How do online bookmakers make their money?

Posted on by Clare Louise

Most bookmakers tell you about the high chances of winning on their platform, and some inflate these indices to get bettors to stake more. But what bookies rarely reveal is how they make their income. Read on as the secrets to their profit-making are about to be unveiled in this guide.

Who is a bookmaker?

There are many different names for a sports bookmaker around the world, from the informal “bookie” used in the UK through to 마권업자, which is the Korean version. Whatever they are called in each country, though, a bookmaker is an individual or a company that facilitates betting, usually on sports games. A couple of years ago, the operations of a bookmaker would require a physical shop, but now these platforms can operate through the internet.

These online bookies can define odds, accept wagers, place bets and initiate payouts, all from the online space. The objective of online bookmakers is to define the odds in such a way that balances the books with an even number of bettors staking on win or loss. However, this goal is not singular, as it is also designed to stimulate more wins or payouts on the part of the bookies.

If the books are balanced, Bookmakers earn the ‘vigorish’ – the fee collected on bets by the platform. However, if there’s an imbalance in the bets, the bookie stands more chances of losing money. The vigorish that bookmakers charge is usually within the borders of 10%, but the value is not set in stone. It can go higher for more popular sports events.

Online bookmakers can pocket these commissions because balanced bets are equivalent to the losing bets paying the wins. This disproves the notion that only the losing bets pay the vigorish, as winners pay just as much.

History and legality of bookmakers

The legality of online bookmakers is not universal, as different countries have different regulations to this effect. For instance, in 2018, the US Supreme Court placed the fate of sports betting in the hands of the states. It nullified the Professional and Amateur Sports Protection Act, which saw 33 states legalize these betting ventures.

Prior to this, sports betting was only fully legal in Nevada, which is home to Las Vegas, one of the gambling capitals of the world. The increase in regulated gambling has also reduced the prevalence of black markets in the bookmaking industry. Notwithstanding, there are still lots of bookmakers who operate behind the scenes to avoid remitting taxes.

However, with the increased revenue generated by sports betting each year and the rising popularity of sporting events, more jurisdictions are expected to join the trend across the US and worldwide.

How bookies design the odds

Here, the primary factor is the odds that a bookie would win an event. Usually, calculating these indices is undertaken by expert statisticians using complex models and advanced analysis tools. Without getting into any boring details, these factors can be reduced to money lines and spreads, both of which revolve around selecting which team will win a match.

Although many online bookmakers get their odds from the Las Vegas sportsbook, which stands as the primary source, these values are still subject to change. The lines and spreads can be dynamic and change up until the sports event commences. The values fluctuate based on:

  • New bets being made
  • Weather conditions
  • Player injuries, etc.

Is the vigorish the only source of profit for bookies?

The vigorish is not the only source of income for bookies, but it is the most consistent and reliable one. As such, most online bookmakers rely on seeking a balance on the number of bets on wins and losses.

On the other hand, bookies also make money depending on the outcome of the games. However, it’s easy to see why this is unreliable. If there are more losses than wins after the game, the bookie’s pocket gets fatter. If it goes the other way, the bookmaker takes the loss.

Balancing the bets by shifting the lines and spreads remedies this uncertainty. More so, bookmakers allow bettors to incur the risks/probabilities associated with sporting events and, on their part, bank on the surety of the vigorish.

Conclusion

Most individuals only view the profitability of online betting from the bettors’ perspective, but they are not the only ones who benefit. Bookmaking is, after all, a business. So, bookmakersnaturally work towards getting significant monetary rewards for their operations. While bettors depend on the outcome of probabilistic games, bookmakers can get income in the form of vigorish whether teams win or lose.