The psychology of the bookmaker
Racing Editor for bettingexpert. Always searching for winners "against the crowd" and trying to find the value.
How do bookmakers succeed? How do they think and apply their analysis? What are their strategies in dealing with the betting public? Today on the blog our racing expert and former on-course bookmaker Stephen tells us about the psychology behind bookmaking and how punters can find an edge.
What is it that sets a bookmaker apart from a punter? What mentality does he have when pricing up an event? What edge can a punter find to win the never ending battle with the old enemy?
Understanding the bookmaker's perspective can be a huge help when trying to gain the upper hand and turn a recreational punt into something that can be considered earning a living.
1- The layer's mindset
A bookmaker in the traditional sense was not opinionated at all. He could be thought of as someone operating a roullette wheel at the casino. He knew for an absolute certainty that the odds were tilted in his favour and over a long period of time, he would make a profit on his turnover full stop. It was a hard grind, but it was impossible for the punters to beat the in-built margin that they had to play against. How much his business won depended on his customer base and how he controlled his liabilities. In the "good" old days when there was very little competition, a bookmaker could bet to big figures to a captive audience who had nowehere else to go and no access to finding any better value.
These notions are largely dead but the mindset remains. An in built assumption that the punter will lose.
In fact it is a complete fallacy in the modern age as many companies have found to their cost. They now have diversified into other areas as they desperately struggle to cope with competition and lower/non existent margins and a highly educated customer base.
I base this knoweldge on my experience working for two major betting firms and holding a bookmaker's on-course license myself. Both internet based firms used their betting product as a "shop window" to attract custom into the casino and games aspect of the website (hugely profitable with fixed winning margins and praying on the addictive nature of the roullette wheel). The nature of the sports betting/horse racing product in competitiion with the betting exchanges means that there is literally no profit margin in it at all. Anyone who consistently beats prices and bets winners will find their account rapidly cut, restricted or even closed. While this price competition has created a "golden age" for punters, it has made getting bets on regularly and with ease extremely difficult.
The bookmakers have been extremely slow to adapt to the threat posed by the exchanges and have lost vast swathes of their business to them. They have tried to promote mobile betting (rapid area of growth) and a huge array of footballl markets (where margins are still high). This coupled with development into emerging markets i.e Turkey, The Far East has maintained turnover at decent levels and hidden the effect on margin that increased competition has caused. Basically the big firms have got bigger and grown while many have perished or been swallowed up.
2- The modern day bookmaker now has to be opinionated in forming prices
Have a look at the bestbetting or oddschecker grids displaying prices on almost any event. The "overound" at the bottom of these grids hovers around the 100 mark and is often less when comparing prices across around twenty different bookmakers. These prices furthermore are often arrived at early in the morning by glancing at the betting exchange prices where there has been very little turnover and the prices havent settled.
In the world of horse racing this is extremely dangerous for bookmakers, where prices can easily be manipulated and false prices created by a knowledgeable few. It is little suprise that only those companies with a long established and nurtured customer base have survived and carried on offering the product, while smaller firms have gone bust and fell by the wayside. In the early days "Luvbet" offered early prices on every race first thing in the morning, and despite trying to bet to massive margins found themselves picked off by astute players and ended up going bust owing thousands.
The marketplace is now dominated by the bigger firms and in time this may lead to an increase in margins, although the low cost business models of the betting exchanges will continue to be a thorn in their side. It really is a vicious circle for the layers : if they try and increase their profitability then the turnover disappears and customers are lost elsewhere. But if they bet very close to nothing (100pc books) they are forced into risk taking that is alien to their mindset (i.e standing huge liabilities confident in the knowledge that the odds are in their favour - when they are not). More and more "views" that a favourite must be laid are being taken (often masked in a marketing budget as a move to attract new business), and this can only be good news for the shrewd punter.
3 - What sets a bookmaker and a punter apart?
