SBC News Voice of the Sports Betting Industry
Thomas Holland, Product Director at Genius Sports, outlines how automated trading technology is enabling operators to use real-time liabilities across correlated markets to drive margin growth at scale, reducing reliance on manual limit settings to minimise risk.
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In many ways, the growth of 24/7 betting content has been both a blessing and a curse. On one hand, the 250% rise in in-play event coverage since 2016 (according to our data) – and equally impressive market-type growth during the same period – has sparked a significant rise in sportsbook turnover and transformed the nature of in-play betting.
However, at the same time, with operators increasingly reliant on third-party odds providers for round-the-clock content, there is now a disconnect between pricing and risk management which has resulted in many trading teams setting bet limits in order to minimise risk, rather than using liabilities to adjust odds and maximise profits as they once did.
Manually managing and monitoring liabilities spread across thousands of fixtures and bet selections each day is a near impossible task, with betbuilders creating even more complex liabilities – and doing so would incur the costs of hiring an extremely large trading team.
But in the age of AI and automation, is there finally a way for operators to lean less on player profiling and truly maximise profits with a liability-driven approach at scale?
Time for a pricing re-set
Earlier this year, Genius Sports launched Edge, a first-of-a-kind solution that automatically adjusts odds based on real-time bet and liability data to grow margins at scale.
Born out of the belief that traders are today leaving margins untapped, Edge dynamically optimises odds based on every bet and liabilities across the entire sportsbook.
When I first started in the industry over a decade ago, the basic role of a trader was to deliver maximum profits by setting the optimal price. This considered the true price, weight of liabilities and which individual customers were driving those liabilities.
But, in the wake of explosive growth in fixture coverage, this has been lost. Bookmaking in its simplest form requires sportsbooks to set a price that reflects their willingness to take on punters for a certain liability, and one that is competitive and fair for the punter.
Without the visibility or manpower required to utilise liabilities, traders are left with no choice but to restrict players and reject bets, especially on the huge volume of lower-tier and off-peak events within the 24/7 schedule.
While it’s true that trading at consensus price represents the market efficient line, betting activity differs between territories meaning that the liabilities incurred will differ significantly between operators, and the potential for profits at different prices will be very different.
Edge addresses these challenges by dynamically updated odds based on each operator’s bets and liabilities, across every fixture and market-type automatically.
From limits to profits
If Manchester United are heavily backed to beat Chelsea, liabilities will accumulate across related market-types like the Match Result, Double Chance and Correct Score. The same goes for First, Anytime and Last Goalscorer markets if punters are fancying Marcus Rashford.
Until now, traders have not able to move prices in way that accounts for how exposure correlates between these interlinked outcomes. But thanks to the emergence of new automated capabilities, operators can finally do exactly this.
This technology allows operators to consider all pre-match, in-play and betbuilder activity to create a unified price that delivers margin growth irrespective of the event outcome. With a purely manual approach, traders can’t realistically balance liabilities and shift prices correctly based on every bet, match state change and trading parameter changes on every single market-type and fixture at the same time.
For example, selections with a high volume of bets and negative liabilities will automatically have higher margins applied. Meanwhile, less popular outcomes will have more attractive odds to attract more turnover.
Imagine the bottom-line impact across your entire sportsbook? The result is incremental margin growth on every bet, increased stability and predictability, and less trading volatility at the same time.
Gaining an edge
At major events like this summer’s UEFA Euro 2024 is where automated correlated liability-driven odds can have a profound effect, with regional betting activity of great influence.
Take the 2022 World Cup Final, a great day for Argentina but not such a great day for Argentinian bookmakers. Across 120 minutes there were six goals, eight cards, Lionel Messi scored twice – including a penalty – and Kylian Mbappe scored a hat-trick – including two penalties – with Argentina eventually coming out on top after a penalty shootout. Looking at these event outcomes retrospectively, you could argue it was more of challenge to construct a betbuilder that didn’t win if you were an Argentinian punter.
With the help of automation, this sort of nightmare scenario is mitigated. Traders will know that liabilities are automatically being adjusted to mitigate any significant losses on high turnover games. Traders can still adjust overrounds to price markets more aggressively in order to remain competitive and attract and retain players. But correlated liability-driven pricing provides an additional safety blanket against losses, proving a real gamechanger.
The end user gets a seamless betting experience across pre-match and in-play without disruption, while operators can yield the highest possible margin from every bet and optimise real-time pricing at the highest turnover betting event of the year.
Automation in the form of trading models was the foundation for the breadth of today’s sportsbook event coverage and market-type offerings. By equal measure, automation is the answer for traders looking to maximise sportsbook profitability on each of those individual events and market-types in a scalable and efficient way.
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Thomas Holland, Product Director at Genius Sports
