In today’s world, the gambling industry is one of the biggest entertainment industries. And it’s growing very rapidly, too. These days, more and more frequently you can find newspaper reports about people who have made big profits with an online casino game, like roulette or blackjack. The thrill of the competition and the thrill of actually winning is something that attracts people heavily. It goes without saying that winning a big sum on the tables at the casino is one of the best feelings there is. However, because of probability theory and statistics, we will see that it is actually impossible to beat casinos in the long run.
In this article, we will explain how casinos can be profitable in the long term and why nobody is able to make a solid profit at online casino games as a player. And fortunately, we will see that, as opposed to the online casino, it is possible to make a consistent profit with online sports betting. At the end of this article we will explain how Transparent Bets is able to be profitable in the long term with online sports betting. Ironically by using about the very same theoretical, statistical models that casinos relate on and apply as well.
Gambling is the wagering of money on an event with an uncertain outcome with the primary intent of winning money. And that is exactly what casino want it to look like: they want to give players the feeling that there is something in it for them. Psychological factors play a major role in this, in the favor of the casino. The excitement of gambling, the thrill of the competition and the thoughts of actually winning money quickly and easily, are factors that many people find very difficult to resist.
The house edge – a fixed, built-in profit margin
The fact that it is possible to make a big hit in the online casino once in a while is what makes people keep going there. Even though it is impossible to be profitable in the long term by playing (online) casino games like roulette and blackjack. This can be explained on the basis of casinos’ built-in profit margin, on which the entire business model of a casino is actually based. All of the games offered by a casino have a statistical ‘edge’ (overround) for the house, while offering the player the possibility of a large short-term payout. The house edge is the expected profit for the casino from a player’s gamble and this varies greatly with the game. Some games have an edge as low as 0.5% and some games have house edges of up to 25%. We know that it sounds ridiculous, but it is true! The house edge can also be applied to sports betting and explains how bookmakers make profit.
Heads or tails
We will explain ‘the house edge’ with the help of the following example. Imagine a coin flip where you can bet on heads or tails. The odds should be 2 on each side, which means 50% probability of hitting one of the sides. Now, the odds at the casino do not represent the probabilities of a specific outcome correctly. In the case of the game ‘heads or tails’, a casino would set their odds for each outcome to 1.9. This will result in a long term profit for the casino. All of this is based on the law of large numbers, which is something we will elaborate on now.
In probability and statistics, the law of large numbers states that as the number of experiments increases, the actual ratio of outcomes will converge to the theoretical. In case of the online casino: the expected profit. In other words, over a large volume of experiments, the variance will even out. Variance measures how far a set of random numbers are spread out as compared to their average value.
Let’s clarify this with our example, heads or tails. If we flipped a coin 100 times it may land on heads 62 times and tails 38 times, or heads 45 times and tails 55 times. In other words, the chance of hitting just as many heads as tails with such a small sample of coin flips is really small. But, as the number of tosses gets larger, the distribution of heads or tails evens out to about 50%. The same principle can be applied to variance in sports betting.
The house edge in practice
By now, we hope that you understand a little bit more about the theory behind the casino’s business model. The model that explains why the majority of casino visitors fail to go home with a nice profit – and are more likely to lose a lot of money instead. Now, we will proceed with giving some more insight into certain popular casino games to further illustrate our theories.
Roulette is one of the oldest and most popular casino games. In this game, players may choose to place bets on either a single number, various groupings of numbers, the colors red or black, whether the number is odd or even and some other selections. Altough these bets differ, they have one thing in common: over any volume of roulette spins, they are not profitable.
This is because of the built-in profit margin (the house edge) which we mentioned earlier. Let’s make this clear with an example. When you put your money on red or black, you will double your money by winning (just like an odd of 2.00 in sports betting would do). 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),
which results in an edge of about 2.7% and 5.4% respectively.
Blackjack, also known as twenty-one, is in short a comparing card game between several players and a dealer, where each player in turn competes against the dealer. It is played with one or more decks of 52 cards and the objective of the game is to beat the dealer. Unlike roulette, the house edge in blackjack is relatively low. Unfortunately for the players, the casino does have an edge in blackjack and the expected value for every bet is also here negative, for the player.
Although the house edge at roulette is fixed with every single bet you place, this doesn’t apply to blackjack. This is because blackjack is a card game where skilled players can use a strategy to lower the house edge, which results in a bigger chance of winning. However, no matter how good you are, the minimum edge for the casino is 0.5%. Although this is not very high in comparison to other games offered by the online casino, it is still profitable for the casino.
Casino’s will rob your bank, but sports betting won’t!
Or at least, it doesn’t have to be the case, when you know what you are doing. By now, we hope you understand that casino’s can’t be beaten in the long run because of their built-in profit margin. In other words, the house’s edge. For many years people have tried to beat the casino, but they never have and never will succeed.
With Transparent Bets, you have an edge over the bookmakers
Although the same theories about the house edge can be applied to bookmakers, who also aim to have an edge over the punter, we at Transparent Bets are able to outsmart them and the competition, other bettors who lack the skill and knowledge. We can do this because bookmakers, in comparison to the online casino, can not always predict the probabilities of a particular outcome correctly. Although they also have an average built-in profit margin, they make mistakes.
In other words, the edge in sports betting isn’t fixed and predefined, it rather differs from time to time and game to game. These mistakes made by bookies will result in wrong odds in the bettor’s favor.
Finding these odds can be explained by the concept of ‘value betting’. Finding value in sports betting is about having an edge over the bookmakers. The idea of value betting is to find exactly those odds where the implied probability of the odd is actually incorrect and exploit these mistakes. If you know how to find these , you can expect a positive value of every single bet you place. In other words, you have an edge over the bookmakers (a reverse house edge, if you will). As a result of this, you will make a profit in the long run, because the odds are in your favor. And it is exactly this edge, that we at Transparent Bets are able to offer you through our predictions.