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Former Odds Compiler Series Part 2: Profiling and Tipsters

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MatthewLast week Matthew talked about how the bookmakers come up with their odds. That article received rave reviews from readers. This week he is back with a topic we have covered on the site before and one that punters always want to know more about. Matthew talks about how bookmakers go about profiling their customers. He also talks about how they deal with Tipsters. Another great read. You can follow Matthew on twitter @CrazedAlchemist and he also has his own blog. Over to Matthew.

In this article I am going to look at the subject of profiling. I am not going to discuss it from a business sense perspective or from a moral one but simply to look at it from the perspective of analysing the process and how it has changed over time. I will tackle the subject of account restrictions and closures in my fourth and final article once I have looked at all the relevant elements of the problem.  I will also look at in this article the subject of tipsters and how they influence bookmaker trading decisions and their risk management. Bookmakers will often find themselves profiling tipsters to an extent rather than individual clients.

Bookmakers have always profiled bettors and do not let anyone tell you otherwise. At the racetrack bookmakers could turn you away, offer you different place terms, offer you an amount that they felt comfortable with or lay off your bets at other on course bookmakers if they didn’t fancy the liability on their books. Of course different racetracks and regions will impose different rules on the behaviour of on course bookmakers but they could still of course offer you less attractive odds in the hope of getting you to move on. Knowing who the smart punters were was as vital then as it is now. They also had to become familiar with those who placed bets for the smart punters because of course using another person to place your bets is nothing new. It is possible that historically it was easier to place a smart bet of decent size because of the attitude of at least some bookmakers as to how to handle that sort of bet at the track. They could use that information to not only shape their own book at the cost of the liability of the accepted bet but also over hedge the bet with another bookmaker on course before they got wind of the smart money and could slash their odds. In that way it made sense to try and get the smart money in manageable size early on rather than get picked off further down the line when you could only hedge at a price much shorter than you laid yourself. At some point this mind-set dissolved in western bookmakers barring a very select few while still remaining prevalent in the Asian bookmakers. If anything as the betting volumes around the world have risen the appetite for early smart money in Asia has only grown as the race to be smartest fastest has become ever more important to them. So what did everyone else do?

The western bookmakers found that with the rise of online betting there was even more money to be made but also that as with all industries where there is a gold rush the space became crowded very quickly. The online betting boom went stratospheric with the rise of online poker and soon everyone was making so much money that it was possible to make money sharp betting or bonus bagging or arbitrage betting for quite some time before anyone even noticed and limited or closed the account. Sadly when the market settled and then was crushed by the collapse of the US poker market it became just a bit harder for betting firms to make money. The cost of acquiring new customers rose, as there were so many operators competing for the clients and all of them desperate to fill holes created by lost poker revenues. Don’t get me wrong there were still account closures and restrictions due to some basic profiling before this point but nothing like there is now. Profiling at this point was largely driven by the odds compilers who would be able to see all the bets they laid thanks to improvements in technology and also in real time. I can’t speak for other odds compilers in the industry but at times the relationship between compiler and punter would get personal and the compiler would push for an account to be closed or at least restricted. This actually worked the other way as well if the client was sharp and bet once the market had settled and in moderate size on a decent market. As a compiler you even at times became fond of these gentle nudges from clients who seemed to be smart yet playing “honest” with you. For the online industry the rise of arbitrage trading and bonus exploitation as they saw it was becoming epidemic and running a successful bookmaker became about how many you turned away as much as how many you got through the door.

It actually came as quite a surprise to some bookmakers just how many of their clients were making money or exploiting their bonus offers once they began to actually analyse the figures. It soon became clear that odds compilers either did not have the time (or could not be trusted) to do all the profiling so risk management departments sprouted up everywhere. These are teams of people who are incentivised to root out non-profitable accounts and as always with this kind of motivation there are going to be those who are overzealous. The UK risk managers had the ultimate tool at their disposal in that they had a true market price to hand in the form of Betfair and they quickly decided that odds compilers could not beat Betfair on every market all the time so clients who bet on odds bigger than the Betfair price were by definition sharp bettors. This progressed further to the assumption that odds compilers could not beat Betfair ever on any market. The obsession with arbitrage in the UK betting industry surrounded backing at the bookmaker and at the same time laying on the exchanges rather than say the placing of three separate bets at three different bookmakers to guarantee a return although the latter was still a concern. Odds compilers disliked arbitrage traders and sometimes tolerate sharp bettors because while they work hard to calculate the outcomes of events (unless it makes more sense to simply copy Asia or Betfair) all the arbitrage trader need do is wait for an alert and place the relevant bets. The intellectual competition has been removed in their eyes (sadly odds compilers are being kicked out of the industry as fast as the shrewd punters). Successful long term arbitrage traders will tell you it is actually both mentally and physically taxing but that is for another article. Arbitrage trading did an awful lot to educate the risk management community about how markets work and also made them realise the horrible Pandora’s box that had been opened by odds comparison sites. It also made them realise that copying an established set of market odds was both efficient and reduced arbitrage and some types of sharp betting.

