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Sports Betting

Sports betting is probably one of the world’s oldest pastimes, having been enjoyed for centuries if not millennia. Along with many other forms of eCommerce, the scale of online sports betting has been building for several years. According to GBGC, in 2007 the global online sports betting market was estimated to be worth approximately $5.0 billion of gross gaming yield, implying a CAGR since 2000 of 19%. Excluding the US, which despite the legal difficulties of operating online is still believed to be the largest online sports betting market in the world, GBGC estimates that the size of the online sports betting market was approximately $3.6 billion in 2007 – an increase of approximately 17% over 2006. It predicts that, in the absence of any material changes in the regulatory environment this will increase to approximately $6.1 billion by 2012, implying a CAGR of 11%. In terms of geographic markets, according to Google¹, the biggest number of historical searches including the word ‘bet’ was Greece, followed by Romania and then the UK. The popularity of different sports by territory also impacts the mix of sports that attract wagers. In the UK, horse racing and football are particularly popular whereas in other parts of Continental Europe football and tennis are among the most popular events.

Live betting, where punters can make bets during a sporting event is an increasingly popular betting product. Whilst the margins on live betting are lower than traditional betting, it is still attractive as a product for bookmakers because it makes for a much more exciting betting experience and this tends to increase betting volume by encouraging the customer to stay on the site.

Spread betting on sports and financial markets is an increasingly popular variant of conventional sports betting. This involves the bookmaker providing a two-way price, buy or sell, on either the outcome of a sporting event such as the final score or the winning margin. Relative to the price offered, the customer in effect bets that the score will either be higher or lower than that offered by the bookmaker. The same principle holds for financial spread betting. In this case, a customer can bet on upward or downward movement of financial indices like the Dow Jones or FTSE indices, on the movement of currencies or even individual financial instruments, including shares. Operators make their money from the ‘spread’ – the difference between the bid and offer price – multiplied by the total value of bets placed.

Success in online sports betting

As the operator is taking principal risk by offering odds on a range of sporting events, player liquidity is not as important as it is in online poker. That said, the larger the number of bets placed on a single event, the greater the spread of risk and the greater the prospect that the operator, or bookmakers, will make a profit on the event.

Success requires customers, a broad range of products to bet on and excellent bookmakers that are able to price odds effectively and generate positive gross win on the amount wagered.

Market statistics supplied by Global Betting and Gaming Consultants - January 2008

¹ Source: Google Trends - 15 May 2008