High betting limits, low juice and a ‘winners are welcome’ policy is an unusual business model for bookmakers.
So how does the trading director of such a sportsbook manage risk while taking on some of the world’s sharpest sports bettors?
Marco Blume shared some great insights on the Pinnacle Podcast and here were the major takeaways:
The Pinnacle bookmaking model is low margin and high volume. They’re like a supermarket that offers products at the lowest possible price. It’s a ‘no-thrill’ feeling with no deposit bonuses or inflated odds. Because they operate on low margins it’s essential that they attract volume, especially offset money which is the opposite side to the sharpest action.
There are many different types of bettors. Some like to originate the line, some are market driven, others want to oppose the market. Some are recreational and others dedicate their life to betting on a particular sport. Pinnacle sportsbook clients are generally more sophisticated types. They want good quality odds and to get paid.
The ‘wisdom of crowds’ effect means that they come to a very efficient line that represents the truth of a betting event. The Pinnacle Sportsbook closing line is the most efficient out there. If you don’t consistently beat the closing line you’re probably not going to be a winning bettor.
Pinnacle have skin in the game so if they’re getting beaten they simply need to get better. They can’t just stop taking bets from a bettor like other bookies may do.
Some of the betting syndicates they deal with have hundreds of employees.
Most other bookies don’t really employ many traders. They just outsource it. A massive European bookie stated in their annual report –
“We don’t operate in the sports betting industry, we are in the entertainment industry. Our competitors are cinemas and bowling alleys”.
In-play sports betting is between 66% to 80% of the total betting handle at Pinnacle’s sportsbook. That’s a massive percentage and one that has grown consistently over the last decade. It appears likely that live betting will be a fast-growing bet type for US bettors.
The quality of sports betting articles and information has increased dramatically over the last few years. Many feature sophisticated statistical analysis and prediction forecasts. The free programming language ‘R’ is used extensively. Data is becoming more widely available and there are plenty of good data-sets out there, albeit expensive in some cases.
Blume believes intuitive sports handicappers can still find an edge on the market. He said that the models are right on average, but not always correct in specific situations. Some bettors are able to watch keenly and understand the flow of the game and why it might diverge from the average.
Edges are easier to find in smaller leagues and markets. The odds aren’t as efficient as they are in bigger leagues.
Everything gets faster and sharper over time. Everyone is trying to find an angle that others haven’t found yet. For example there was a period a few years back when first access to team line-ups gave some bettors an edge. But that doesn’t last.
Blume has seen all kinds of winning and losing runs. A few months really is nothing – you need to see thousands of bets to be certain that a bettor is a long-term winner.
Betting volume on esports has grown rapidly over the decade they’ve offered it. Pinnacle Sportsbook has 5 figure limits on some esports matches and even $100,000 on a big event. Blume expects esports betting volume to continue to grow, especially amongst 18-24 year-olds. It is currently their 4th most popular sport, behind soccer, tennis and basketball.
Simply by being smarter than Pinnacle. The weakness of the bookmaker is that they have to price up all the markets, so the job of the bettor is to find markets where Pinnacle are weak. To find mistakes and exploit them.
For winning players, parlays are a smart strategy and actually a decent way of getting money down. As a multiplier of odds they are just neutral EV (Expected Value). But if you’re a winning bettor then parlays are a bookies nightmare as you’re multiplying your positive EV. Pinnacle regularly has to pay out big money on winning parlays. But one thing to remember is (in the example of a 3 leg multi) that if you have a sequence where wager 1 happens before wager 2 which is before wager 3, ultimately you’re having a very big bet on the 3rd leg.
Blume believes there’s a strong correlation in skill-sets between online gaming and online betting. That includes uncertainty, variance and making good decisions under time pressure and with incomplete information. He believes gamers are fast learners and enjoy adapting to new challenges, can perform under pressure and have resilience to pain.
Becoming very good at a game shows you have the dedication and drive to compete with other people. Those are similar skills to what’s required in trading as a bookmaker, because you’re competing with others. It’s a game of trader versus bettor and the Pinnacle sportsbook team is dealing with the sharpest bettors in the world so they try not to be too exposed on any one outcome.
For those looking to become a trader, Blume doesn’t actually consider it to be helpful to know sports. In fact in some ways he actually considers it a hindrance. It’s more important to have experience in data science and modelling. Very few of the trading team actually bet, but that’s primarily because they can’t find other bookies with odds as good as Pinnacle. They hate the idea of taking lower odds at other bookies and losing value.
You can listen to the full podcast with Marco Blume here.