So now we have a situation where you have a team of people constantly crunching data and the remit has come down from above that any client that does not pay for the exorbitant marketing, affiliate (also being abused) and advertising costs and also create a profit for the company is no longer to appear on the books at all. At this point it has been established that beating widespread arbitrage across all markets without moving prices is near impossible so trading arbitrage prices gets an account marked. Of course if you aren’t going to move your prices with the rest of the market there is every chance that when you are best price any outcome it will be an arbitrage opportunity with someone somewhere and you will end up best price even unintentionally if you do not move your prices even when you have not struck a bet. They have rejected the concept of losing money on one client to help make more money on other clients or rather they have rejected the concept of making a book. The truth is without the Pinnacle model in place it is very hard to make a balanced book, as there are simply so many bookmakers to bet with. Often an arbitrage opening and possibly a tipster selection are the only bets struck on a market. Lopsided books are an unavoidable reality for most bookmakers as square money tends to all bet one way and it bets in a different time frame to sharp money and can at times bet the same way as sharp money just at a worse price nearer to the start of the event. These latter bets are better bets to take but they still make for a one sided book however, if you have to always cheer on a particular outcome then better make sure it is one that the very worst bettors have not bet on.

What do they look for when profiling? Well not all risk teams are the same but here are the things that will most likely be looked at:

I am sure there are other factors but suffice to say if you manage to avoid all the above listed things then maybe your account will avoid being restricted or closed. If ever you find yourself having one bet or even no bets and being restricted or closed just ask yourself whether you can rule out every single one of the above possibilities or being linked with an account that has exhibited some of the above behaviour.

Finally there is the subject of tipsters, which is of course a subject close to the hearts of readers of this blog. For the most part bookmakers are not concerned about tipsters from the sharp betting perspective (hard to believe I know but there are exceptions). Bookmakers will have seen so many lemmings following unsuccessful tipsters off cliffs that they do not instinctively inspire fear. Again Steve has frequently highlighted in his blog that following a given tipster is no guaranteed path to riches. Tipsters do create one-sided books though which can be frustrating, particularly in small illiquid markets. They also can cause bets that overlap with all of the behaviours listed above.  Tipsters generally try to tip at best price and well in advance of the event start. Tipsters can often cause prices to collapse and if some subscribers smash in to the exchanges they can make those who are hitting the books look like arbitrage traders. The price collapse can also trigger those who bet dropping prices to push the market even lower and it leaves the bookmakers with one terrible result and no easy way to get out of it if they have been foolish enough to not move the price fast enough. So for this reason compilers like to keep tabs on the popular tipsters of the moment. I personally used to regularly sign up for short periods or free trials to all sorts of services just to see if I could see what angle the tipster was working and whether it was something I felt I generally overlooked. Compilers in general will always respect tipsters who appear to be compiling their own prices more before tipping a selection. I first discovered Sportpunter about ten years ago when looking for information on rugby and it was obvious straight away that he was mathematically modelling the sport and also advocating value based staking which instantly made it noteworthy. In fact it was that experience that first made me look at the correlation between the money line and the handicap line in rugby as Sportpunter would often pick out a very short priced or big priced money line selection at a time when very few punters were betting rugby money lines at all that I knew of. In fact it seemed for a time that in general short priced favourites in rugby union in general were priced a bit too big and they were bets, which aroused very little suspicion. Good compilers were never afraid to learn from a tipster or site that had genuine merit. Compilers will be quick to dismiss tipsters without verified results, no clear strategy and inflated ROIs beyond what they deem likely. In other words we were trying to do exactly what the punters are doing more diligently nowadays and in both cases to see who to take seriously. Always of particular interest were any betting related websites, which had useful statistics or model calculations on them although many of those were swiftly dismissed as behind what we had already.

I think that is quite enough from me but if anyone has any particular questions they feel I might be able to answer then please notify myself or Steve and I will do my best to answer them, possibly even in a Q&A type post. The next article will look at a possible future for profiling and risk management that might benefit all parties.

If you enjoyed this article you might also like a similar one written by a current employee at one of Australias largest bookmakers.

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