Without a doubt, the only sport that manages to both unite and divide a country must be football. While the World Cup succeeds every four years in attracting careful attention and thrill from a whole nation, the Champions Leagues or Premier League will trigger, every year, the same pride and rivalries. However, football is a sport of not only pride and passion, but also of money. The multibillion dollar industry involves the whole organisation of the national leagues, clubs’ businesses, as well as the media and rights to broadcast, and finally, betting: What better way to spice things up a little than to bet on the game’s outcome? Making the link between the traditional field of gambling and a football game is just another way to intensify the inherent euphoria that surrounds sports. It is at this very junction that bookmakers intervene to make money out of this “mess” mainly made of passion, excitement, pride, gut feelings, and intuitions.
But how does making money out of a football game exactly work? The online sports betting market is a peculiar one, with its own words and ways of doing business. At the core of this betting “game” or market, we find the bookmaker, often called a “bookie”, which would be the organisation in charge of accepting the bets and subsequently paying off the associated price for each outcome. Before receiving the bets, the bookie is in charge of allocating specific odds to the different uncertain outcomes of a game. Hence, part of the job of the bookmaker is to foresee the outcome of a game to make profit out of it. It is easy to imagine that nowadays, bookmakers are sharper on their forecasts, using highly sophisticated quantitative methods to derive the accurate odds of these events. Despite this, online betting on sports has faced a substantial increase and interest in the past years – the dream of beating the bookies is always there, and all the advertising around online betting strengthens this phenomenon.
In reality, however, is the goal of making money off online sports betting attainable? If the bookmakers use “la crème de la crème” of data scientists, how should we expect to beat their own odds? What if gambling was not all about instincts and guts?
Hunter S. Thompson once said that “there are many harsh lessons to be learned from the gambling experience, but the hardest one of all is the difference between having fun and being smart”. A team of three researchers (Kaunitz, Zhong, and Kreiner, 2017) built a strategy to make a profit out of online sports betting. What distinguishes their work is that they chose to rely on the bookmakers’ forecast models: First, they collected ten years of data on the online sports bookmakers’ football games odds in order to ensure the high predictive power of the bookmakers in estimating the final outcomes. They found evidence that bookmakers were already highly performant in predicting the end of a game with accuracy. Based on this, they realised that they did not need to try to build a “better” model, and instead decided to analyse all the bookmakers’ odds and bet on the mispriced ones.
The key element of their approach was to bet on odds that were above their estimated fair value. They, therefore, built a model that would find these mispriced odds and show them on an online dashboard, and they would then check the bet on the bookmakers’ website to place a certain amount of money on it. A bet would from a fair odd if its expected payoff is zero. After having estimated the payoff of a bet, they would place money on the one that benefited from a positive expected payoff. They first applied this strategy to old data from 479 440 football games over a ten-year period and it yielded a 3.5% return, before turning to real betting: With the help of this approach, they succeeded in obtaining a profit of $957.50 across 265 bets by placing $50 per bet over a period of five months, which was equivalent to an 8.5% return compared to a “random strategy” that yielded an average return of -0.7%. The combination of their paper trading and real betting had consolidated the fact that their strategy was indeed profitable.
While making profit out of online sports betting is achievable, is it worthwhile? One of the three researchers, Lisandro Kaunitz discusses the big picture of the betting experience and the concept of a “professional gambler” with scepticism. To achieve sustainable profitability as a gambler is more complex than many imagine: Succeeding in coming up with and implementing the right strategy is very challenging to begin with, requiring high technical and programming skills for data analysis and machine learning. This means learning the skills or hiring someone to do it for you, which takes time and money. You would also need a lot of data from many games from different bookmakers’ websites; this is without counting the initial investment, the necessary technology and the time spent looking for the right opportunity.
Lisandro Kaunitz explained how they would check the dashboard for opportunities from 12:00 p.m. to 12:00 a.m. every Saturdays and Sundays. They spent so much time and energy on the betting that Lisandro Kaunitz regards their profits as a salary and not a return on investment, as you would not make as much effort in an investment as you would in some paid job. You might consider building a more sophisticated automated betting system, which is doable but very technical. Even if you were successful in doing so, the three researchers faced a tougher challenge from the bookmakers themselves, who would not hesitate to limit their account for no explicit reason. The researcher explains in his blog how the potential exponential growth in earnings of profitable gamblers could completely bankrupt the bookies who “could literally not pay their debts even with all the money that circulates in the world.” This sole fact makes the online betting market rigged and the researcher concludes with the fact that the “odds of becoming a sustainably profitable gambler are pretty close to zero.”
So here you have it: Making money out of online gambling is possible. The researchers have even given free access to their dashboard online with the mispriced bets to bet on. Online betting might be more of a waste of time than of money – but if you enjoy it, why not give it a more professional try?
by Camille Quideau