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Living with and Understanding Your Bookmaker

Our Betting Academy has gone a long way to describe the theory of sports betting: odds setting, market inefficiency, value betting, analysing histories, luck versus skill, forecasting systems, money management and more. At some point, however, we have to take the plunge and actually start betting. What sort of things can the punter expect to have to deal with in the everyday world of sports betting? This is the focus of the final lesson.

First we must decide what bookmakers we are going to bet with. A number of considerations are relevant here. Do they accept punters from my country? Do they accept my currency? What sort of deposit and withdrawal methods do they make available and what do they charge for them? What sort of betting markets do they offer? Do they have a reliable customer service? Do they have a good reputation? How competitive are their odds? Are they known for limiting winners? Last, but by no means least, particularly for the punter just starting out, is whether they offer any welcome bonuses?

A welcome bonus usually comes in one of two forms: a free bet or a percentage bonus. The free bet is offered to new customers of a brand who deposit and place their first bet. The size of the free bet usually matches that of the customer’s first stake, up to a maximum value, typically about £25 to £50. The stake is generally returned to the bookmaker when the free bet is played and the punter keeps any winnings from it.  Sometimes other strings are attached like the minimum odds that the free bet can be placed at, thereby ensuring that there’s a fair chance the bookmaker won’t have to give away any free money. The percentage bonus is calculated according to the size of the customer’s first deposit, and is usually a 100% match, up to a maximum, typically not more than £200 or currency equivalent. The percentage bonus frequently appears to be more generous than the free bet, but beware the more stringent terms and conditions that apply. In order to release the bonus the customer typically has to turn over a sum of money much larger than the size of the bonus from his own deposit money. An unlucky punter may find that he has to make several deposits simply to bet through enough money in order to release the bonus. Whatever welcome offer is available, always make sure you read the small print in the terms and conditions, and understand what it is that you have to do to be rewarded. If you don’t read the bookmaker’s terms and conditions you then don’t have any right to complain about something that you thought should be the case turns out not to be the case. If you take the trouble to read them before registering and see something you don’t like you can always find another bookmaker.

When it comes to terms and conditions there is one that almost all bookmakers will use, and there is nothing the punter can do about it. Essentially it takes the following form: bookmakers reserve the right to close the account of the customer without notice or explanation. For “close”, you can also read “limit”. Punters cry all the time about bookmakers who have curtailed their betting. They are wasting their tears. A bet is essentially a contract between two consenting parties. If one party decides for whatever reason they don’t want to be part of that contract anymore, they are perfectly entitled to do so. It may seem unfair but it’s within the law. Provided the bookmaker has identified this possibility loud and clear in his terms and conditions, each party knows (or should know if they read them) where they stand.

With the exception of money laundering or attempting to fraudulently use multiple accounts with one bookmaker, there is really only one significant reason why a punter should ever be limited or banned: if he’s winning. In fact that is not always the case, but if he’s not winning, it is probable that the bookmaker has identified the punter as someone who will be after some time, based on his betting patterns. Bookmakers use sophisticated tracking software to help identify the habits and preferences of their customers. Arbitrageurs are despised by most bookmakers, and competitive odds hunters (who target best market prices) aren’t far behind. As has been mentioned, if you are going to indulge in this type of betting, you will need to use a pretty good disguise to avoid being caught. In addition to placing some additional random bets to throw them off the scent, don’t withdraw too much of any winnings in one go. Bookmakers are at pains to point out that they are not operating a banking facility, and suffer costs every time a punter deposits or withdraws (unless they pass on the whole cost to their customers). They also see repeated large deposits and withdrawals as evidence of professional activity, and account restrictions are sure to follow sooner or later. Naturally this will have implications for how you manage your bankroll. Keeping a lot of money tied up with bookmakers is clearly not ideal, since they don’t pay you interest. Provided you have a profitable edge, however, your winnings will more than make up for any banking interest you might otherwise have received.

One might wonder why a bookmaker whose job is to balance the action and take a slice of it as profit should really care about winning punters. Winning punters, after all, are paid for by losing punters, aren’t they? The reasons for this are probably multiple, complex and difficult to unravel. Part of it will stem from an old school attitude of “them versus us”. Most bookmakers traditionally started out as gamblers themselves and will still let their ego get in the way. Perhaps it’s more fun to be part of the action than just sit on the fence and take a commission. Part of it will be a consequence of a business decision to offer market leading prices on a regular basis in an attempt to attract new custom, or gain a reputation for offering competitive odds. Often these best prices will be “loss leaders”, that is to say intentionally offering an edge to the punter, like supermarkets selling cheap alcohol for a loss in an attempt to lure more customers in to buy their food as well. Of course, most punters won’t realise this behaviour is intentional, but those who do and choose to take repeated advantage of it will be strategically filtered out by the bookmaker. If liability is increased by offering loss leading value, it has to be managed by other means: limitations and bans are the obvious choice. Finally, part of it might simply be down to the preference for a large number of small staking customers as opposed to a small number of high rollers. It is easier to balance action and consequently far less risky for the bookmaker if he takes many small bets on a market rather than a small handful of large ones. Whether he can make more absolute profit with this business model, however, is surely open to debate. If you cut off your winners, you are restricting your turnover; and lower turnover usually means less profit.

