Local flavour: KTO Group on the strength of its community and content-driven brand

In what has been a hotly anticipated country to regulate, last December Brazil finally gave the green light for the licensed market to go live on 1 January 2025.

When the priority licence bid window closed on 20 August 2024, the government confirmed 113 operators had submitted applications.

Among those was KTO Group, headed up by CEO Andreas Bardun, which applied on 5 August once it had all the relevant documents in order. The privately owned operator first launched in the South American country in 2019 with an aim to offer a more localised product than the competition. 

In a LinkedIn post at the time of its application, Bardun shared: “We are incredibly proud of our humble beginnings and the progress we’ve made in building one of the largest igaming companies in Brazil now we face a new challenge that we have been anticipating for many years: operating in a regulated environment in Brazil.”

Bardun, an industry veteran of 20 years, has high hopes for Brazil, which is predicted to become a $10bn market by 2029, according to H2 Gambling Capital, where he is confident his firm can achieve a 10% market share. 

According to data from search engine marketing company Semrush for July 2024, KTO.com was ranked the ninth-most popular gambling site in Brazil with 3.59 million visits. In particular, Bardun attributes this success to its product localisation as well as being a community- and content-driven brand. 

While KTO’s boss believes it is “probably the most recognised brand” in the southernmost state of Rio Grande do Sul, next on the agenda is making its mark across the rest of the country with a new focus on regulated markets, having signed a multi-year agreement with Kambi to power its online sportsbook in Brazil just as this issue went to press. 

EGR: What was your vision for KTO when you founded the business?

Andreas Bardun (AB): We’ve been around since 2018 but we launched in Brazil in 2019. We actually looked across the world trying to find unexplored spaces. While everyone was looking at other areas, we found Brazil a very enticing market for us because at the time, we could see there was no real localised product for the Brazilian market. If you looked from a sportsbook perspective, we could see it was very Euro-centric, with UK-based operators targeting Brazil at the time but with Premier League specials, etc, yet there was nothing really for the Brazilian people. 

EGR: How is KTO performing in Brazil and how significant is its position? 

AB: From the beginning, we were a very small operator. We were self-funded and not taking in big investors. We have no major backing. So, when we entered Brazil, we had to do it in a different way. 

We targeted just the south of Brazil to start off with and we decided we wanted to be the biggest there. We managed to conquer that, and I think we are probably the most recognised brand in Rio Grande do Sul by growing and doing everything organically through grassroots marketing. When we couldn’t outspend everyone else, we had to outsmart and outwork our opponents. That has led to huge success. 

We haven’t seen any official numbers because everyone has different types of rankings, but almost in every ranking we are somewhere between the sixth and 10th operator in Brazil. I would say we’re around eighth, ninth or 10th place. But I’ll put us pound for pound as one of the best-performing brands in Brazil, which I’m very proud of.

EGR: Who do you think are the current market leaders in Brazil and how competitive is it?

AB: There is one, which is our North Star, and that’s Betano. They came in slightly after us, but they obviously have bigger pockets. They don’t just have the money, they also have the know-how on how to do it.

We have been really impressed with how they have performed in Brazil. It’s becoming very competitive right now. Plenty of people are spending a lot of money in Brazil. It is also not an easy market, so it’s easy to overspend money there. 

You have to be careful when you operate in Brazil because there are a lot of traps. A week before the application deadline, there were only about 10 to 15 applications submitted, so it shows that a lot of people seem very hesitant about Brazil because the hurdles to enter right now are getting very difficult.

EGR: With the regulated market due to go live in January 2025, and KTO having applied for its licence, when do you expect to hear back on your application?

AB: Licensing is expected to take 90 days from the ‘early bird’ deadline of 20 August, so we should have the decision by November. The application process is quite interesting because  we submitted what we believe are all the documents in order, while some operators applied the first day, yet they couldn’t have had all the documents ready. 

It was a little bit problematic because the ordinances were not all out before the accepted the application. We have a little bit of an advantage in that we are focused only on Brazil because all we are doing right now is making sure everything we do is compliant with the new regulation.

EGR: While operators will be taxed at 12% of GGR, what are your thoughts on the 15% tax on players’ annual net winnings above the general income tax threshold, currently BRL2,259.20 (£308) per month?

AB: I’m always against a winnings tax for players, so that’s a negative thing. But I think in the end, compared to where it could have been when it was discussed it would be on every bet at one point, it’s turned out now to be on a yearly basis. It’s a big win for us because on every bet would have been impossible. 

Taxation, in general, is the biggest concern I have for Brazil because there’s a lot of taxation even for the future, with talk of a new ‘sin tax’ potentially. We have seen it in other countries where you have high taxation and there’s a bigger black market. But I honestly have a pretty good feeling about Brazil because they have been very reasonable. 

EGR: Licence fees are relatively high at BRL30m (roughly £4.1m). What are your feelings on that?

AB: It is very expensive compared to other countries. But I also understand why because I think Brazil, unfortunately, as it operates right now has a lot of not-so-serious operators. By putting up a higher licence fee requirement, the government is ensuring that not so many will apply. 

It’s going to be hard for the government – which has no experience in doing this since this industry is new to them – to actually enforce all the rules. Let’s say if you had thousands of operators applying – I think there are about 1,000 brands out there right now – it would be very difficult for the government to oversee everything. 

