Colombia: A potential gateway to Latin America

After years of discussing the long-term potential of Latin America, Europe’s largest online gaming companies are finally making their decisive moves into the region, with a strong focus on the first Latam country to establish a European-style regulatory framework: Colombia.

In December, William Hill announced the acquisition of a majority stake in Colombia-licensed operator Alfabet SAS. “We’re excited about Colombia,” said William Hill CEO Ulrik Bengtsson. “And we know that markets in Latin America are on the regulatory path. I think expectations in the short term are modest but, over time, I think Latin America has great potential for our industry.”

Hills’ move into Colombia – a market home to a population of around 50 million – is the latest from a major European operator looking for a foothold in the region. In January, Entain announced it had acquired a Colombian licence the previous month and would soon launch its bwin brand in the country. “In 2020, we were one of the first global operators to be granted a licence to operate in Colombia and launched under the bwin brand,” the company said in a trading update. “Together with our existing strategy for the region, this gives us a strong foothold in the Latin America market as that opens.”

And in February, Flutter received a five-year igaming licence for its Betfair brand, having previously secured a partnership with BtoBet to facilitate an entry into Colombia. “The launch is in line with our strategy to grow in international markets and our commitment to bring the best products and safest gambling experience to life for Colombian customers,” said Dan Taylor, CEO of Flutter International.

Market movers

William Hill, Entain and Flutter all enter Colombia five years on from the regulation which introduced legal online gaming in the country for the first time. The legislation was signed into law in 2016, with the first licences issued the following year. While Colombia’s online market remains modest in size, the president of the country’s gaming regulator Coljuegos, César Augusto Valencia Galiano, tells EGR that it is growing significantly.

Total wagers were up 73% in 2020 versus the previous year, and Coljuegos brought in more than COP94bn (about £19m) in what it refers to as “exploitation rights”, essentially licence fees from online operators. This figure was up 38% on 2019, and Valencia Galiano predicts it will top COP106bn in 2021, accounting for roughly a quarter of total fees for the entire industry, including the land-based sector. The revenue is used to fund Colombia’s healthcare system.

So far, Coljuegos has licensed a total of 17 online operators. Valencia Galiano notes that while there are currently no applications pending, additional investment in the market is likely to arrive this year. While these figures paint an encouraging picture for the likes of William Hill, Entain and Flutter, all three will face stiff competition from local operators, including some backed by major European suppliers.

The market’s dominant online brand, Wplay.co, has pursued an aggressive marketing campaign, particularly since announcing a partnership with Playtech in 2019. Its adverts are a regular feature on ESPN’s Latin America-wide sports feeds; a current spot featuring former Colombia goalkeeper René Higuita playing the guitar has been in constant rotation over the past few weeks.

One of the main challenges is trying to stand out among the fierce competition that has resulted because of the hype the Colombian market is generating abroad – Mosquera Ochoa, country manager at operator Rivalo

Both Entain and Flutter will hope to quickly leverage strong recognition across Latin America of their respective bwin and Betfair brands. The latter has been a staple on televisions across the continent since a three-year sponsorship of the Copa Libertadores, South America’s equivalent of the Champions League, was struck in 2019. William Hill’s acquisition of Alfabet is likely a response to its own lack of brand presence in the market.

Local operators will look to utilise their local experience to fight off the international competition. “We have been operating in Colombia with one of our two global sportsbooks since before the market got regulated in 2016,” Alvaro José Mosquera Ochoa, country manager at operator Rivalo, tells EGR. “We have also had our Spanish and part of our Portuguese customer service and payments and fraud operation in Medellín since before we acquired our licence.”

For Mosquera Ochoa, Rivalo’s competitive advantage stems from its local experience and the opportunities this opens. He cites an innovative partnership with Rappi, a Colombia-headquartered delivery app which has emerged as one of Latam’s most successful tech unicorns in recent years. The agreement gives seven million Rappi users in Colombia direct access to Rivalo. “The advantages are there if you know how to materialise them,” Mosquera Ochoa says.

Understanding Colombian players 

Colombian customers are heavily sportsbook-focused, and within that vertical football dominates. According to data from Coljuegos, sports betting accounted for 89% of Colombia’s online market in January 2020. However, the regulator has moved decisively to diversify away from a reliance on sportsbook by regulating new verticals; last year both virtual sports and live casino were added to the product mix. By December 2020, sportsbook accounted for a slightly reduced 85% of the market.

Across sportsbook, football accounts for around 90% of all bets placed, followed by basketball and tennis. Markets such as over/under and number of goals are particularly popular. According to Mosquera Ochoa, these heavily sportsbook-focused customers present their own challenges to operators. “The Colombian punter is very savvy […] For most players it is not about casual entertainment or the thrill of betting, but about making money and beating the house,” he says.

