Why Do Bookmakers Charge Bet Margins? Understanding the Profit Motive

Whether in business, work, or personal relationships, our interactions are always built around a ‘give and take’ formula. No one is ever selfless. If we do something, deep down, we expect something in return. No effort is ever free. There is a cost, a profit, and a loss. And that is the basis of a bookmaker’s life. 

When you play with them, they lure you in by offering the best odds to bet on. And you think, ‘Wow, what great odds!’ But within those odds is a secret: a winning amount that always helps them turn a profit, even if you win! Let’s understand the actual winning margin meaning today. 

What Are Bookmaker Margins?

The bookmaker margin is the financial gain a sportsbook will make when you place a bet with them. This is a small percentage that is built into the odds they offer. No odds are ever based on the actual probability of a result. 

They’re adjusted so that the sportsbook, which is offering you a chance to play, is able to make a profit. This tiny amount pays for the expenses of running their operations and safeguards them from the losses associated with betting. 

Bookmaker Categories

There are two types of bookmakers, based on the margins they place on their offered odds: 

• Sharp Bookmakers: These sportsbooks cater to professional bettors who like to place large wagers and take higher risks. Since the betting activity is huge and constantly changes with market dynamics, sharp bookies are able to offer odds on a competitive, lower bet margin.
• Soft Bookmakers: These are the opposite of a low margin bookmakers. They cater to your everyday, casual bettors who prefer to wager small amounts. Soft sportsbooks have higher amounts, they limit bet sizes, and restrict big wins, keeping their risk factor to a minimum.

How Bookmakers Calculate Margins

Bookmakers use the overround principle to calculate their profits. Let’s understand this better with an example. 

Say you and your friend decide to place a friendly wager. You both put $100 on the table, so the total winning is $200. If Team A wins, you take the $200 and if Team B wins, your friend takes it. The odds for win or loss, for either team, are equal.

When you decide to go to a bookmaker and place a bet, the bookmaker offers you 1.90 odds, which means if you put $100 on the table for Team A to win, the bookmaker will only put $90. The total winning will be $190.

The table below shows the actual and implied probability of winning outcomes, which can help you visualise how to calculate overground.

Every outcome needs to have a probability of 100%. In the bookmaker’s case, it’s 105.26%. The extra 5.26% is the overround built into the 1.90 odds they offer.

The formula used for calculating winning probability is Your Stake ÷ Total Winning x 100. To do a calculation on the losing outcomes, you’ll use this formula: 100 – (Your Stake ÷ Total Winning x 100). 

If you do a losing margin calculation in the bookmaker’s case, it comes to 94.74%. The difference is the overround of 5.26%.

The Role of Overround in Bookmaking

Overround, also called vig or juice, is the margin sportsbooks adjust on the odds they offer. Why do they do this? A couple of reasons: 

• To minimise their risks of paying out hefty sums in the event a bettor wins.
• To pay for the expenses of running their operations.
• To make a profit.

You should know that overrounds have to be delicately placed on different events and markets. Because if it’s higher, the sportsbooks risk losing you to their competitors. This is their conundrum: lower margin means they’re more appealing to bettors, but also means they take on more risk. 

Why Do Bookmaker Margins Vary?

There are many reasons why bookmakers would adjust their margins. Some of them being:

• Competition: Bookies want to attract customers. To do so, they’ll offer lower options than their competitors.
• Betting Volume: If the betting volume is high, a bookie can still turn a profit with thinner margins.
• Sport Type: Niche sports give higher offers due to a low betting volume.
• Market Inefficiencies: Bookies try to reduce their losses by overvaluing or undervaluing outcomes. This way bettors cannot exploit them.

The Impact of Margins on Betting Odds

Higher bookmaker margins mean your payout is low and no one likes that. Since we are all for ‘Team Bettor,’ we’ll let you know what you can do to minimise the impact on your winnings. 

How Can Bettors Minimize the Effect of Margins?

Read below to know what tricks you can use to make killer winnings. 

Check an Odds Comparison Website

Use platforms like Oddschecker to compare odds from multiple bookmakers and place bets with the ones that offer the best odds. 

Specialise In Specific Sports and Events

When you focus on a specific sport, you’ll develop a sense of how to place winning bets and how to identify the market inefficiencies. So we’d suggest you master one sport, rather than placing bets on a variety. 

Use A Betting Exchange Option

Betting exchanges like Betfair eliminate traditional bookmaker margins by allowing you to bet against each other. This often leads to better odds and increased winnings.

Claim Promotions and Free Bets

Bookmakers offer bonuses and promotions, such as free bets. Knowing about these offers can help you make a profit despite their margins. 

Identify Value In Today’s Market

It’s a common practice for bookies to undervalue and overvalue bets. Use match betting calculators to understand pricing differences. Beat them with some old-school data analysis. 

Bookmaker Margins vs. Betting Exchange Commissions

Betting exchanges make money by charging a commission, while bookies adjust odds to add in their profits. 

If you go with an exchange, they’ll charge you a betting commission, which is typically between 2% to 5%. This amount is still lower than the standard margins bookies set. So if you’re a serious bettor, betting exchanges may be more attractive. 

Responsible Gambling

We are advocates for responsible gambling. Never go after your losses. Understand the game, and the margins to properly manage your bankroll. Set limits and exclusions to keep your mental health and your finances safe.