EGR: What do you think about the ban on sign-up incentives such as free bets and bonuses? 

AB: It’s mainly the welcome bonus that you’re not allowed to offer. I’ve seen regulations in other markets that don’t have welcome bonuses and those that don’t have retention bonuses. Of course, I believe the customer should have the right to be incentivised to play but I can see the counter-argument. We are not a bonus-driven brand, so we don’t see a problem with this. 

For us, it’s probably a competitive advantage but, at the same time, I’m feeling more for the players. For the user experience, it would be better if there were bonuses. From our selfish point of view, we believe it might be an advantage for KTO.

EGR: As the priority licensing window closed on 20 August, 113 operator applications had been submitted. Why do you think there was a slow trickle of applications initially, followed by a last-minute rush in the final week?

AB: People were waiting for the ordinances, and then it takes time to get the documents. If I have to complain about something, the application process is not very clear. You just have to submit your documents, and then you can’t do anything. You have to wait for a reply.

There are a lot of things that need to be done, such as structure your company with a Brazilian shareholder, and so on. Once you have done that, you need to go to the registry and appoint your Brazilian directors.

I am very curious to see how many will actually go through with a licence in the end. I would be surprised if all 113 do because you need the BRL30m to apply. You also need to have equity for almost the same amount in your company, and you need to guarantee player balances.

Essentially, you need about €10m (£8.4m) to operate in Brazil. And then there’s a lot of cost involved with setting up call centres, dealing with labour unions and customer complaints. 

EGR: Will the offshore market still thrive? 

AB: I believe that if the taxation will be heavy, the black market will exist. I always say the most important thing is to actually give customers the same experience because then there is no point for them to be in the black market.

The Brazilian government is motivated in putting blocks in place for non-licensed operators. Even the fact that they’re giving licensed operators a specific domain – bet.br – can also be another way to really highlight it.

EGR: How have you localised your product offering?

AB: A couple of years back when the Pix instant payment was introduced, we managed to integrate that as probably one of the first operators to have it. By being first with Pix, we could steal market share from the others by having a localised product.

When it comes to the sportsbook offer, we have KTOdds, which is similar to the premise of Request A Bet in the UK. We’re really trying to engage our own customers to come up with Brazilian-related markets. If you have to break it down into its own category, it’s our third-biggest sport, in a sense, if it was a sport. 

Also with marketing, it’s about the way you speak to customers as the different regions have different dialects. You don’t come with European Portuguese, but you respect the different cultures and states. 

EGR: How much of a game-changer has Pix been for the industry? 

AB: Pix is such an impressive tool. When we started in Brazil, people would have to deposit on a Wednesday and maybe have their money on the Friday if they wanted to bet for the weekend.

Then if they wanted to withdraw, after they had won some money, it would take another two or three days. It was a nightmare. After Pix, I can deposit, I have my money instantly in the account and when I withdraw, my money goes into my bank account instantly as well.

EGR: How is igaming performing in Brazil, especially with the explosion of crash games?

AB: When we started, it was mainly sportsbook. Now casino is just through the roof, especially around crash games, and even slots are becoming really popular now. It’s been a huge shift, and it was also very important to get online casino in because it’s so important for our business right now. 

We are taking more on the casino side than the sportsbook now, and I think most brands in Brazil do, too. But a couple of years ago, it was the complete opposite. We had a split of 80% sportsbook, 20% casino when we started. Now, in just a year, casino is bigger than sportsbook. 

KTO plans to open new offices in São Paulo in the next few months

EGR: KTO has built its own PAM and front-end. How has in-house tech helped you to compete?

AB: It has been very important for us because it allows us to focus on the Brazilian regulation. When SERPRO – the government agency that takes care of the data processing – discussed testing betting platforms with the sector in January 2024, there were 130 brands that started to share some data with the government. But only five companies concluded the project, and KTO was one of them. 

We are so focused on getting everything right for the regulation and the Brazilian market. That’s our strength, with our in-house technology, to ensure we are up to scratch with everything.

EGR: What’s next for KTO in terms of growth opportunities and other markets?

AB: We have some really exciting projects ahead. We’ve already established ourselves as the biggest brand in the south. For us, right now we’re conquering the whole of Brazil and we just continue growing. 

I think that the brand has done fantastically. We’re growing like there is no tomorrow. We’re always reviewing it, but obviously Latam is our focus as we only want to work in licensed markets.

We’re looking at re-entering Peru, but with a real licence. We’re also exploring Argentina, trying to understand that a little bit more. 

We are really happy about the growth, but the main thing is we’re focusing on having the best customer experience. We want to concentrate on building the best customer service for our clients and right now, we’re setting up our new state-of-the-art offices in Porto Alegre and Santa Cruz do Sul in Rio Grande do Sul. 

We also intend to set up offices in São Paulo later this year or in early 2025. These will be some of the most modern, cool office environments so we can attract the best talent. We’re focused on training everyone to deliver the experience Brazilian customers want. 

We really try to pay attention to the basics: giving really good customer service, a good product and doing that with a smile. It’s going to be very competitive with hiring people and that’s why we’re putting a lot of effort into building the best offices and working environment.