Bookmakers earn from their ‘edge‘, known as the “overround”. But you’ve no doubt seen free bets advertised on internet banners, on TV, even heard about them on the radio. They aren’t quite as valuable as they once were, but they’re still pretty generous — and they put the edge in player’s favour.
Simulating The Value Of Free Bets
To illustrate the value in free bets I have collected a large set (of 9,242) odds & results from Bookmakers:
- Odds were available pre-race at UK bookies
- Odds range from 8.0 to 20.0 (I will explain this choice later on)
- All bets assume a £25 stake
- A simple selection method (based on recent form) was used to choose the bets
Using this “bank” of 9,242 bets, I’ve randomly simulated the profitability of different types of Free Bets.
Stake Not Returned (SNR)
SNR bets are generally offered when you first sign up to a bookmaker. Any winnings you make on the free bet are returned to your account, but the free stake itself is not credited.
e.g. if you placed a £25 free bet place on a horse at 3.0 and the horse wins you return ((3.0 * £25) – £25) = £50 as opposed to the normal £75 return you would from a regular bet.
- When you sign up you may need to enter a code to let the bookie know that you want the free bet
- Before you obtain your free bet you’ll need to deposit your own money and place one “qualifying bet” of (typically) an equal amount at the minimum odds stated (e.g. over 2.0) before the bet is credited. This must be your first ever bet.
- SNR bets don’t normally carry a wagering requirement on winnings made from the free bet; this means you can withdraw it straight away
- It doesn’t matter if you win or lose your initial qualifying bet using your own funds — the free bet is still credited
- You usually have to risk the full SNR stake on one outcome (no splitting the bet up)
Qualifying bets placed on a random half of the sample (4621 bets)
The trend is somewhat inconsistent. But given the large bet size, the result is a relatively small loss of -£675. This is only -£0.14 per every £25 bet.
The SNR bets placed on the remaining half of the sample (4621 bets).
- The SNR bet simulation consistently makes money due to the fact that the player is not risking their own money like the qualifer i.e. the outcome of each individual bet is one of the following:
- SNR Bet wins: the player keeps the winnings
- SNR Bet loses: the player’s real money balance is unchanged.
So, only the qualifying bet can lose the player their own money!
The SNR bets on their own achieved a profit of +£105,050, equating to £22.73 per £25 SNR bet staked. If we include the qualifying bet in the calculation then we have:
(-£675 + £105,050) = £104,375, equating to £22.58 profit per betting account.
Bet Refunds are sometimes available as a signup promotion and are frequently given as bonuses to existing customers. A Bet Refund is when you place a bet with your own money and have your money re-credited in cash, or bonus funds, if you lose.
e.g. if you placed a £25 bet place on a horse at 5.0 and the horse loses you’ll return £25 in cash OR a free bet, opposed to simply losing your stake.
- You may need to enter a code to let the bookie know that you want the refunded bet
- Before you claim a refund (on the website or via email) you’ll need to place a bet at the minimum odds stated (e.g. over 2.0)
- This is similar to the SNR bet in that if you lose the “qualifying” bet of your own money you’re not out of pocket yet
- Bet Refunds are often credited as an SNR bet, which makes it less valuable than if its withdrawable cash balance. This is because you won’t receive the stake back on any winnings from SNR free bets. If you’re unsure on how this works then read back the previous section on SNR bets.
Qualifying bets on half of the sample (4621 bets)
You may observe that our random simulation is quite different to that of the qualifying bets on the SNR’s despite it having the exact same number of bets. I have purposely selected random bets in order to underline the impact of variance in results. Even on substantial sets of data the results can hugely differ across different simulations. In this case it’s lost a lot more than before.
The qualifying bets have performed realistically and lost a total of -£6,025. This is an average loss of £1.30 per every £25 bet.
However, the Bet Refunds have a huge positive impact to such negative results on the qualifying bets.
Total credited from Bet Refunds (4621 bets).
What this graph shows is the result of crediting refunds on players’ accounts. For every loss made by the qualifying bets (-£6,025 in our case), a refund is credited. The total running credit received by the players’ accounts grows steadily in the positive direction, trivialising the -£6,025 total losses incurred by placing the qualifying stakes.
The refunds credited a total of +£104,075 to player accounts.
By including the qualifier in the profit calculation, we have (-£6,025 + £104,075) = £98,050 = £21.22 profit per betting account.
NOTE: If the refund is credited as an SNR bet then the expected profit will be less because:
- You’ll be placing more stake at the Bookmaker, thereby betting against their margins
- The stake is not returned in your free bet, meaning only winnings are retained.
Free Money (Stake Returned)
Free Money or Stake Returned (SR) bets are normally given as a signup promotion — like at Bet365. When you first deposit money you’re given extra money in your balance (sometimes shown as bonus balance). Unlike SNR’s or Refunds, the funds looks and behave like real money in your account.
e.g. if you deposit £25 and are eligible for a 100% free money bonus, then you double your balance to £50 prior to betting. Before you withdraw you’ll need to meet a minimum rollover requirement.
