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Guide to Understanding How Do Bookmakers Make Money in 2024

Publish Date: 10/03/2020
Fact checked by: Myra Chopra

Online gambling can be incredibly lucrative as you stand to win massive amounts of money with well-placed bets. However, you might be curious as to how the bookmakers are making money since only if they are making money are they able to offer exceptional online gambling options. Bookmakers, including online operators, use precise techniques to ensure they maintain an advantage, even while giving you the chance for great winnings. By understanding how bookmakers make money, you can learn when they are providing a poor value compared to an exchange, helping you become more profitable. Bookmakers make money by accepting bets on a market and pricing it in a way that does not represent the real probability of the outcomes. This margin, or overround, gives them an edge over bettors.

Main Points Covered:

Here are the ways how bookmakers make money:

  1. Bookmakers set the right bet prices (the vig)
  2. Setting and changing the betting lines
  3. Balancing the Book by eliminating the risk
  4. Taking advantage of Better’s emotions and poor knowledge

Let’s Look at How Bookmakers Make Money! – Quick Guide

The basic principle of bookmaking is easy to understand. So, how do bookmakers make money? A bookmaker takes money when a customer wants to place a bet with them, and they give customers money when they win the bet placed. The basic idea is to take more money than to give to the customer, and that is primarily how bookmakers make money. The art of this role is to ensure this scenario happens. We all know it is not possible to control the result of any sporting event. But one thing the bookmakers can control is to decide how much they would win or lose on the result of the sporting event. How? Because it is the bookmaker who sets the odds for all the bets they lay, which in the end enables them to ensure a profit for themselves.

  1. Charging Vigorish/The Overround

The most basic technique that bookmakers use to gain a profit is by including a Vigorish into the odds that the bookie presents to the punters. Also known as a vig, overround, margin or even ‘juice’, the vigorish is added into the odds so that regardless of the outcome of your bet, the bookmaker will get a profit, similar to charging a commission on the bet you place. To understand this concept, here is an example of a coin toss:

  • When we flip a coin, there are two possible outcomes – heads and tails. Both of them have equal probability. In other words, there is a fifty percent chance of heads and a fifty percent chance of tails. If a bookmaker were giving real odds on the toss of a coin, they would offer even money. If you view it in odds format, it would be 1/1 in fractional odds, 2.00 in decimal odds, and+100 in money line odds. A successful Rs. 1000 bet at even money would give back Rs. 2000, which is Rs. 1000 profit plus the initial stake given on the bet.
  • Now think this way, the bookmaker had 100 customers, all betting Rs. 1000 on the toss of a coin, with half of the wagers betting on heads and half of them betting on tails. In this case, the bookmaker would make no money and would run into a loss.

So as per this example, the bookmakers are taking in a total of Rs. 100,000 in bets placed, but they also have to pay out a total of Rs. 100000 in winnings no matter what the results are. And as per this scenario, it is of no good to their business.

What is the Vigorish or Vig?

The role of vig is important in how bookmakers make money, and this is the primary reason why they build in the vig to the odds. They can thus guarantee that they will make money no matter whatever the outcome is. When two outcomes are equally the same, it is common for them to use odds of 1.9091 in decimal odds, 10/11 in fractional odds, and -110 in money line odds.

  • Going ahead with the same example, the odds on heads and tails would both be the same, but they would now be a little different at 1.9091. This means that a successful Rs. 1000 would return a total of Rs. 1909 were Rs. 909 in profit, plus Rs. 1000 original stake.
  • So, assuming with 50 customers betting on tails and 50 customers betting on heads, you can understand how much difference it made. Now, the bookmaker is getting guaranteed profit forever tossing the coin.
  • Now, the bookmaker needs to pay Rs. 95,450 against the Rs. 100,000 which he received from total bettors. In this case, their built-in profit of margin, which is Rs. 4,550 is called the overround or vigorish (vig). It is usually called the percent of total wagers received.

