When it comes to business, the Zeitgeist of our epoch has been defined by templates for a postindustrial knowledge economy. The times when money makers were embodied by sophisticated, bureaucratic management and technologically proficient mass production stayed back in the 20th century; these elements are no longer ALL that it takes to create a successful business model... there are many more ingredients to the gold-making formula now and many of these new components to that formula are nowadays hardly to be perceived as tangible assets.

In less than one generation, new business models have emerged as world-transforming economic institutions and have made their innovating creators billionaires.

That is truly outrageous.

In the past, capital that big could only be inherited, as it took a couple of generations of relentless and arduous working men with innovative ideas to amass a respectable fortune. In our day, the wealthiest figures of the capitalist market were born poor; now the children of their children won’t be capable of spending all the profit generated even if they recklessly tried. Yes, the formula might still encompass 99% hard work and only 1% genius, but it can be done incredibly faster these days.

How did Sam Walton (Wal-Mart), Bill Gates (Microsoft) or the founders of Google Larry Page and Sergey Brin, manage to create some of the largest fortunes in the history of human trade in less than a life time? How did 2 Indian guys with funny names and a former porn entrepreneur manage to list a company on the London Stock Exchange for over $10 Billion (PartyGaming) in a period of time short of 7 years, when that company is based on playing a hand of poker? More importantly yet, how can you benefit of these new revolutionary concepts in your everyday life? And of course, can you wise up and apply the same principles these men and women have applied to your recreational betting over the weekend?

The Yeast of It All - Technology in Successful Business Models

The answer to those questions is to be found in the explosive progress of technology in the last 20 years. Technological revolution has changed the face of human life. Our society has evolved into a fast-paced viral culture that feeds on information and that information is now available to all walks of life more than ever before thanks to the Internet. In a technology industry that changes and renews itself by the second, the only constant is change. In the past 25 years the velocity of that change has accelerated at a seemingly exponential rate. As a result, technology has transformed every human activity from its very core and sports-betting is not the exception.

Less than 10 years ago, if you wanted to 'get down' on your favorite college team to beat the spread, you could either take a plane to Vegas for the weekend or you could get on the phone with your local bookie. Today you can sit on your Lazy Boy and sip on some Grey Goose, while you get down on hundreds of different lines on any given sporting event from your laptop... it truly is that simple. Internet has revolutionized the way we watch and enjoy sports.

But it doesn't stop there. There are a few distinguished outfits that have revolutionized online sports-betting, as they have introduced a brand new concept when betting on sports: reduced juice. But how does that affect you?

 

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What is Reduced Juice in Sports Betting?

In traditional models, the bookmaker offers -110/-110 odds on Team A/Team B to win a specific sporting event. Gambler 1 bets $1,100 to win $1,000 on Team A, Gambler 2 bets $1,100 to win $1,000 on Team B. The bookmaker is hence holding $2,200; out of which he has to pay $2,100 to the winner ($1,100 stakes + $1,000 winnings). The bookmaker earns a commission of $100 out of every $2,200. That is a 4.54% theoretical percentage of hold. That is called juice.

In reduced juice models, the prices offered to the bettor entail a theoretical discount of 30%-50% on the juice; that simply means that the theoretical percentage of hold is significantly decreased for the bookmaker. Following the same premises as above, the theoretical percentages of hold for:
• A 14 cent line (-107/-107) is 3.27%
• A 10 cent line (-105/-105) is 2.38%

If you were to bet on mere hunches and sheer luck, you'd be doing nothing short of flipping a coin to determine your picks... any player flipping a coin can expect to hit 50% of his games. However, he would need to have a winning percentage greater than 52.37% to overcome the -110 juice. At that rate he would break even, as he wouldn't win neither lose money.

When you apply reduced juice pricing to your betting, the percentage of picks you need to win to profit from your betting is drastically affected. If you were to always pay -107 instead of -110, you would only need 51.67% of your picks to win, in order to break even and that percentage goes even lower to 51.22%, when you bet at -105.

Just like Wal-Mart stores, the online sportsbooks offering reduced juice pricing structures apply a business model based on low-prices, low-wages and global outsourcing. The strategy has taken advantage of the world's new telecommunication infrastructure and it has allowed the business model to achieve an unparalleled proficiency and a remarkable cut-down on wages and human errors, and effectively reinvesting their profits into a better platform of services.

But precisely because they take the most advantage of a multi-lateral platform of web services, the majority of the reduced juice betting options are restricted to Internet wagering. That means you do not count with the possibility of getting on the phone to get some action while you drive home back from work, as they will likely reduce the cost of their operational overhead costs by offering online wagering and customer service by e-mail only.

