We all know that all bookmakers in fixed-odds betting apply a certain margin to all events. This is the way they make themselves for living and we don't hate them for that. Since the beginning of bookmaking business house was always keeping their cut and that doesn't make them evil, that makes them business people.
This margin is different from bookmaker to bookmaker depending on their position in the industry, competitiveness, personal visions or greed. It also differs from market to market and form event to event. High profile events will have the smallest margins to attract more bettors, main markets will have lower margins as bookmakers trust them more.
There is a specific type of market we want to analyze in this article. It is a 3-way market or a market with a possibility of a draw. Some of you don't like betting on this type of market as it has more juice – or margin, others love it as it provides them an extra opportunity for making money. Margin is usually from 104% to 110% in this market as you might already know, but the way this 4-10% is distributed is maybe a thing you didn't know.
Margin distribution on draw
Draw is a market that usually 90% of people avoids. This is natural as everyone always bets on some team to win. Bookmakers are aware of this and, as they try to balance the risk on every market, draw market is usually pretty high containing sometimes 1% of margin or even going into negative margin to attract more money on it.
This is a reasonable move from them to make because when you have 2 millions payout on the favorite, 1 million payout on the underdog, the only way you can reduce further risk on those 2 outcomes and increase the number of bets on draw is to balance out the draw going over realistic probability.
There is also one more thing to consider about betting on draws. Poison distribution model – a model bookmakers base their calculations on, can not precisely calculate the probability of draw. This is the reason why Asian bookmakers offer 1x2 market with 108-110% and 2-way market with 102%. This fact was revealed to me from the CEO of one Asian betting company. Simply put, they have never managed to calculate it right so that it delivered the required percentage, although they had the most precise odds for 2-way markets (where you can see the power ratio between 2 teams). European bookmakers add up another factor into Poisson distribution model so it balances out margin on draw in the long run.
Margin on favorites
There are 2 types of bookmakers. Ones who try to be as attractive as possible on favorites and ones who are conservative and afraid of losses. Both philosophies have their pros and cons, but they all make a lot of money when favorites lose.
Those who are attractive on favorites attract more money and suffer more losses when all favorites win, but gain higher returns when they lose. Those who are conservative on favorites and think about risk more than about gain have smaller base of players they attract. They lose less when favorite wins and gain much less when underdog wins.
Margin on favorites differs from event to event, but on most attractive events it can be down to 1% - about the same level as the mathematical probability, about the same level as betting exchanges with good liquidity.
Margin on underdogs
Despite the fact that some bookmakers are unattractive on favorite, they remain the main proportion of their margin on underdogs. This is because the whole industry is afraid of high payouts. They are also afraid of fixed matches, of betting experts being able to recognize high odds on underdogs. In short, bookmakers are afraid of smart bettors.
Betting on underdogs is mathematically the most expensive betting and unless you have the information or real handicapping skills, you will lose on them as you would lose betting on multiples. Although this is being said with simple language there is a lot of mathematics and stats that stand behind this claim.
Margin distribution is made to maximize profits to bookmakers. It was introduced into math models years ago and it has included more factors you can imagine. The best tactic remains picking more winners than losers. It made our life harder with bets on underdogs, but at the same time it is easier to make profit betting on draws and favorites.
This has been recognized in last year or so by numerous bettors around the world and as guys from within the industry we have analyzed this trend. The truth is that this massive betting on draw has produced some results for customers in general, but just betting on draw in any match will not secure you profit in the long run. Betting on draws is as profitable as betting on favorites – you must know how to pick winners. To pick a draw winning bet is a bit more complicated than picking a winner and the number of long term winners using strategy of betting on draw can be counted with fingers.