From trackside, to betting shop, to phone app, the way we gamble has changed significantly over the last 5 decades. In this article, I’ll consider the challenges facing online betting companies today, and discuss whether technology could be turning odds in the punters’ favour.
Online gambling began to emerge in the mid-1990s, with companies quickly spotting opportunities to cash-in on the newly invented World Wide Web. In 1994, the island nation of Antigua and Barbuda was one of the first to cash-in. By passing the Free Trade and Processing Act, they gave themselves permission to grant licenses to companies that wanted to operate online casinos.
Microgaming, amongst the earliest pioneers of the time, was formed in the same year, and started developing innovative gaming software. Using this software, the company launched what is generally considered to be the world’s first online gambling site, ‘Gaming Club Casino’, a website that still operates today.
Fig: The Gaming Club, 1998 and 2019. COPYRIGHT © 1998 – to date BY STANWORTH DEVELOPMENT LIMITED and DIGIMEDIA LIMITED ALL RIGHTS RESERVED.
Sports betting websites soon followed, taking the action out of traditional high street betting shops, and into people’s homes. The first recorded online sports bet was made on Intertops by a Finnish man named Jukka Honkavaara, in January 1996. He bet $50 on Tottenham Hotspur to beat Hereford United in an FA Cup third round replay, making a modest $2 profit.
Fig: Intertops.com, 1998 and 2019
Internet-enabled mobile phones have since made betting a far more personal activity, putting power directly into the player’s hand. Latest statistics from The Gambling Commision reveal that remote gambling brought-in a gross yield of £5.6bn, constituting 38.8% of the total UK gambling market.
Today, there are scores of online betting companies vying for our attention, and with such aggressive competition, firms must meet some key objectives in order to thrive:
Attract new customers
The industry uses one method above all else to attract new business, the introductory offer. Free bets, money back if you lose, these sweeteners are designed to tempt us into registering an account. However, these offers are now so common that customers have become discerning, and their persuasive power is diluted.
As a result, factors like user experience are increasingly important. Bookmakers are focussing on developing apps that enable players to bet at any time, from anywhere, with extreme ease. A smooth transaction process is crucial too. Who wants to type out their 16 digit card number when you can use PayPal with an email address, or better yet, Apple Pay with a thumbprint or facial recognition?
Software improvements have opened up new ways to bet too. The ‘Cash-Out’ feature was first launched by Betfair in 2013 and has since been adopted by many prominent bookmakers, who offer a host of live in-play markets. Social media, too, plays a more active role. With SkyBet for example, players can use the hashtag #requestabet on Twitter, prompting a response with personalised odds, and a helpful URL link to click and place a wager.
Retain existing customers
Once captured, keeping customers is the next challenge, and there is little loyalty in the market. Players will quickly turn to the next company offering a better deal, particularly when introductory rewards run out. To address this, some firms reward loyalty by allowing customers to obtain bonuses depending on their gambling frequency. Ranking-up earns better rewards, thus compelling the player to continue.
Data is key to retaining customers. If the betting firm can establish what games and markets are popular for certain people, they can create bespoke offers to those players. Just as Netflix uses a user’s viewing habits to suggest a new film, bookies can use betting trends to launch targeted promotions, and encourage the player to stick around.
Offer the best odds
In such a competitive landscape, bookmakers are determined to offer the best odds through their service, and pride themselves on providing better potential returns than the competition. But it’s a fine balance. The bookmakers use algorithms to not only calculate the odds of a particular outcome, but to establish the fractional tipping point between a set of odds being attractive to the public, and covering any risk of loss.
Machine learning takes the process further by applying intelligence to these algorithms. By implementing machine learning, the system used to calculate odds is able to learn from prior experience, improving the accuracy of future results based on the feedback it receives.
These determinations are often made without any direct human involvement, so we are knocking on the door of ‘Artificial Intelligence’ at this point. However, even with some systems experimenting with neural networks (and reporting positive results), I would stop short of describing this process as true AI – for now at least.
Operate in real-time
Frequent comparisons are made between sports betting and financial trading, which isn’t surprising considering the predictive nature of each industry, and the balance that must be struck between risk and reward. In both worlds, one thing is critical to the success or failure of an operation. Latency.
