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Explained: How Online Bookmakers Work

If you are new to the world of online sports betting or simply can’t tell your odds from your elbow, then look no further, we’re here to help. As with any game it pays, quite literally in this case, to know at least a little of how it works.

You’ve heard the phrase “beat them at their own game’’ – in order to increase your chances of winning, it makes sense to have some understanding of how online bookmakers operate.

We’ll take you through the basic mechanics of betting, from how bookmakers function to how the odds are set and how you can make smart bets.

The Beginnings of Betting

Betting has been around since pretty much the beginning of time. Tiles, thought to have been used in a game of chance, were found in China dating as far back as 2300 BC; this, as well as 40,000 year old dice and cave drawings showing gaming groups, mean that gambling could easily be classed as the most ancient pastime ever.

And if betting has existed for that long, you can bet your bottom dollar that there has been a bookmaker in the middle making it all happen, and making a tidy little sum in the process. Things have come a long way since the Stone Age, though, with the global market value for online betting alone hitting over the $41 billion mark in 2015.

What Do Bookmakers Do, Exactly?

What Do Bookmakers Do, Exactly?

A bookmaker is the middleman.  For every bet there is a winner and a loser, and the bookmaker is the pivot between the two, pitting them against each other. Bookmakers set the odds and determine the price of bets. They don’t predict or speculate – at least not in a realistic way, but more on that later. Instead, they’ll offer a bet that will gain equal interest both ways, and give as little risk to themselves as possible.

It’s a basic in and out system – they take money in on bets, pay money out to the winners, and pocket the rest. The key part of that process for the bookies is to ensure that there is more money coming in than there is being paid out. So how do they do that?

How Do Sportsbooks Operate?

Let’s take it down to the most simple of bets: the humble coin toss. In realistic odds, there’s an equal 50/50 chance of winning. In decimal terms, that’s 2.00 (again, more on this later). You bet $1000 on heads, someone else bets $1000 on tails. The bookies will have $2000 in the pot.

With those odds, that would mean the payout will be $2000 (the original $1000 bet, plus the $1000 win). In this case there is no profit for our poor bookmaker, who’s just trying to run a business, and that business is all about making money.

How Do Bookmakers Make a Profit?

So what do bookmakers do to ensure a profit? They change the odds in their favor by building in a margin to the odds, also known as the ‘vig’ or ‘overround’. In layman’s terms, that’s simply the bookmaker’s fee for making the bet.

Now, instead of a realistic 50/50 outcome, or 2.0 decimal odds, they offer you odds at 1.901.  It’s not statistically accurate, but there’s still a fair chance of winning either way – heads or tails. Except this time the payout to the winner will be $954.50, meaning that the bookies have a profit margin of $45.50.

This is a simplistic explanation, but that’s basically how it works.  So, how do bookies make their money? They do so by factoring a fee (margin) into the odds with careful consideration and calculations.

How Are Odds Calculated?

How Are Odds Calculated?

Odds are worked out by oddsmakers, otherwise known as ‘traders’.  These whiz-kids look at the realistic probability of outcomes, using a combination of statistics, mathematical principles of probability, public opinion, and expert knowledge of a particular sport or event.  Using their findings, they then calculate the odds required for the bookmakers to achieve their target profit margin.

What they will also take into consideration is a ‘balanced book’, which basically means odds which will see the bookmakers making the same profit, no matter the outcome of the bet. This is why you will often see the odds change as the event nears – that’s the bookies protecting their profit.

For example, if too many people have placed their bet on one option, this is a risk to the bookies and so they will offer better odds on the opposite outcome in order to encourage bets in that direction, to balance things out.

So What Exactly Are Odds?

For every event, there are a certain number of probable outcomes. Bookmakers work out the probability of each outcome and translate that into odds for betting purposes.

The odds can be written in a few different ways. Fractional and decimal odds are more commonplace in Europe, while in the States, you’re much more likely to see them written as a number preceded by a ‘+’ or a ‘-‘ (+150 / -300). Whichever way the bookmakers present their odds, they all provide the same information: how likely an outcome is and how much money you’ll potentially receive should you win.

It’s just a matter of learning how to read them. Here is just one of many simple guides to get you started.

If you do get confused by all these numbers, dots and dashes flying around, there are easy-to-use convertors that allow you to switch between fractional, decimal, US, plus other international odds systems without your head exploding.

A quick Google search will also provide you with a number of online betting calculators that can help you figure out what your returns will be from the odds offered  So as long as you have a basic understanding of what you’re looking for, there are plenty of online betting tools to help with the rest.

How Can I Use This to My Advantage?

How Can I Use This to My Advantage?

If the bookies are the ones setting the odds, using knowledge from a team of mathematical geniuses, how can you ever expect to beat the bookies?

They may have the brains and the business edge, but as we said earlier, there is always a winner and a loser. So, you still have a 50/50 chance in that respect!

However, there are things that you can do to maximize your returns.  First of all, shop around. There are so many online sports gambling sites to choose from, some offering more competitive odds than others. Different bookmakers will have different margins (the fee worked into the odds to ensure a profit for the bookmaker). The higher the margin, the less value your bet has, meaning less profit for you.

Getting Started in Sports Betting: What to Consider

The margin is just one thing to consider when choosing which online betting website to use. To help you chose, we’ve compiled a list of the top betting sites with an easy-to-understand guide to online sports betting.

It also pays to consider the timing of your wagers. As we mentioned before, the odds can fluctuate over time. That could be due to team information released closer to the game, or it could be the bookies playing the public to balance their books. By keeping a watchful eye, you can look out for those sharp bets.

A sharp bettor is one who thinks about the long-term game, someone who carefully weighs up the information at hand and doesn’t follow the public consensus on a bet. You’re betting to make money, right? Having a long-term game plan is worth thinking about.


As well as knowing how to read the odds, it’s worth considering how they are used in different kinds of wagers. You have straight bets, money line, point spread or over/under.  Then there are your more exotic bets such as parlays, which can be a combination of straight-line bets.

It can take some time to get to grips with all the terminology.  The best advice is to start with a sport you have some knowledge of, but try not to let your team allegiances sway your decisions. And as mentioned previously, don’t always go with the public bet. Start with simple bets, and take time to work out a betting strategy that works for you.

Welcome to the World of Online Betting

Whether you are a complete novice to the scene entirely, or your previous betting experience has been confined to your local bookie’s shop on the high street, the world of online betting can seem like a whole new world, with its own strange language. But the principles are the same, and it gives you so much more freedom, and many more options.

If you want to put your bookmaking knowledge to use, check out the latest betting tips.  Good luck!

John Milton
John Milton
Having worked in the marketing department at two online sports betting sites, John brings his love of sports to serve BigOnSports as chief writer. He will be researching and writing about the sports betting community to improve your experience as a sports bettor.

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