To a layer this is a business pure and simple. It is not a punt down the pub for an interest, but a numbers game with high costs that must be covered and a base of players that these days have to be tightly controlled and limited. Only when a layer feels he has found a "VIP" client will huge freedoms be granted to that account. Until then punters are viewed with suspicion in the modern age, with the dreaded label of "arber" immediately tagged on any account taking a price bigger than those available on the betting exchanges.
The punter on the other hand has to be similarly ruthless and price focussed if he is to profit over the long term. He can ill afford the loyalty that online layers seek to covet. He can never accept a lesser price simply because he has bet a winner with firm a, when firm b offers a point bigger. Many companies delay the process of withdrawing funds simply because of this. To them the withdrawing of winnings is a bad sign and to be discouraged. Not only does it signal a disloyal price sensitive bettor, but also the costs involved have a huge negative affect on their bottom line.
The punter has to be flexible and fast moving in his battle to obtain the top price about every carefully considered bet. The bookmaker is keen to promote an "action junkie" mentality in its clients. Channeling punters towards the "next live event" and a rapid succession of games and betting options, with little time for reflection or analysis. Enter any betting shop in the UK today to witness this attempt to bamboozle. There are live "events" every minute whether it be animated racing, dog racing, lottery draws etc etc and higher margin betting "opportunites" are ruthlessly promoted.
4- What edge and advantage can the punter gain over the old enemy?
The punters huge advantage has always been selectivity. Whereas the bookmaker now has to offer literally thousands of markets on any given day and stay on top of them, the punter can specialise in a certain area of expertise and focus totally on that. The layers love a punter who bets in a wide number of sports, often when they are shown on live TV, and actively seek to cultivate these recreational players by offering free bets and promotions on these sports.
Such is the competition to bet on so many different areas relevant to many different countries that many firms used automated pricing systems to offer prices across a massive number of sports. Companies such as Betgenius offer online firms the ability to bet on events that their relatively small staff numbers could not possibly cope with. While these prices offered mirror the "average" offered across the industry, they can be extremely slow to react to a change in circumstances and can be rapidly wildy wrong. In low margin events such as tennis the astute punter is always favourite to show a profit overall if he can keep his discipline and not chase any losses.
In the world of horse racing the betfair market offers a the skeleton on which the entire bookmaking industry offers its prices. Near the off these prices are more settled and an extremely accurate guide to the likely outcome on any given event, but in the mornings the prices are based on tiny turnover and regularly completely "wrong". The shrewd punter will always profit if his opinion is good and he can manage to get reasonable sums on through an array of different accounts and outlets.
With regard to staking the bookmaker does seem to hold all the aces. Within all trading software firms can limit there liabilities per bet and overall for the event. This can cause huge frustrations to any astute punter who's account is limited to pennies when he tries to bet in hundreds. On small events, such as a selling race in horse racing, the trader may have the maximum bet liability set to a hundred pounds, which means a customer with a high risk factor of 0.1 can only bet his selection to win ten pounds.
This causes immense frustration, particularly when the heavily limited punter in a profitable area discovers he can still bet in thousands on an event where the bookmaker has more confidence in the prices. From my own experience I have found all my betting accounts "slashed" to death on any horseracing market, but if I wanted an "interest" bet on the football shown on TV in the evening I can bet upto the maximum stake offered. This is good management by the bookmaker and in some ways shows the punter respect but hardly helps in the achievement of long term profitability from betting.
The psychology of the modern bookmaker has had to adapt in recent years as margins have fallen dramatically. It is still based in the flawed theory that the bookmaker always wins but in order to achieve it he has had to manage his customer base with far more rigour than ever before. At the same time he must nurture and encourage "mug" business and expand the turnover into areas and countries where margins are far higher and liabilities controlled i.e casino and games.
For the punter he has never had it so good in terms of choice and value. If he can keep disicipline and manage stakes to a rigid set of rules he is, for the first time in the history, favourite to win and make a long term profit from betting.
You can follow Stephen on Twitter @stephenh61
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