The example we have given is a very simple one to help you understand how bookmakers set the odds to help them benefit and how bookmakers make money. In real life, things are more complicated, especially when it comes to real sports events as no one can guess the outcomes and also, there are not just two outcomes, but many more and bookmakers aren’t always going to take in exactly the same amount on all possible outcomes.

For these reasons, making money is not a piece of cake as a bookmaker. They do not just have to charge vig but also use a lot of other techniques to ensure constant profits, and this is where the role of odds compilers comes in to how bookmakers make money.

Who Sets the Bookmakers Odds?

Odds compilers (traders) are people who set the odds at bookmaking firms. The odds they set finally decide on how much in wagers a bookmaker is likely to take in, and how much they are likely to make. This act is also known as pricing the market. Pricing affects how bookmakers make money.

Several aspects are involved in pricing up markets for sports events. The main goal is to make sure the odds correctly displays how possibly an outcome would be and also ensuring that there is a margin of profit. How bookmakers make money is by determining the likelihood of outcomes is based on statistics and sports knowledge and adding their margin. Thus, compilers should have knowledge of statistics and sports as well.

These compilers have to take a number of factors into consideration like the current form of players, past records etc. Based on all factors, they reach a conclusion, and they do have a target margin. Compilers also have to try and ensure that a bookmaker has a balanced book.

Why Do Odds Change Over Time? The Balanced Book 

If a bookmaker has a balanced book on a specific market, he gets the chance to make about the same amount of money despite the outcome which is also how bookmakers make money. With an imbalanced book, the result would influence how much is made, and it could even end up in a loss. A balanced book is usually the choice, for understandable reasons, and is what odds compilers typically look for.

This is one reason why odds fluctuate over time because odds compilers adjust them to make sure their book is balanced.

However, there’s no guarantee that adjusting the odds will always create a balanced book, but in most scenarios, it helps. This is also one of the primary reasons why the volume of bets is so vital to bookmakers. The more money they get for placing bets means they are more likely to get the balance right. Although it is rare to get markets perfectly balanced; the aim is to get as close as possible.

It’s worth mentioning here that at times odds compilers will actually want an imbalanced book. If they are pretty confident about a particular outcome, they will try to create a scene where they get a chance to make the most profit if it happens.

How Much Profit Do Bookmakers Make?

How much bookies make per year can vary substantially, but it mainly depends on how much each of their customers bet on each game and how many total players they have betting with them each week.

Despite the fact that bookmakers make money, punters can use betting/casino guides to increase their chances of winning bets by using strategies such as Inplay tennis Betting Strategy matched betting, Betting Glossary, Betting terminology and arbitrage betting.

Matched betting is using the free bets offered by the bookmaker in combination with betting exchanges to guarantee that a profit is made no matter what the outcome of a sporting event is. An arbitrage bet is when you can cover all results of a sporting event and guarantee yourself a profit.

There are also specific betting strategies based on particular sports, for example, cricket betting strategies, golf betting strategies, Horse racing betting strategies, tennis betting strategies and football betting strategies.

How Bookmakers Make Money – Concluding Thoughts

By now, you’d have got the answer to your question, “How do bookies make money”? The mathematical advantage isn’t the only reason bookmakers make decent money. It could also be attributed to the fact that most bettors, due to their lack of knowledge, place bets that they are likely to lose. If you do not want to place a bad bet, then you would need to learn what actually makes for a good bet.

The biggest myth punters follow is that they think they will win because of their gut instinct. Emotions play an important role in how bookies make money. Although this approach can work if you have in-depth knowledge or information about the sport, and have a vast experience in predicting, most often most punters do not have it and end up losing bets. Apart from How do bookies make money”? Gambling Guy also provides information about guide such as can you make money on betting, Which Bookmakers are best for Beginners?, How to do sure bets, how betting odds are calculated, how to bet online? and Asian Handicap, etc.

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