As with financial trading, low latency is key in sports betting. Bookies need to be able to constantly update their odds in response to a number of variables. For one, they need to adjust in accordance to who is betting on what. The company must above all else cover their risk, and make a profit regardless of the outcome. With the introduction of in-play betting and cashing out, firms need to react quickly before and during the event itself.
For example, a bookmaker may offer long odds on a substitute footballer to score a goal, based on the low likelihood of them featuring in the game. If the team’s star striker is injured in the warm-up, the chance of that outcome may change dramatically. The systems that feed data to the company’s algorithms need to operate with the minimum latency to allow this information to be received, interpreted, and reflected as fresh odds as soon as possible.
The ‘professional gambler’
Whilst betting companies embrace technology to maximise their profitability, some consumers are employing techniques that incorporate technology, to give themselves an edge.
Traditionally, players who wanted an edge had to know more than their bookie, something that could only be achieved through watching countless hours of sport and doing your homework. Now, regular players can use mathematical algorithms to do the heavy-lifting, just like the ones bookmakers use to calculate their odds.
These predictive models absorb statistics and interpret them to give a percentage chance of a particular outcome. To be successful, the algorithm needs to process a huge amount of accurate data from the real world, much of which is in the public domain and is free to obtain. For in-depth information, there are companies in existence that watch sports on an industrial level, selling specific data points for further analysis.
Once an algorithm spits out a prediction, it is compared to the market price and any discrepancies are exploited. Of course, there’s a risk that these discrepancies highlight a weakness in your own algorithm not the bookmaker’s, and some crucial elements of sport cannot currently be measured, such as swings in momentum, or player psychology.
Regardless, data-driven gambling is a burgeoning market, with individuals and companies offering ‘systems’ for sale, ranging from an excel spreadsheet to downloadable software.
In short, arbitrage betting is the process where odds on the same event from different bookmakers are compared, and bets in both directions are placed to cover it. This method relies on the fact that bookmakers have slightly different ways of calculating odds, and can make mistakes, so in some situations it is possible to bet on all outcomes, and guarantee a win.
Arbitrage betting relies on fractional gains, requires a large outlay, and carries a degree of risk when live online odds can change in an instant. To maximise profits, arbitrage betting companies create software that scrapes data from dozens of betting sites and exchanges, eliminating manual calculation, and exploiting these gaps on a larger scale.
In-play betting can give savvy players a chance to exploit a key issue we’ve already mentioned, latency.
Courtsiding is a technique where a player attends a game in person (often tennis), and bets on individual moments in-play, such as the next point won. The aim is to bet on a known outcome before televised coverage catches up, and/or before officials at the stadium can input the score into their own equipment. By getting in first, players can exploit the fractions of seconds between live events, and the bookmaker suspending/updating the odds online.
To combat this, many sports have strict regulations about gambling at sporting events. Excessive mobile phone usage is heavily policed, should there be an off-site accomplice at work. Exploits such as courtsiding aren’t illegal, but they no doubt contravene bookmaker policies, leaving bets open to the risk of being invalidated if discovered.
Fortunately for exploitative players, betting companies deliberately make it easy to create a new account. This feeds a culture of ‘burner’ accounts, which are used briefly and dropped in favour of a fresh one, to avoid detection.
There is a gradual shift to understanding that betting firms have a duty of care to promote responsible gambling. For those who struggle with addiction, technology simply makes the process too easy. Whilst the industry abides by the law, it is not as proactive as it could be, despite having ready-made technology that could be employed to do an awful lot of good.
The gambling industry is in a prime position to better support these third party services. For example, the same data used to entice a player to gamble could be used to identify people at risk. By interpreting the type, frequency and success of a player’s bets, help and guidance could be delivered directly to people who may be unaware they have a problem. Better yet, this guidance can be delivered directly into the player’s hand through the apps they have worked so hard to develop.
Betting firms will inevitably remain focussed on maximising their bottom line, and developments in gambling technology are almost exclusively designed to achieve this. However, conscientious brands are on the rise, and public opinion carries weight in this social media age. It’s only a matter of time before this bleeds into the gambling industry.