What is Value Betting – A Guide
Few industries have embraced technology quite as eagerly as the gambling industry. And yet the roots of gambling can be traced back as far as 3,000 BC in Mesopotamia. Over the centuries gambling in the UK has evolved into a £14.3bn business. Betting, both remotely and on the high-street, counts for almost 35% of this total figure (over £4.9bn).
The recent boom in online sports betting has made gambling more accessible than ever. And despite its dubious past, gambling has become a mainstream activity.
At the heart of this industry are the bettors, or as they’re sometimes called, ‘punters’.
Type A – These are ‘pro gamblers’ and are typically associated with syndicates who combine data, statistical modelling and in-depth analysis to create a bet strategy. These guys bet on value and are the tip of the gambling iceberg. They represent no more than 2% of total punters. Trust me, they leave nothing to chance. Which is why they can make a full-time living from gambling.
Type B – or sometimes called ‘smart followers’ because they are most aware of pro gamblers and the value bet. They understand some of the maths around bookmaking and have a level of expertise. They make up around 10% of all punters.
Type C – are punters who don’t understand statistical modelling or the maths behind gambling odds, but have relationships with tipsters and are generally well informed about the sports they gamble on. They make up about 8% of all punters.
Type D – this is by far the largest category of punter, accumulating 80% of all bettors. They know little about the odds and have limited sporting knowledge. Think of friends or family members who like to have their annual flutter on the Grand National or FA Cup final. 99% of the bets made within this category are unsuccessful.
For those of you who haven’t figured it out already, Type As are the value bettors. And by the time you’ve read our guide to value betting, you’ll have all the information you need to get you started on your value betting journey.
What is value betting?
Let’s start with the basics.
Most bettors place a bet and gamble on the outcome of a sporting fixture. These bets are often based on emotion. But value bettors (Type A) are placing bets against a bookmaker, not the actual sporting fixture. These bets are technology enabled and based on real-time data inputs, not intuition.
Think about it another way. Value betting is about identifying when bookmakers have priced odds incorrectly and using this to create an advantage. This is how ‘value’ is created because value bets have a greater chance of winning and supply an edge over a bookmaer, particularly over a longer period of time.
Sounds great, right? So why isn’t everyone doing it?
For starters, it’s not easy. You need to be able to identify errors in a bookmaker’s odds. Not everyone is capable, nor do they have the time, patience or dedication to invest in what is most definitely a long-term strategy.
Value betting isn’t for the faint-hearted either. It requires deep analytical insight and a love of maths and statistical methodologies. But for those prepared to put in the hard graft, the rewards are significant. The best betting syndicate’s are known to deliver monthly ROI of up to 47%.
To put that into context, a 7% rental yield is considered very good in the property industry.
How does value betting work?
Value betting works by identifying where odds offered by a bookmaker don’t reflect the true probability of an actual outcome.
This may sound simple in theory, but the application in practice is much harder. This is why Type A bettors use sophisticated software and statistical modelling. But more about that later.
How to calculate the expected value of a bet?
Gambling is built on probabilities. Bookmakers generate odds based on the likely probability of a specific outcome. These odds are expressed as fractions, which can also be expressed as decimals (or factors) and percentages. For example, 1/3, 0.33 and 33%. Here’s a useful guide to gambling maths from Wikipedia.
The simplest example to use is the coin toss. There can only be two possible outcomes. Heads or tails. 50/50. To calculate the odds lets express 50% as a decimal (0.5) and use this equation:
Odds equals 1/0.5 = 2.00 (also known as evens).
Imagine you were offered odds of 2.05 on Tails and 1.95 on Heads by two different bookmakers. Which would you choose as a value bet?
You pick odds of 2.05. Because over time, the odds you’ve been offered have a greater chance of success than the true probability or expected outcome (which in this instance is 2.0).
So far so good, right?
But live sport isn’t a coin toss. It’s far more complicated. Deep expertise in specific sports is hugely beneficial to value betting. Being a specialist in a particular niche within a specific sport will help you gain insights which you can apply to create your own odds.
If your odds are more accurate than the bookmakers, then you have created ‘value’. And this is the edge you need to beat the bookies at their own game.
How can you identify a value bet?
The million dollar question!
Experienced value bettors rely on sophisticated mathematical calculations, statistical modelling and advanced software. Using these tools they create value betting strategies to leverage as much value out of the market as possible.
Identifying a value bet is based on the understanding that bookmakers don’t always get it right. No system is ever perfect, but how do value bettors exploit this?
Despite all the data and technology associated with online betting, the creation of odds can still be largely subjective. This reflects the complexties of sport but also a bookmaker’s need to reduce their liabilities. Using multiple bookmakers at once will help you understand the ‘spread’ of a bet across a range of bookies, and give you an edge in market.
Oddschecker (see image above) and other odds comparison sites, allow you to compare odds from multiple bookmarkers. In the Mexico v Japan football example, we can see that Bet365 are offering Mexico to win at 1 (evens), yet William Hill are offering it at 23/20 (1.15). That’s a 15% discrepancy!
Finding these discrepancies are a big part of value betting. So make sure you shop around for the best odds and make it a key part of your value betting strategy.
