What is a bookmaker and how online bookmakers work?

Bookmakers working at the office We realize that not everyone visiting our website is a pro punter looking to lay large bets and watch the margins tightly. Many people decide to bet online out of curiosity or to get better odds than their high street bookmaker offers, without actually knowing much about this business. If you ever wondered what exactly is a “bookmaker” and how the online bookies work, we have compiled information about all this in a way that is simple and easy to understand.

First, lets' look at what is a bookmaker and how the bookmakers make money. A bookmaker, sometimes referred to as “bookie”, is simply a company (sometimes individuals) which takes bets on various events. The bets are based on whether a certain event will happen or not and customers of the bookmakers have to option to chose to wager on either outcome. More often than not, the bets offered by the bookmaker will be related to a sporting event or horse racing, although with the popularity of the internet and fast communication, today's bookies would take bets on pretty much everything – from presidential elections to TV competitions.

The bets placed by the customers of the bookmaker are based on predetermined odds and the profit of a winning bet is also correlated to the odds offered on that particular bet. For example, a bookie could offer 2/1 (pronounced “two to one”, not two divided by one) on Team 1 to win the game and 5/1 (five-to-one) for Team 2 to win the game. The 2/1 and 5/1 are the odds and punters could chose to place bets on either outcome. If you placed a wager on Team2 to win and they do, the bookie will pay you back 5 times your wager. See our how odds work guide if you are also unfamiliar with the workings of the betting odds offered by the bookmakers.

Now, this begs the question of how do the bookmakers make money? Most people wrongly assume that the bookies make money when people lose their bets and lose money when the punters win their bets. While this is true sometimes, this is not how the bookies make their money, the well-run ones, at least. The main source of profit for the bookmakers is what is known as “vig”(short from Vigorish) or sometimes called “juice” and “spread”. You can view the vig as a small fee the bookie makes from all the bets. The main focus of a bookmaker is not to have a lot of looser (although it does help), but to have equal amount of wagers, relatively speaking, on each side of the bets offered, than charge the small fee via the vig (juice) on the odds.
Let's look at an example to make all this clear. Let's say a bookmaker offers bets on a flip of a coin. The chances for heads to occur are 50-50. Now, the bookie's job is to have equal amount of money bet on both “heads” and “tails”, let's say 10 people bet £1 on “heads” and 5 people bet £2 on “tails”. No matter the final outcome – the bookie will lose no money, since on each side of the bet there is the same amount of money. But how will the bookie make money from this bet? Simple, they will “juice” the odds (have vig) and instead of offering 2.00 odds on the “heads” and “tails”, they will offer only 1.90 odds. Assuming that “heads” comes up, the bettors have wagered a total of £10, but will get paid a total of just £19 (£10x1.90), the bookie pocketing the £1 left over from the punters who took the “tails” and lost. Bookie taking bets

As you can see, there are equal amount of money lost and won on this bet, but because the bookmaker has the vig in the odds, they make money regardless. But how would the bookie ensure that both sides of the bet have equal amount of money wagered? That's also done via the odds. Often you have seen odds on a sporting event change over time. This is done by the bookmakers to give people incentive to wager one way or another, all with the point of having both sides of the bet with equal amount of money. To use our previous example, what if there are more people betting on “heads” than tails? In that case, the bookie will change the odds preferentially for “tails”, let's say offering 2.10 odds on tails and only 1.70 on heads. Knowing basic math, people see that the chance is 50-50, but the pay on “tails” is much better, so naturally more people will start betting on “tails”, until both sides of the bet have equal amount of money, in which case the bookie will go back to offering 1.90 odds on both heads and tails. Of course, this is a very simplified version of how the bookie moves the odds and makes money, but the basic idea is the same, only the math is much more complex.

So now that you know what is a bookmaker and how the bookies make money, let's talk about the online bookmakers. What makes them so different than the traditional bookmakers? Nothing, really, other than the fact that people can now place bets over the internet, rather than going down the street to the local bookie. The online bookmakers work in the same way that a traditional bookie shop does, but have many more customers, since the pool is the entire world, rather than just the local residents. Because of this, the odds at the online bookmakers are much better, betting markets (things you can bet on) are more numerous and it's easier for the punters to place bets, either from home or on the go via their smart phones, now that the mobile bookmakers are becoming increasingly popular in the developed countries. The only issue, although a big one, with online bookmakers is safety. Because an online bookmaker is simply a website that takes bets, realistically anyone with some betting software can create a betting site and take bets from people all over the world. How do you ensure your own safety, as far as getting paid and not having your personal information sold to some marketing company? The bookmakers we have listed on our home page are all licensed and regulated to offer sports betting in their jurisdictions, so you know you bet only with safe bookies. Don't fall into the trap of simply joining the first online bookie that has a good sign up offer, rather than chose from the very best in the industry.