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A Tale of Two Bookmakers: Sharp vs. recreational models

A Tale of Two Bookmakers: Sharp vs. recreational models

To coin a phrase, “there are two types of bookmaker, my friend, those who take bets and those who make dresses.” To the uninitiated, that might sound a little cryptic. Don’t all bookmakers take bets? And what has dress-making got to do with bookmaking? To answer the first question, well, it depends. Depends on what? On what sort of bookmaker you are betting with and what sort of bettor you are. We’ll get to the dresses shortly.

In June 2020, Pinnacle published my article investigating some of the reasons why many bookmakers have gained a reputation for restricting or even closing the accounts of winning bettors. Pinnacle is not one of them. By 'winning‘, I should make it clear now that I do not necessarily mean profitable, at least in the short term. Here, the term applies to expected profitability. Over small samples of bets, bettors can win or lose money largely because of good or bad luck.

What the bookmaker is really interested in is whether their customer holds expected value, that is to say, what profit the bookmaker believes their customer will make after good and bad luck cancel each other out. Looking at results only can take a very long time to answer this. Instead, the bookmaker can make a reasonably accurate assessment much more quickly by using proxy methods such as how the odds move after betting them and the bettor’s closing line value.


The differences between Pinnacle and other bookmakers

Why do some bookmakers restrict winning customers whilst Pinnacle does not? In short, and to avoid repeating previous material, it’s because they operate different bookmaking models. Pinnacle might be regarded as a more traditional bookmaker, setting odds and lines and challenging their customers to beat them. If they do, fair play, they win, but Pinnacle will use the information they bring to the betting market to improve their own data analysis and odds making. In this way, winners are an active ingredient in Pinnacle’s success. Pinnacle isa data-analysis bookmaker.

By contrast, many other bookmakers, who restrict winners, have been labelled by some of the more critical industry observers as dressmakers, hanging their products in the front window to attract customers but restricting access to them if their most generous offers are overexploited. The critics contend that bookmakers should be in the business of setting odds and taking bets, not making dresses.

Such bookmakers are more like providers of entertainment, attracting the recreational bettor who might be more interested in market variety, bonuses, odds boosts, and other offers than looking for expected value. Indeed, most of their customers wouldn’t know what expected value was. Rather than specialising in data analysis, they put more focus on marketing and promotion.

Such marketing comes at a cost. To achieve it, odds must be set that will be genuinely attractive to customers. However, most of the recreational bookmakers have betting margins larger than Pinnacle’s. This implies that to beat the odds of a traditional bookmaker like Pinnacle, they must bias one side or the other to such an extent that the availability of expected value becomes far more likely. Those bettors who are most able to spot this generosity on a systematic basis are the ones most likely to face restrictions. It’s just not profitable for recreational bookmakers to allow them to continue betting the stakes they would like, given the way the odds are being set.

What is the evidence that traditional and recreational bookmakers set odds so differently? One way to investigate this is by looking at the hypothetical returns a bettor will make when betting odds that are best-in-market. What should we expect to see? Pinnacle, as the traditional data-analysis bookmaker should be setting odds that, in their opinion, are always, or at least on average, allowing them to make a profit in line with that predicted by their margin. Recreational bookmakers, too, will be unwilling to stray too far from their margins, but their model of promotional advertising necessitates a larger departure, in an attempt to beat the traditional bookmakers who will typically have smaller margins.

All of this should mean that when Pinnacle’s odds are best-in-market, the returns achievable by betting them will be broadly the same as when they are not. By contrast, when recreational bookmakers go best-in-market, we should predict that returns from those odds should be superior to those implied by their margins. Let’s analyse some data to find out.

How can bettors find the best value?

For 20 years I have been collecting soccer match betting odds and match results to undertake such investigations. Taking a data set of closing football match odds from the start of the 2019/20 European domestic leagues soccer season for 22 separate divisions, after data cleaning and rejection of errors I had a sample of 16.974 matches and 299,619 separate home, draw, and away closing odds from six different bookmakers: Pinnacle, bet365, Bwin, Interwetten, William Hill, and BetVictor.

Each bookmaker’s odds were then separately checked for when any of them were the best price, as compared to a much larger market made available by the odds comparison service Odds Portal. There were 5,727 best-in-market odds for Pinnacle; 3,470 for bet365; 1,916 for Bwin; 1,051 for Interwetten; 634 for William Hill; and 2,234 for BetVictor. Pinnacle unsurprisingly had the largest number, given they have the smallest margins.

The histogram chart below compares three bits of data for each of the six bookmakers. The blue column is the percentage expected loss for a bettor calculated directly from the bookmaker’s average betting margin for this sample of matches. The orange columns represent the actual hypothetical percentage loss a bettor would have suffered had they bet every single price with flat stakes. In the absence of any market odds bias, we would predict the blue and orange columns to be the same. They are indeed similar. In each case, the actual losses are slightly larger, most likely on account of the favourite–longshot bias. Finally, the green columns show the actual percentage loss that would have been experienced when betting only the best-in-market prices.

The difference between Pinnacle and the remaining bookmakers is striking. Whilst the percentage loss from best-in-market odds is much reduced for bet365, Interwetten, and BetVictor, and indeed has actually turned profitable for Bwin and William Hill, those for Pinnacle are more or less the same as the percentage losses for all their odds, as the hypothesis had predicted. Despite having the smallest margins, Pinnacle is still taking the biggest percentage profit from their odds when best-in-market.

The implication is that regardless of the behaviour of other recreational bookmakers, on average Pinnacle ‘know’ what the real price of a football betting match should be and are not afraid to buck the market where necessary. They are still taking their profit margin when they do.

Of course, this is not to argue that the other recreational bookmakers don’t know what they are doing when they go best-in-market. On the contrary, it is likely that their data analysis, whilst perhaps not as sophisticated as Pinnacle’s, is sufficient to tell them what it should be. Moreover, if it isn’t, they can always follow Pinnacle’s odds. Instead, the data implies that a choice to give up some or even all of their profit margin when going best-in-market is a proactive decision and one that fits with a bookmaking model that prioritises promotion, marketing, and entertainment over and above accurate odds, data analysis, and accepting winners. Of course, the trade-off is that if customers are found to be exploiting this generosity repeatedly, that will not be tolerated. Given that perhaps only 5% of bettors are found to be doing so, this is clearly a calculated business decision that works for the recreational bookmaking model. It’s simply cheaper to sell dresses.

To emphasise the distinction between the two types of bookmaker, in the second histogram below I’ve grouped together the data for bet365, Bwin, Interwetten, William Hill, and BetVictor and compared them to Pinnacle’s.

We can also perform a statistical significance test (a two-tailed t-test) on the difference between the percentage loss betting all odds versus the percentage loss betting just best-in-market odds. If our hypothesis is that the orange and green columns should be the same, what is the probability of seeing the differences that we see simply by chance? For Pinnacle, that figure is 79%. For the aggregated five recreational bookmakers it is 0.1%, a statistically significant result.

It means that the difference that is observed is very unlikely to have occurred by chance, and if chance isn’t the explanation, there must be a causal one. The most obvious one is a decision by the bookmakers to intentionally offer more value relative to their betting margin as a marketing tactic.

By implication, then, Pinnacle’s odds are much harder to beat. However, this statement is only true on average. Pinnacle, like any other bookmaker, will make mistakes, and it is the job of the bettor to try to find them. The good news is that with Pinnacle, at least, you will not be restricted from being successful in that quest.
Why choose to bet with Pinnacle? Value is the key to long-term success in betting and Pinnacle provides the best opportunity for you to find value in the odds.



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Joseph Buchdahl
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