A “must win” market: Entain’s strategic reset in Brazil is paying off 

Back in March, Entain’s stuttering performance in Brazil was laid bare when the company revealed net gaming revenue (NGR) had slumped 14% year on year (YoY) in the country for the whole of 2023. The decline was a stark warning that the company behind Sportingbet had lost ground and had underinvested in product and brand compared to its rivals in an increasingly competitive market going through the process of regulating online gambling. Regulus Partners described the 14% fall as “euphemistically disappointing” in a market the analyst firm estimates grew 30% in 2023.

Yet it wasn’t all bad news; there were green shoots of recovery in the second half of 2023, including a steep increase YoY in first-time depositors (FTDs), as the business benefited from an action plan initiated by management to reset operations in South America’s most-populous nation. These FTD gains were partly down to the FTSE 100 firm adopting the ubiquitous Pix instant payment system, introduced by the Brazilian Central Bank in 2020, allowing for lightning-fast deposits and withdrawals. The immediate benefit for the operator was more than one million deposits using Pix in the few weeks after its integration.

More importantly, Entain installed a new leadership team on the ground in the second half of 2023, replacing the status quo of managing efforts from Europe. Having that local knowledge and expertise in Brazil has, says Entain, enabled the business to better react to the latest trends and developments. The team in Brazil made some key changes, too, including improving the user acquisition funnel, such as tapping new digital channels and affiliates. There has also been a ramp-up this year of TV and digital marketing as part of a drive to reinvigorate the Sportingbet brand, while the product received attention from tech dev to deliver a more localised offering with a greater focus on domestic football in Brazil.

Furthermore, the acquisition of 365scores is bearing fruit in Brazil. Questions were raised last year as to whether Entain had paid too much for the sports media and live scores app business in July 2023 in a transaction worth up to $160m. While that might still be the case, management reported in its H1 2024 interim results, published yesterday, 8 August, 365scores was a “powerful channel and complementary to our other initiatives”. Finally, the gaming portfolio has been broadened to cater to a market seemingly besotted with crash games, alongside overall product design refreshes, site speed upgrades and improved user journeys.

And the result?

Hard on the heels of double-digit quarterly NGR declines in 2023, Q1 2024 NGR reversed the slide with a 9% gain in Brazil in constant currency (cc), although as per usual no actual figures were disclosed. More impressive was the 48% cc surge in Q2 online NGR. Overall, there was a 28% cc increase in online NGR for the first six months of the year – and this return to double-digit growth was achieved sooner than bosses had expected. Such was the recovery, Brazil outstripped YoY online NGR H1 gains of 19% cc in Croatia and 11% cc in Georgia. What’s more, Brazil accounted for 5% of group online NGR for the first six months of 2024 and is now its fastest growing market.

As for the remainder of the year, the company says the focus is on further improving customer retention and continuing to make strides with UX, including launching a new in-house bet builder. Then comes the transition into a regulatory regime from January 2025. Sportingbet applied for an online licence in late July, joining the likes of Kaizen Gaming-owned Betano, Superbet and DFS operator Rei do Pitaco to apply during an initial 90-day window. Five-year licences cost BRL30m (£4.2m), with successful applicants allowed to have up to three skins. Operators will be taxed at 12% of gross gambling revenue (GGR), while players face a winnings tax above a threshold of BRL2,824, or around £400.

Crowded house

The past few years the Brazilian market has become extremely crowded as a flood of new brands entered the space, which turned up the heat on a legacy operator like Sportingbet. “Clearly Brazil is very competitive,” said chief commercial officer Sameer Deen when responding to an analyst question yesterday about why bosses are confident the brand can regain market share. “[It’s a] large market, big population and [there is] a lot of competition from domestic and international players – and a lot of people looking to come into the market post-regulation as well. We have an historic brand, a lot of trust and players who are excited about what we are doing from a player experience perspective. And, frankly, re-engaging with a brand in a market where there is a lot of new products and a lot of fly-by-night operations, if you will.”

According to keyword research tool SEMRush, Sportingbet.com generated 12.5 million visits in June in Brazil, a 70% increase on the year prior. Sportingbet was in fourth spot in the web traffic pecking order, behind Betfair on 15.2 million, although there was a delta between it and leaders Betano (93.4 million) and bet365 (66.8 million). Entain, which recently appointed Gavin Isaacs as its new CEO to fill the void left by Jette Nygaard-Andersen last December, described Brazil as a “must win” market. The operator has also previously highlighted the opportunity and how the total addressable market (TAM) is worth $2.5bn.  

Deen commented: “We’re confident, but right now there is no clear market share data – we will have a better sense of that post-regulation. Based on our growth rates and based on what we are seeing from our customers and feedback, we’re confident that the business is on the right trajectory […] marketing is good, the product is improving, and you can see on our social channels how people respond.” He concluded: “We are happy about where we are but, obviously, we continue to execute, focus and invest in the market.”