Waterhouse VC: Ordem e progresso
In his latest column, Tom Waterhouse of Waterhouse VC analyses the burgeoning sports betting market in Brazil after the country's recent regulation.
Note: every month, industry investors WaterhouseVC publish an article that spotlights different aspects of the ecosystem. This month, Tom Waterhouse analyses the burgeoning sports betting market in Brazil after the country's recent regulation.
Ordem e progresso
‘Order and Progress’ - The national motto of Brazil, inscribed on the Brazilian flag.
The motto is an allegory for Brazil’s new reforms to regulate the country’s >US$1.5 billion wagering industry. With 214 million people and 217 indigenous languages in addition to Portuguese (World Population Review), Brazil is a large and complex market. It is one of the largest online sports betting markets in the world with 42.5 million unique users (The Brazilian Report). Wagering operators are generating significant revenues in Brazil by leveraging influencer marketing and numerous sports sponsorship deals.
Brazil’s historic and forecast wagering revenue across online casino, online lottery and online sports betting. Source: Statista
Brazil's Chamber of Deputies recently passed a gambling regulation act, allowing online gaming and omnichannel wagering, with operators able to buy three year licences. However, operators will be prohibited from offering bonuses and will pay an 18% tax on revenues. A 30% tax on player winnings over US$400 will also be enforced. This tax disincentivises high value players from wagering online, potentially impacting regulated operators’ revenues by 30-50% (Regulus Partners). Furthermore, by banning bonuses, bettors are motivated to wager with grey market wagering companies, attracted by tax-free bonuses.
The regulation requires locally approved payment options aimed at curbing offshore and crypto wagering. Only institutions authorised by the Brazilian Central Bank will be allowed to provide payment services, with customers restricted to transferring funds from their wagering account exclusively to a bank account domiciled in Brazil.
In our research, we have found that the majority of payments to/from Brazilian wagering accounts are conducted through PIX (comparable to Australia’s Osko Payments system). According to Thomas Carvalhaes (Managing Director, VaiDeBob), PIX payments dominate in Brazil, representing more than 95% of transaction volumes for operators.
Sports sponsorship in Brazil
Football is the most popular sport in Brazil and many wagering companies have sponsored football clubs, along with teams in other sports. For example, KTO (a large Brazilian operator) sponsors Caxias Do Sul, which plays in the top-tier Brazilian basketball league, the NBB. KTO has grown through a localised strategy, initially catering to the southern states within Brazil’s 26 states. A state by state approach combined with a strong product has increased KTO’s player retention. Established in 2018, KTO currently operates in both Brazil and Peru, with intentions to expand its presence to Chile as well.
Caxias Do Sul is sponsored by KTO. Source: KTO Group
Betting websites sponsor 39 out of the 40 teams in the two highest Brazilian football leagues, with betting sponsorship rates far higher than other major global football leagues. For example, in the 2022/2023 season, just one Bundesliga team (Mainz 05) is sponsored by a betting company.
Tche Tche of Botafogo (sponsored by Blaze, one of Brazil’s largest betting companies) competes for the ball with Alan Patrick of Internacional. Source: Wagner Meier/Getty Images
In January 2022, BetPix365, a large Brazilian operator, announced Luis Fabiano as its latest brand ambassador. Fabiano is the third-highest goal scorer in the history of Brazil’s national team. Launched at the end of 2021, BetPix365 has an extensive wagering offering, with deposits and withdrawals through PIX. Prior to announcing Fabiano’s ambassadorial role, the company also inked ambassadorial deals with Willian (a striker for Corinthians) and Dudu (an attacking midfielder for Palmeiras).
Luis Fabiano, an ambassador of BetPix365. Source: iGaming Brazil
The endorsement of wagering companies by some of Brazil's revered football icons underscores the immense potential within the country’s wagering industry as it continues to mature.
Influencer marketing in Brazil
In addition to sports sponsorship, influencer marketing is a widely used funnel for acquiring new wagering customers. As discussed in our September 2022 newsletter, wagering operators are gradually embracing a fresh perspective in their marketing strategies, increasingly leveraging influencer marketing, which provides brands with a way of forging deeper connections with their customers. One of Brazil’s most popular influencers is Felipe Neto, who has 45.5 million subscribers on Youtube. In 2019, Neto rose to prominence as the world's second-most-watched YouTuber. He also advocates for democracy in Brazil and earned a spot on TIME magazine's 2020 list of the 100 most influential people worldwide.
Felipe Neto. Source: United Nations
Blaze, one of Brazil’s most popular wagering operators, has gained substantial market share through endorsements from notable influencers including Felipe Neto and even footballer, Neymar. The company uses 400 influencers to promote their wagering website (Eightify). In August, the company had 50 million website visits, up from 30 million in June (Similarweb).
In the Instagram post below, Neto said:
“Anyone who follows me here on Instagram or on my channel knows that BLAZE is our official sponsor. In addition to having a platform with countless ways to earn extra income with games like Crash, Double and Mines, at Blaze you can also place your sports bets”.
One of Felipe Neto’s Instagram posts promoting Blaze. Source: Instagram
Crypto wagering in Brazil
Despite Brazil’s grey regulatory environment, crypto operators have also had strong traction in the country and have formed partnerships with celebrities, sportspeople, sports teams and leagues. For example, Sportsbet.io has entered into a strategic alliance with NBB to provide content across NBB’s digital platforms centred around giving fans betting options and statistics before and during basketball matches. Denílson, a former professional striker for Brazil’s national football team, is a Sportsbet.io ambassador.
Stake, Sportsbet.io and BC.Game all count Brazil as a top 5 driver of website traffic, with Sportsbet.io attracting 60% of its global visitors from Brazil in August. Source: Similarweb
With a population of over 200 million people and a burgeoning middle class, the Brazilian wagering industry holds exciting growth prospects for B2B suppliers and operators, across both well-funded local players and experienced offshore operators. However, operators in Brazil must confront several challenges. Foremost among these is the stringent regulatory framework, which prohibits bonuses, taxes player winnings over $400 and imposes payments restrictions. Operators and suppliers should also anticipate ongoing regulatory changes as the market evolves.