so is because of professional bettors and tipsters who have the knowledge and skills to calculate when an odd is wrong and thus are able to profit from this, which is essentially Transparent Bets’ practice.

See also:

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