What's the catch?

As with any other great advantage, there's a downside when playing at a reduced juice online sportsbook. But in this case, players can exclusively profit form the assets by simply being aware of a common practice in the discount prices market: Juice Manipulation.

A line set at reduced juice means less commission for the book overall, but it does not always mean a better price for the player on each event. Many a times, the line managers will play with asymmetrical straddles in their lines. This can be better explained with the following examples:
• 10 cent line (-105/-105) + Juice Manipulation = -124/+114 = asymmetrical straddle
• 14 cent line (-107/-107) + Juice Manipulation = -124/+110

As explained above, a typical line for any given match-up at a sportsbook offering standard -110 odds could look like this:
• Team A: -7 -110,
• Team B: +7 -110

After price manipulation applied by the reduced juice sportsbooks, the same match-up will end up looking like this, at a 10 cent line (-105/-105):
• Team A: -7 -124 , instead of -110 and
• Team B: +7 +114 , instead of -110

Or, like this at a 14 cent line (-107/-107):
• Team A: -7 -124 , instead of -110 and
• Team B: +7 +110 , instead of -110

It's important for players to be aware of the fundamental differences between the traditional bookmaking models (-110) and the price manipulation in the reduced juice market. While this type of deal might at times offer great value (Team B: +7 +114 or +110), it's also possible that an unaware player gets caught up paying more than required on the other side of that same match-up (Team A: -7 -124, if compared with Team A: -7 -110). Reduced Juice can be a very useful tool for the player that likes to do value shopping, but players must pay close attention to the above mentioned juice manipulation.

Internet/computerized version of "booking to faces"

While juice manipulation is a powerful risk management tool for any line manager in the reduced juice marketplace, the most valuable information will always come form sharp bettors with the best information. As long as there have been bookmakers, there has been a different value assigned to each player's action. This is known as "booking to faces" and it consists of moving the line by half a point or more when a known wise or sharp player puts a chunk of money on a side at a specific number. The opposite is true for players without a clue or 'squares', whose bets are pretty much ignored.

Nowadays, that principle can be applied in a broader form with a data base-driven website. This data base would allow these reduced juice sportsbooks to work like a black box, as a value would be assigned to every player. This value could be generated by historical percentages over long periods of time. A player, whose winning percentage is well over 55% (for example) would have a higher value assigned to his account than a player with a winning percentage of 27.8%. As soon as Mr. Sharp would make a bet, the data base would calculate the odds of the sporting event landing on that specific number based on how many games under similar circumstances -played by teams involved- fell right on that number, how many of these times actually represented a winning bet for Mr. Sharp and an infinity of factors that we would call 'handicapping', but that for a data base and the many applications run by it, would be nothing else than data processing. This is nothing else that the instant calculation of odds (Probability Math). And all of this would be done DYNAMICALLY and in no time by a database driven website.

This would allow these online sportsbook to generate real-time odds for a market of speculation at prices that entice the most knowledgeable players to bet those numbers. The key to any lean is opening at the right number, one that will entice players to bet against the lean side. Most likely, these shops applying reduced juice business models will let several very sharp bettors bet into their openers before they post them on the board and will try to manipulate the market through asymmetrical straddles from that point on. This offers enormous advantages to sports betting arbitragers as well (read here for further info on arbitraging); and terrible disadvantages for the other online sportsbooks without the technological capability to keep up with this feature of the reduced juice market.

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The effect of the reduced juice business model in the sports betting industry

The online betting market has grown in an unprecedented way in no small measure because of a generation of new companies, companies that are radically different within their fields of action. Furthermore, these companies have invested heftily in research and development. The edge gained by this research created new products and generated tremendous profits, which were once again reinvested in further research and development. This symbiotic process has become a winning bet.

Companies like Wal-Mart embody to perfection the concepts of "creative destruction", by which one form of capitalist production is replaced by another. The business model of the Wal-Mart stores has effectively and inexorably killed the "mom-and-pop" shops -in a community scale- but has also reconfigured the macro-economic landscape, casting a cultural and moral shadow across all of society.

In the very same way, the reduced juice sportsbooks have changed -and will continue to change- the very essence of what we currently know as the online gaming industry. Due to the plethora of information on injury and weather reports, historical trends, players' and teams' performances and an infinity of other resources, the guy that will bet on his Team A -14 -110 just because he likes the team is a dying breed of bettor. Nowadays, players not only recognize value in a bet, but also shop for the best price available. And guess what? 9 out of 10 times, the reduced juice online sportsbook will offer you just that... a better price.

Welcome to a new dimension in online sports betting.

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