Another market-based strategy is to find bookmakers that specialise in specific sporting events. The odds they create will be more accurate than larger, big-brand bookmakers that don’t have speciliast expertise. Use the smaller, specialist bookmaker’s odds as a benchmark and compare the big-brand’s odds against it. Again, this will highlight the discrepancies and expose inefficiencies.
Professional ‘Tipsters’ or people with very niche expertise in a specific sport are also worth getting to know. Being a generalist doesn’t work. For example, having deep knowledge of the Dutch Third Division, will provide you with an advantage over bookmakers who have a much broader approach.
Again, niche expertise will expose discrepancies in the market, and give you ‘value’. Just be careful though, not all Tipsters are created equal.
The Bookmakers advantage – Understanding how they make money
I’m sure you’ve heard the saying, ‘the house always wins’. Of course, it refers to casino games being designed to make you lose more money than you win. But the same can be said of sports betting.
Despite what some punters may tell you, bookmakers know what they’re doing. If they didn’t they’d soon be out of business. But even if certain bookies aren’t perfect, they still have a priced-in advantage over the market. This is known as the Vigorish or ‘Vig’ for short.
The ‘Vig’ is a bookmaker’s value or edge on the market. It guarantees them an advantage with every bet placed. The standard ‘Vig’ placed on each wager is 10%. Think of it as a tax or commission to be paid on every wager placed. No matter what the outcome, bookmakers are guaranteed fees, because when two bettors take the same odds, a bookmaker pays out the winner but keeps the loser’s 10% commission.
In reality, things are never as straight forward as our example would have us believe. Bookmaker’s can’t always balance their books, but they can limit their exposure to risk. This is why you see frequent adjustments to betting odds, as bookmaker’s try to balance both sides.
However, a good bookmaker may also benefit (on top of their 10% ‘Vig’) when one side has more money in play than the other. Taking a lopsided view on a fixture, particularly if there’s a strong chance of an upset, can be hugely profitable.
What is a Betting Exchange, and how can they help?
The process of placing a bet with a bookmaker has barely changed over the years. You placed your bet and, depending on the outcome, made some money or, more likely, lost some money. Bookmakers’s will do this all day long knowing that most bettors will lose.
But what happens when you start winning, and keep winning?
As soon as a bookmaker realises you know what you’re doing the rules of the game are changed. Remember, bookmaker’s only play if there’s a built in advantage to them. As soon as they figure out what’s going on, they’ll restrict your account.
But betting exchanges offer a solution to this problem. The best known exchange is the Betfair exchange and it will not penalise you for being successful. Do you know why? Because with a betting exchange, you are betting against other punters, not the bookmaker.
The business model is different. The exchanges make commission out of every bet made. So it makes no difference to them what the odds are and how good you are. They win no matter what. With plenty of inexperienced punters to play against and no restrictions, betting exchanges are becoming increasingly popular with value bettors.
Value Betting software
Value betting is complex. It has plenty of moving parts. It requires a multitude of skills. This is why syndicate’s are so successful. They can bring a team together with all the right skillsets in place.
But value betting software can help even up the playing field. Sophisticated algorithms, powered by deep machine learning, have automated much of this process. You can purchase software to help you compare odds, harvest tips, create strategies and implement buys.
By using software you will firstly, significantly increase your chances of finding value bets and secondly, ensure they are made in a timely fashion. The reality is you have to invest in technology if you want to succeed at value betting due to the sheer scale and complexity of wagers you need to make.
This reliance on technology also means you are entering an ‘arms race’. As software improves, the only way you can get an ‘edge’ is by getting more advanced software that outperforms the bookmakers and your competitors.
Trouble is, that advantage only lasts for so long.
Looking after yourself
For many people, gambling is something to be enjoyed in moderation. But for some, the thrill of gambling can be all consuming. If you are thinking about investing more time and energy into gambling, then It’s important to look after yourself.
To start with, you need to be aware of the signs of problem gambling. If you experience any of the following, then stop and speak to someone, or even better, seek professional help.
- Constantly thinking about gambling and how to get more money to gamble with. If you think of little else, then you need to pause and talk to someone.
- Like any addiction the more you do, the more resilienace you build up. If you need to gamble with larger amounts of money to get the same thrill then it’s time to stop.
- Are you gambling to avoid other problems or mask negative feelings? This is often a sign of an unhealthy relationship with gambling.
- Getting into the downward spiral of chasing losses.
- Lying to friends and family about the extent to which you gamble.
- If you’re contemplating theft or financial fraud to fund your gambling, then you need to stop.
If any of the above are happening to you then the worst thing you can do is bottle it up and hope things will change. Talk to someone you trust. A friend or family member. And get a fresh perspective on what’s going on in your life and how to fix it.
If you’re prepared to invest the time and energy, value betting offers the potential for serious return. Invest in the right technology and partner with the right people to assemble all the skills you need to make your investment into value betting a success.
But it won’t happen over-night. It’s a long-term strategy that requires patience and dedication.
Carl Hughes - Editor
Carl Hughes is a leading expert on sports and casino betting. Carl began his career with a BSc in Sport, Exercise and Health Sciences from the University of Birmingham before working within the industry for some of the bigger names (GVC and Bet365) and has been praised as being "a leading sports betting commentator".