The maths behind the bookmaker’s latest tactic to take your money and how to beat them.

by | Jun 8

5 min read

The current state of the betting industry

The betting industry is currently super competitive with a large number of bookmakers vying for market share.

Marketing effectively to new and existing customers has never been more crucial to their success, and the latest tactic being employed by bookmakers makes them look like they’re giving away free money when in fact the maths behind it all is in their favour.

Below we show you the latest tactic used by bookmakers and also how you can make a side income by betting smart with these bookmaker promotions.

 

 The latest bookmaker tactic

The tactic is the use of a “bonus bets for 2nd and 3rd horse racing promotion.

Nearly all bookmakers are offering these horse racing promotions weekly. There is a high degree of “perceived value” in these promotions yet nearly all bettors actually lose money from them. See the below banner for what is typically offered.

What is the secret the that bookmakers don’t want you to know regarding horse racing promotions?

Well in fact there are three parts to this.

1) Pricing of favourites: On these horse racing promotions 90% of the bets are on the favourites, and the bookmakers anticipate this betting flow. So what they do is “protect the prices of favourites”. For example a very common scenario is when the bookmakers are $2.50 for a favourite when the true odds (as implied by Betfair) are $3.00. The 50c price difference may not seem like a lot, but in expectancy terms is very significant. Betting on a $2.50 favourite when the true odds are $3 leads to an expected loss of 16.6% on turnover. I.e. if you have a $100 bet you’re expected to lose $16.60. This is “bookie secret #1

2) Bonus bet likelihood: The next step is to calculate the probability of receiving bonus bets by betting on these favourites. Historically favourites run 2nd or 3rd approximately 25% of the time.

3) Extraction of value from Bonus bets: Now we need to calculate how much cash value can be extracted from bonus bets that are received 25% of the time. The main thing to know about bonus bets is that the bettor doesn’t keep the stake. So for example if someone has a $50 bonus bet on a $1.20 favourite and the favourite wins, the bettor will have converted a $50 bonus bet into $10 cash. This would be a conversion of bonus bets into cash of 20%. The maths behind optimal bonus bet use is that the loss on conversion of bonus bets to cash is the reciprocal of price, assuming the price is fair (as implied by Betfair). For example if you have a bonus bet on a price of $2.00, you’re expected conversion from bonus bets to cash is 1/2 = 50%, whereas if you bet on a price of $10, you’re expected loss on conversion is only 10%.

Betting industry insiders indicate that the average bettor in Australia converts bonus bets into cash at 25%. This is bookie secret #2. 

 

The final thing to do is summarise all the above scenarios to derive a final “mathematical expectancy” (see below).

 

Value from the average bet on a race with a promotion on it: -16.6%

Value from the bonus bet: 25% (the proability of receiving a bonus bet) multiplied by 25% (the average conversion from bonus bets to cash) = +6.25%

Total expected value: -16.6% + 6.25% = -10.35%

So the average bettor loses at 10.35% when they bet on horse racing promotions, which is quite a spectacular statistic. 

See the derivation below. 

 

How to beat the bookmakers on these horse racing promotions

Edge Alerter has a system that wins 30% profit on turnover from racing promotions. The racing model monitors last minute price fluctuations to snipe the best value horses/greyhounds in these promotional races. As explained above there is often very poor value in the favourites so the model identifies the best value around these favourites. 

 

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