What is the Bookmaker's Margin and Why Does it Matter When Betting Online in South Africa?

To become a more successful bettor, it's important to know how bookmakers make their money. As punters, we know that making money from betting is hard and we don't win every time we play. But you might still be wondering how bookies make money when winning and losing can be unpredictable.

In this article, we explain how online betting sites in South Africa use margin to be profitable and stay in business. You'll also learn how to calculate margin for your bets to see which bookies pay out more.

What is the bookmaker's margin?

Bookmakers make money by setting odds that DO NOT represent the true probability of all possible outcomes within that betting market. The bookmaker's margin is the difference between the odds they offer and the true probability of an outcome occurring. 

When setting the odds, bookmakers aim to attract betting on all sides of the market. In doing so, they hope to balance their liability, which is the amount of money they stand to win or lose on each outcome. 

However, if a bookmaker’s liability were 100% balanced without margin, they wouldn't make any money because they would take in as much money as they would payout to punters. 

So to make money, they must charge punters a fee (known as margin) which is built into their odds and ensures they can make a profit if their liability is balanced correctly.

How online betting sites in South Africa make money 

As we just mentioned, every time you place a bet, you are charged a fee by the bookmaker, which is known as their margin. You can think of it as a small tax you must pay for the privilege of placing a bet.

In South Africa, the bookie's margin ranges from 5% to 25% depending on the site and betting market you choose. However, 10% is about the average margin you can expect to pay on any bet.

You have to remember that bookmakers are running a business, and it's their margin that allows them to be profitable in the long run even if punters win money from them as often as they lose.

How does margin in betting actually work?

This margin or fee we explained earlier, is built into all bets from Sports and Casino Games to Slots, Virtuals and Lucky Numbers. 

How it works is that bookies set their odds slightly lower than the actual probability of any outcome you can bet on. Therefore your winnings are slightly less than they would be if bookies weren't trying to make a profit. But of course they want to make money, or they wouldn't be in business!

The difference between the true odds of an outcome and the odds offered to you as a punter is the bookmaker's margin. This is their fee for giving you the opportunity to bet and win money from them.

True versus implied probability 

The best way to understand true versus implied probability is to think of a coin flip, where the true probability of heads or tails landing is always 50%. 

If the bookmaker was being completely fair, they would set the odds at 1/1 (2.00) for both heads and tails. But instead, they typically offer odds of around 9/10 (1.90) or 5/6 (1.82) for these kinds of bets. This guarantees they can make a profit in the long run, no matter what happens. 

In other words, you might win your R100 bet on "tails" and take home R90 today, but the law of averages says that if the bookmaker accepts hundreds or even thousands of bets (which they always do), then their 10% margin will ensure they are profitable over time.

How to calculate the bookmaker's margin

Using the odds a bookmaker offers to calculate their margin is the best way to see which are the best online betting sites in South Africa to use. 

It works like this - the higher the bookmaker's margin, the more profit they make and the smaller your payout when you win. The lower their margin, the less profit they make and the more you win as a punter.

THREE-WAY BETTING MARKETS

The most common example of a 3-way market is the Win/Draw/Win (1X2) market in soccer.

Calculate the bookmaker's margin for a 3-way market as follows:

(1 divided by the home odds) X 100 + (1 divided by the draw odds) X 100 + (1 divided by the away odds) X 100 = Bookmaker's margin

For example:

Arsenal 2.15 | Draw 3.20 | Tottenham 3.50

(1/2.15) X 100 + (1/3.20) X 100 + (1/3.50) X 100

46.5 + 31.7 + 28.57 = 106.7%

However much the number is above 100% is the amount of margin the bookmaker is charging. So in the above example, the bookmaker's margin is 6.7%.

TWO-WAY BETTING MARKETS

To calculate the margin for a 2-way market, like tennis, use the same calculation, without the odds for a draw which cannot happen.

Calculate the bookmaker's margin for a 3-way market as follows:

(1 divided by the home odds) X 100 + (1 divided by the away odds) X 100 = Bookmaker's margin

For example:

Rafa Nadal 1.67 | Novak Djokovic 2.18

(1/1.67) X 100 + (1/2.18) X 100

59.8 + 45.8 = 105.6% 

However much the number is above 100% is the amount of margin the bookmaker is charging. So in the above example, the bookmaker's margin is 5.6%.

Don't use betting sites with a high margin

When betting online in South Africa, always remember that if you place a bet where the bookie’s margin is high, you will lose out even when you win.

For example, if you place a winning bet of R100 at odds of 1.80, you will make a profit of R80. But if you can find the same bet with another bookmaker at odds of 1.90, you'll make R90 in profit if you win. 

R10 isn't a lot of money, but these small amounts add up over time, especially when you start betting more money at a time. In summary, taking the best odds possible will help you win more in the long run.

For more about online sports betting, casino games and lotteries in South Africa, visit the Betting Guide homepage to find bookmaker reviews, promotions, betting tips and more.