Understanding how betting works is of crucial importance for any future punter, because there is no point in trying to play against the betting provider if you don’t understand the underlying principles of betting.
In addition, betting without any knowledge of how betting operators conduct their business will only increase the chances that you will lose your money. And while that can happen to all of us, it is important to try to minimize those losses since the point of betting is to beat the bookie and overcome the advantage that the ‘house’ has over you.
So how can you overcome this advantage? Are there any techniques which you can use to beat the bookmaker? In order to answer these questions we first have to understand how betting works. In this article we will look at the basics of betting, how bookmakers compile the odds, balance their books and how the new trends in betting exchanges and eSports betting might influence your choice of wagers.
In essence, when you are making a bet, you are depositing money with the bookmaker. If the bet is unsuccessful, the bookmaker keeps the deposited money. However, if the bet is successful, then the bookmaker has to pay out the client the deposited sum multiplied by the odds of the winning bet. This is pretty straightforward and easy to grasp.
The next and more complicated step in understanding betting is the adjustment of the odds and the balancing of the books. These enable the bookmaker to always have an advantage over the punter. Let’s see how this is done.
The bookmakers’ margin, or also known by a couple of other names such as vigorish (vig for short), house’s edge or overround, is the technique with which the betting provider ensures that he always has an advantage over the player, regardless of the outcome of the match.
The simplest way to understand the bookmakers’ margin is to look at a coin toss. In this game there are only two outcomes, each with a chance of happening of 50%. This means that if the bookmaker decided not to include the vigorish in the odds, he would give odds of 2.00 for tails and 2.00 for heads.
If there were 10 players playing the game, and 5 of them bet $1 on heads, and the other 5 bet $1 on tails, the bookmaker would not make any profit at all. If the coin flip results in heads, the bookmaker will have to pay out all of the $10 he received as a deposit, and exactly the same thing will happen if the coin toss results in tails. But let’s say that the coin toss bets were not distributed equally, and say, 7 people bet on heads and 3 on tails. In this situation the bookmaker would basically be riding his luck.
If the coin toss results in tails the bookmaker will win $4 as he will only have to pay out $6 in winnings. However, if the coin toss results in heads, the bookmaker will have to pay out $14 and will therefore record a loss of $4. Based on this, we can easily see why bookmakers have to have a technique which would prevent their business from either constantly working with 0 profit or from being completely dependent on fortune.
The bookmakers’ margin ensures that the bookmaker will make profit regardless of the outcome of the match or event. That’s why when there are only two outcomes in a game (and both of them are equally possible), such as in a coin flip, it is much more likely that you will see odds such as 1.85 or 1.90 instead of odds of 2.00 being given to the two outcomes.
If we use the same example, we can see that if there were 10 people betting $1 on the coin flip, 5 of which bet on tails, and the other 5 on heads, the bookmaker will always stand to make a profit. This is because the total deposits will again amount to $10, but this time the maximum amount which the bookmaker will have to pay out will be $9.5 (if the odds were 1.90) regardless of the outcome.
However, it must be said that this is an overly simplified example, and that there are many more factors involved when creating the odds. This is because most of the time there are more than only two possible outcomes. In addition, the outcomes don’t have the same likelihood of happening. And finally, people don’t distribute their bets equally on all outcomes.
When compiling the odds, it is incredibly important to understand all of the above mentioned factors. That’s why when bookmakers hire people to create the odds they always look for people who specialize in only one or two sports and have extensive knowledge of how statistics and odds work. Odds compilers must look at factors such as the form of the teams and players, their previous results leading up to the game, match history, injuries to players and even the weather conditions on the day of the match.
However, since these are all top notch professionals, they know how to compile odds containing the right vigorish every time, all the time. Let’s look at an example of how odds compilers would create the odds for one specific esport match up.
When Cloud9 are playing TSM in let us say League of Legends, the relative probability of a Cloud9 win is 60% (1.67) and the probability of a TSM win is 40% (2.50). As we can see, when combined together, the percentages add up to the expected 100%. This is not an optimal scenario for the bookmaker.
This is where an odds compiler comes in. His job is to make sure that the combined chances for both teams to win, always go over the expected 100%. For example, a Cloud9 win will be priced by the odds compiler at 70% (1.43) and a TSM win will be priced at 50% (2.00).
As you can see, the odds are much lower after the odds compiler has been at work.
In addition to creating the bookmakers’ margin, it is the odds compiler’s job to create a balanced book of a specific market. The odds shown for the esport match between Cloud9 and TSM represent a nice example of a balanced book of a market. A balanced book means that the odds compiler has taken into account the fact that Cloud9 are favourites for the match against TSM and has lowered the odds as he is expecting an influx of bets on Cloud9 to win.
However, if for some reason the odds compiler has not factored in an injury to a key player, or the injury happened just before the match started, the bookmaker can further balance the odds. For example, if one of Cloud9's key players wakes up with the flu on match day, the bookmaker can increase the odds for an Cloud9 win, thus compensating for the expected influx of bets on a TSM victory.
The bookmakers’ margin is great for the bookmakers business. However, it is not so good if you are a punter who is betting big money and is expecting his winnings to be as big as they possibly can. In his situation, the lower the bookmakers’ margin the better.
This is where betting exchanges come into play. Betting exchanges are transactions made between gamblers, where the bookmaker is only there to make sure that the transaction occurs and only charges a commission ranging from 2% to 5%. In a betting exchange one punter 'backs' a player / a team to win, and the other gambler 'lays' the same player / team to lose. All bets must be matched, meaning that if there is no one to bet against you, the bet will be void.
In short, at betting exchanges players and punters make the rules and set the odds. This means that there is almost no overround and that as long as you find someone to bet against you, you have basically cut out the bookmaker out of the equation.
Something similar to betting exchanges happens in eSports betting. eSports are probably the youngest type of sport that bookmakers have started to include in their offer, so it is only to be expected that there will be many variations in how the odds are compiled until the most ideal solution is found.
Some bookmakers still use the traditional method of giving odds to eSports matches and events just like they do to all the other sports. They try to make sure that the books are balanced and that they have incorporated all of the useful information such as form, stats and history in their odds.
However, some other bookmakers, especially those working exclusively in eSports betting, have let their customers do all of their work for them. They give their punters the chance to choose the winner of a match and then compare how many people have bet on each outcome.
If both outcomes are equally bet on, then the odds would reflect this, meaning that each team will have odds of around 1.90. However, if one outcome is more heavily backed than the other, then this outcome will have much lower odds.
In fact, because of the interconnected nature of the eSports community, insider betting news often travels quite fast and there are numerous bets being placed on only one outcome as a result. In this situation, it is even possible that, if you win, you will only get your original deposit and wouldn’t make any profit.
To sum up, betting is big business and is programmed in a way which ensures that the bookmaker will always make a profit regardless of which the final outcome is and how many people have backed it. In addition, odds compilers and bookmakers always try to make sure that they have covered all the aspects of an event before they give you their odds for it. And even when they have compiled their odds, they can still modify them to protect themselves against losses.
It is up to the punter to choose the best betting opportunity for him. This might mean taking advantage of an inside information that he has got; being really meticulous in his pre-match analysis; or focusing his wagers on some strategic eSports betting.