Unfortunately almost all bookmakers, including all UK, Irish and European brands, will at some point limit winning customers. How long you manage to remain active with them if you are winning will come down to how clever you are at making each one believe that you are just stupid and lucky. A small number of new breed bookmaker, however, have chosen to break the mould and adopt a different business model that operates more like a betting exchange or a financial hedge fund. The most well-known of these is Pinnacle Sports.

Pinnacle Sports is famous for the tightest margins (lowest overrounds), the greatest proportion of best prices (although note not intentionally loss leading), some of the biggest stake limits and most importantly of all a complete acceptance of winners. Indeed, it is official marketing policy to claim that they have never once banned a customer for winning too much money.They manage all of this by adopting a far more dynamic odds management system (in fact it has been said that their odds setting algorithms are as complex as Google’s search engine equivalents), balancing customers’ flow of money and their own liabilities to ensure that they take their percentage whatever the result of the events being bet on. Of course all bookmakers do this to a point, but other business decisions like the insistence of offering loss leading value, or holding that value long after other brands have shortened, makes it more probable that action will remain unbalanced. The more you see a bookmaker move his betting odds, the more probable it is that any winning behaviour you may exhibit will be tolerated.

The chief drawback for the punter of such an odds management system is the frequency with which prices change. For less popular markets, furthermore, with much smaller volumes of trading, even a relatively modest number of bets or modest stake sizes can move a betting price, sometimes quite significantly. Of course, price drops occur for all major online bookmakers, but for Pinnacle Sports, they are the most frequent precisely because they have chosen to offer the tightest margins, best odds and accept any stakes up to their published market limits. Since they won’t ban winners they simply can’t leave an “incorrect” price out there for publicity. Naturally, this makes it harder to find a value price. Better prices do not necessarily mean incorrect prices which offer the punter an edge. With Pinnacle Sports accepting more money from winning punters, you may find that by the time you arrive to place a bet with them, the value has disappeared, although of course you won’t know that until long after the bet and many others too have been settled, when you come to analyse retrospectively how you have done.

Despite this, Pinnacle Sports are without doubt the leading bookmaker of choice for the serious or professional punter. So why don’t Pinnacle Sports ban winners? It’s simply a question of money management. No matter how good Pinnacle Sports are at setting betting lines, there will always be a few who are better at it. Wagers from marked winning customers, particularly the early trades on the opening prices, enable Pinnacle Sports to more readily identify where they have made mistakes, allowing them to move betting odds towards values which will encourage the balancing of total action by the time the market is closed. So long as they achieve this goal, guaranteeing their profit margins, whatever the results and however many punters are profiting over the long term, Pinnacle Sports aren’t actually funding their winning customers at all, it’s the much larger population of losers who are. As such, Pinnacle Sports is really then just taking a commission, like the betting exchange Betfair, from the totality of trades placed with them. Their customers are not really betting against them at all, but against each other. The only significant difference is the way in which that commission is generated. Betfair need winners to monetise their business model, which takes a 2 to 5% commission from all profits. Pinnacle Sports need winners to identify the best money management strategy. Both are quite content to let them keep winning because they know it is the losers who are funding them.

There is one obvious conclusion to draw from this analysis. If we bet (or trade) at brands like Betfair and Pinnacle Sports, for us to succeed we will need to be better at estimating probabilities of sporting outcomes than our fellow punters. In practise this will be spotting mistakes earlier than most of the rest. The vast majority of punters lose over the long term. It is their losses which support the earnings of the much smaller proportion of winners. Lots of small losses essentially pay for far fewer big profits. We should see the population of sports punters as an iceberg, with 95% or more hidden below the profit line, supporting only 5% or less who manage to get their heads above it. And only a few of those can really claim to make a decent living from sports betting. When we place a bet we are actually betting against the opinions of other punters, not the bookmaker, who if successful will happily sit idly by and take his cut of the action. The bookmaker just facilitates that action to happen in the first place. Since Joseph and Daniel can’t always be in the same place at the same time, the bookmaker, just like the betting exchange, brings people together virtually to have a bet. And if we don’t bet smarter than most of the rest, in the end we won’t have any profit to show for our efforts.

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