Evert Montero Cárdenas, president of industry trade body Fecoljuegos, stresses that Colombia’s diversity and regional idiosyncrasies can themselves make marketing and operating tricky. “The country is very diverse and the success of an operation depends upon understanding it,” he says.

Payments are another important factor, according to Evan Schaffner, head of partner success for the US and Latam at Kambi, which is live in Colombia with BetPlay and RushBet. He says that Kambi’s partnership with Corredor Empresarial SA, which operates the BetPlay brand, has benefited by leveraging Corredor’s large retail network. BetPlay players can top up their accounts in shops, something Schaffner says has provided the operator with a strong competitive advantage over newcomers.

On the product side, Schaffner says Kambi is observing evolving habits among Colombia’s sports bettors, particularly since the introduction of Covid-19 restrictions. Faster settlement markets, including table tennis, are on the rise, as is esports.

Growth potential 

While there are plenty of reasons to be optimistic about Colombia, some have cautioned that international interest in the market is predicated more on its status as Latin America’s first, European-style regulated online market, rather than its actual growth potential.

Mosquera Ochoa notes that Brazil remains Rivalo’s main market, and that Colombian players have a lower LTV and can be tough to retain. “In principle, the more competition there is, the better it is for any market, but in regulated markets you have to be careful not to affect the overall health by increasing the competition at a faster pace than the market can absorb it. If the market growth rates don’t support the large investments companies have to make to enter and stay in the market, the math might just not add up.”

It is a similar calculation for affiliates. Fintan Costello, managing director of BonusFinder.com, which recently launched in Colombia, stresses that the market is still some way from maturity. “We like the market because it’s regulated, but it is definitely very early days,” he says. Costello adds that the majority of operators in Colombia have not yet established affiliate programmes, but that the market is quickly evolving with the entry of major European brands. As the market matures, he expects to find more opportunities for online casino. “For now, the demand is clearly for sports betting,” he says.

Others are more bullish on the short-to-medium term prospects. Playtech, which partnered with Colombia’s leading online brand Wplay in 2019, has been impressed by more immediate growth. Ilana Klein, a senior business development consultant for Latam at Playtech, describes Colombia as a “highly sophisticated market”. She says Colombia could even outgrow Mexico, a market Playtech entered five years ago alongside Caliente, and which has since become one of the supplier’s largest.

But Colombia is increasingly framed as a first step towards greater riches. Brazil continues to drag its feet on online regulation, but there is a sense that progress could be made this year. Further south, in Argentina, the province of Buenos Aires made a major breakthrough in December, announcing the recipients of seven online licences, including bet365, Hills, Flutter and Playtech.

Klein describes a regulated Brazilian market as an “appealing opportunity” to the company, but also says that Peru and Argentinian provinces could be of interest in the coming years, alongside the company’s existing presence in Mexico, Costa Rica and Guatemala. “Latin America represents a great opportunity and growth territory for online gaming, one which Playtech is well positioned to benefit from,” she says.

It is a similar story for Schaffner at Kambi, who says that the Latam market is finally “gaining real momentum” and is now an increasingly important area of focus for the company. “Our Latam strategy is underpinned by the market leadership position we hold in the Colombian market, and the quality of our product leaves us well positioned to take advantage when other countries regulate.” The company has already made another recent move in the region, partnering with Argentinian operator Casino Magic to launch an online sportsbook in the Neuquén province.

Bigger picture

Whether further European operators follow William Hill, Entain and Flutter into Colombia may ultimately depend more on developments in Brazil’s capital, Brasilia, and Buenos Aires than those in the Colombian capital of Bogotá. While growth rates may be impressive, Colombia is still a relatively small market for 17 licensees to fight over. The result is low margins of around 7%.

“I would say that one of the main challenges is trying to stand out among the fierce competition that has resulted because of the hype the Colombian market is generating abroad,” cautions Mosquera Ochoa. “Either the growth in users picks up steam or there won’t be enough room for all operators.”

It was likely no coincidence Bengtsson at Hills described the Colombian regulation as a “role model” for the Latam gambling sector when announcing the Alfabet acquisition. For some European companies involved, the experience of operating in a licensed framework in Latam may be the bigger prize.

“Given the high growth potential for licensed operators, Latin America is widely predicted to compete with some of the biggest markets in terms of revenue,” says Klein at Playtech. “Being the first Latin American country to officially authorise online gambling, Colombia is paving the way for gambling regulation in the region.