- You may need to enter a code to let the bookie know that you want the extra balance in your account upon depositing
- Before you can withdraw the money you’ll need to place several bets at the minimum odds stated (e.g. over 2.0)
- Free Money bets often carry hefty rollover requirements before a withdrawal is allowed. Unfortunately in rare cases this can result in the promotion leaving the player worse off than betting without the bonus
- If you bust-out your balance then this is the end of the promotion for you. Thankfully the rollover requirements aren’t normally still tied to your next deposit
- As the name “Stake Returned” name suggests, the stake you place is returned in all of your bets as if it were a regular bet
- Your rollover may be limited to a maximum stake amount as well as minimum odds.
Due to various restrictions on Free Money bets, it’s a little more difficult to simulate the outcome without making some generalisations. To begin with we can visualise how free bonus balance impacts your profitability by assuming no wagering requirements apply.
NOTE: this third example is theoretical and for illustration purposes only. In reality you'll probably need to meet strict wagering requirements.
Free money deposit bonuses, placed on a random half of the sample (4621 bets)
The graph shows how £25 stakes on a regular betting account without a bonus (blue) fairs against the (£25 real + £25 bonus) double stakes (orange). For the orange line I assume that the full balance of £50 has been bet in one go and that no further bets are required to meet the rollover requirement.
Effectively what i’m showing you is a “double your winnings” scenario, where all losing bets still lose the full £25 stake as per normal, whilst all winning bets have twice as much stake on the horse at no further risk (to the player). Hence the disparity in the profit made on the exact same 4621 bets.
The Free Money bets made +£102,800, and a profit of £22.24 per £25 free money credited. "qualifying" bets are not applicable to SR bets.
Unfortunately the above graph gives absolute best case scenario, and only serves to illustrate how free bonus funds (in their simplest form) give a huge positive edge to the bettor. You may feasibly find an offer similar to this on something like a £5 free spin at an online casino, carrying a “1 x bonus” wagering requirement.
What I have demonstrated (infeasibly) in the graph is a “1x (deposit + bonus)” wagering requirement. This means that the player must bet a total of just £50 to qualify for a withdrawal. The wagering requirement is more likely to be something like 10x (deposit + bonus).
In the next section I explore the impact of strict Rollover Requirements.
Meeting Typical Rollover Requirements
I haven’t yet mentioned much about the “house edge” (i.e. the overround) when placing qualifying/free bets. Generally the overround is negligible for SNR free bets. Take an £25 SNR bet token as an example: the rollover requirement is typically only £25 (i.e “1x bonus” on the free bet itself). The expected loss isn’t too much considering the value you’ve been handed by the free bet.
On high rollover promotions more consideration has to be given to what losses you expect to incur from placing your bets. If you assume that Bookmakers have a 5% profit margin, and this is the average for all bets made, then you can produce an estimate of the expected loss during the rollover.
e.g. A Free Money bonus carries a rollover requirement of 10 x (deposit + bonus). If £25 bonus is added on top of £25 deposited, it makes a £50 total start balance. Here’s how you can draw an estimate…
The rollover requirement is 10 x(£25 + £25) = £500 to meet before a withdrawal is allowed. Therefore:
- Expected loss = £500 * (-5%) = -£25
- Expected account balance by the end of the rollover: £0 (break-even)
Based on this estimate, the promotion doesn’t give any edge to the player! However, the manner in which you bet through the bonus has a huge impact on the results.
But here’s the deal: it’s optimal to bet high stakes. Simulations back this theory up. Below are the simulated profits from this £500 rollover, assuming a consistent bet size is maintained throughout:
- £50 stakes: ~£16.72
- £25 stakes: ~£14.28
- £10 stakes: ~£10.63
- £5 stakes: ~£7.90
- £1 stakes: ~£3.68
Mathematically you make more profit by taking more risk on the rollover because:
- Large stakes: increase the amount of the free money you’ll retain, but also increase the chance of busting out!
- Low stakes: reduce the amount of the free money you’ll retain, but decrease the chance of busting out.
However, betting too low may render many promotions worthless to the player (as shown by such a minor +£3.68 profit on £1 stakes). Additionally, betting small wastes a lot of time. Imagine placing those 500 £1 bets...
The free bets are still good. My simulations show that in the long-term the players collectively profit from free bets — unless the rollover requirements are extremely harsh. But the intention of free bets is to draw in customers, which is an essential part of the bookmaker’s marketing strategy. So they don’t overly mind taking the hit…
Here are the key points to take away from these findings:
- You can never retain more value from a promotion than the money on offer. e.g. a £25 free bet never holds value more to the player than £25. Even if the house edge is 0%.
- To maximise what you make from free bets:
- Keep stakes high: it’s risky but you raise the potential amount of profit per free bet. This is most relevant in Free Money bets where you need to take advantage of the promo money in the account.
- Search for odds that you deem to be value: taking poor odds will lower your margins. Try to at least identify horses with odds close to those offered by the betting exchange (Betfair).
- Use high odds: whilst this increases variance, the return you get from your free bets is higher than if you use low odds. This idea is partly responsible for my test results retaining around 84% of the £25 free stakes offered by the three scenarios — a very good outcome.
You may decide to look into Matched Betting as an alternative, less risky approach to earning from free bets.