How Do Bookmakers Make Money?
Bookmakers don’t make money by gambling they make money by facilitating sports betting.
The bookmaking business is very lucrative. A single player could easily earn you big profits. Player values will fluctuate based on a player’s average bet size. When starting out, unless you have a big bankroll, it’s important to ensure you keep betting limits manageable.
Bookies Make Money off of the Vigorish (Vig)
We’ll use the easiest example to help illustrate how bookmakers make money.
Firstly, let’s consider a coin flip. There’s a 50% chance to land on heads and tails. If a bookie priced this market at even money odds (+100) and he received $1000 in bets on heads and tails, how much would the bookie make? Well, they would end up making nothing in this situation.
They would receive $2000 in action ($1000 on heads and $1000 on tails), but regardless of the result, they’ll need to payout $2000 to the winners, which means the bookie earned nothing.
If you’re going to facilitate betting among gamblers, you need to make money right?
That’s where the vigorish (vig) comes into play.
Vig is basically the commission a bookie makes for accepting the wager. In the case of a coin flip, the bookie would charge -110/-110 odds for betting on heads or tails.
Let’s reexamine the preview example.
If a bookie receives ten bets of $110 ($1100 total) on heads and the same on tails, they’ll end up with $2200 in action. They’ll only payout $2100 to the winners. This means the bookie will make $100.
This is exactly how a bookie makes money. The goal is to try and have a balanced book. What this means is that you’ll make the same amount of money regardless of the result.
Bookies will also have an overround on every single market.
What Happens if You Receive One-Sided Action?
In order to be a successful bookmaker, you can’t gamble. Taking a small gamble on a result once in a while can be fine, but the goal should be to make money on every market regardless of the result.
To do this, bookmakers will sometimes need to use a layoff account. The various pay per head sites will all offer a layoff account, which allows bookmakers to find another bookie to layoff action with.
Here’s an example:
Let’s say the Steelers are playing the Browns. A bookie in Pittsburgh may receive a lot of bets on the Steelers, whereas a bookie in Cleveland will likely take a lot of action on the Browns.
With a layoff account, these two bookies can help each other balance out their action. Both bookies will now make a profit on this NFL game regardless of which team ends up winning.
As a new bookie, it’s important to build up your volume.
The more volume you have, the easier it’ll be to balance most markets.
Making money as a bookie is all about getting the most action as possible. As long as the markets are priced up correctly, you’ll make money on the vig if you balance your book