Perspectives of the arbitrage betting

In 2012 we certainly do experience completely different (and sadly, worse) arbitrage environment as compared to the one we had a decade ago.

The golden age of sports arbitrage was without a doubt in late 1990’s and early 2000’s. Newly established onshore companies accumulated more and more players, teasing them with comfortable betting (you can bet fast, directly from home) and breathtaking bonus actions (just to mention 10% bonus offer in Pinnacle Sports up to 1 500$, that was retracted just 3 years ago). It is therefore easy to understand that many people decided to change their beloved brick-and-mortar betting shop to such online companies.

Throughout the next few years new bookmakers were established, encouraged by the success of initial ones, which resulted in increased competition between them and even more abundant bonus actions and privileges to new customers. There was a piece of cake for every of them – players clearly noticed the obvious advantages of online betting and were moving more and more eagerly towards them. Importantly this was connected to rapid spread of the internet.

 

Establishment of many online sportsbetting services resulted in odds discrepancies, which therefore create multiple arbitrage opportunities, or surebets. At first the idea was rather obscure, but in time increased number of arbitrage bettors and arbitrage services resulted in significant losses to bookmakers. Importantly, not to all of them – just to the ones with worst lines and worst traders.

Just to give you a rough order of magnitude of the issue – based on Unibet’s annual reports, the company earns as much as 19 EUR per year for one client (on average). If you are a successful arber you can make easily 19 000 EUR/year, which means that you earn 1 000 times more than regular “John Smith” loses. This gives you a basic understanding why in turn allowing arbitrage players to play is so risky for bookmakers. Even though there is only a very low number of arbers, they provide substantial harm to a bookmaker’s bottom line.

Also in the crisis times more and more people are looking for an alternative way of earning money, so the idea spreads and the number or arbers increases. That is all why, eventually, bookmakers were forced to undertake precautions against arbitrage activities and the most prevalent of them is limiting players account. This reduces the risk for a sportsbetting service and effectively result in saying “goodbye” to a player.

So again, lets quickly sum up the situation we are facing now. Few worst services, which were unable to move their lines fast enough and/or limit players effectively are closed or acquired by other ones [to list just Gamebookers (acquired few years ago by Partybets), Bet24 (by Unibet), Betsafe (by Betsson) or Nordicbet (by Betsson)]. Interestingly what they also have had in common is very generous affiliate/partner program without negative carry-over feature which effectively ruined their budgets. Sadly I would not expect more of these services to be established, because they will not be able to survive on the market in a long run. I will not be surprised to see BetClic, Sportingbet or Expekt to be acquired anytime soon.

 

There is another group of services – the biggest ones, which financial position is stable and arbitrage betting is not that negatively crucial for them, to list just bwin, Partybets (interestingly these two also have merged). However even these services introduce elevated limiting procedure, so we should not expect anything promising also here.

 

There is finally one more group of bookmakers, I will call them Pinnacle-like services, with the name derived from Pinnacle Sports, top online bookmaker. These basically are not limiting players (or limiting very seldom) and Betfair-like services (the name stands for betting-exchanges). While Betting-exchanges is one other story (they have no interest in limiting players, since they earn commission on transaction volume, when it’s players who bet one against the other), Pinnacle-like services show completely different attitude. They have time-proven odds updating feature, offer no bonuses whatsoever and keep low or moderate margin. These bookmakers currently include: Pinnacle Sports, 188Bet, SBO, 12Bet, Marathon. It is also appropriate to list the betting exchanges like Betfair, BetDaq, Smarkets and perhaps soon Facebook, that discusses enabling real money sports betting with cooperation with other bookmakers – we will see how the idea will evolve there.

 

So now let me share a few theories on how the story will develop:

 

1. Around 70% chances – Equilibrium theory

Extended limiting action will result in temporary arbitrage market crisis. Some of the bookmakers will not succeed in taking appropriate precautions against arbers/smart bettors and these will be acquired by stronger, more effective ones. More and more players will decide not to play arbitrage bets and move to other sectors/areas, preferably outside the gambling industry. This will result in decreased earnings for Arbitrage companies, and likely a few of them will stop functioning. Once it happens there will be general opinion that arbitrage-betting is no more profitable enough to start it. This will result in decreased requirement for traders who analyze accounts and limit them and will (on bookmakers side) also create space for introducing  bonus action to attract new players (market’s competition for new bettors). It might happen, that these bonuses will have anti-arbing terms and conditions (like e.g Tobet’s one, where you have to play at least 3 games at one coupon, so that it counts to the turnover, however this is unlikely in a long run, while it discourages usual players, being too complicated). Reduced potential of arbitrage community and profitability of an entire sector should also result in establishment of new bookmakers, who would need to attract players with solid bonuses. In time it might happen, that the biggest bookmakers will increase their limits on major leagues to attract “big players” and also distinguish themselves from small companies which will, again, promote arbitrage actions.

 

2. Around 20% chances Pinnacle – Asians – Betting Exchanges theory

Community-based services have been more and more important, to name just Twitter’s or Facebook’s influence. First substantial attempt to bring sports betting into community-based service is called Smarkets and we will observe their efforts with attention. Hopefully their success will encourage new developers to create similar services, which will, in time, take over some part of gambling market. Working as betting exchanges, these portals will not limit their players, creating nice opportunities for arbitrage players. On the other side Arbitrage community needs decent success of these services to ensure appropriate liquidity for surebetting. Utilizing them along with usual betting-exchanges like Betfair and Pinnacle Sports could be just enough to keep the cash flowing.

 

3. Around 5% chances – Pinnacle Sports – Pinnacle Sports theory

Success of Pinnacle Sports is certainly repeatable. There are already few good services that try to imitate Pinnacle Sports approach to sports-betting such as Marathon, 188Bet or SBO. They all, however, do lack few things. Either liquidity – which forces them to limit players to have markets balanced or policy – e.g. 188Bet, or SBO have way bigger margins than Pinnacle Sports, thus making them much worse. Without a doubt if this worked for Pinnacle, it could work for another company. Once it finally happens (because I do not expect Pinnacle Sports to change attitude to “limiting one”) we will have two major, non-limiting, low-juice separate sportsbetting services. Fingers crossed!

 

4. Around 5% chances – Arbitrage-betting twilight

While “soft” services continue their limiting actions, there is impossible to effectively utilize them in a long run. Smarkets and other betting exchanges do not share success of casual services. While many arbitrage players end their careers Pinnacle Sports loses huge part of their betting volume and earnings and decides to change the policy. Arbitrage area is over.

 

What is then our role here? Is that anything we could do to support the market and sports arbitrage?

Absolutely.

• Support community-based services
• Sing up at http://arbusers.com and share your ideas, contribute to the fields efforts
• Do not give up! History is cyclical so the best days are probably before us!