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Americas Online: The United Markets of the Americas [Global Business magazine]

by Hope Katz Gibbs
Contributing Editor
Global Business magazine
February 2000

THE SPANIARDS COULDN’T DO IT, despite their 300 years of often-brutal rule. Bolivar organized a valiant effort, and died a disillusioned man. Che Guevarra rallied a hemisphere’s left around the idea, before being shot down in the jungles of Bolivia.

The unification of Latin America’s disparate lands has baffled conquerors and rebels for nearly half a millennium. And that’s just the Spanish-speaking half of the hemisphere. Brazil, where the dominant language is Portuguese, is another story altogether.

But now another campaign to unify the region is underway, this time led by an invading army of techies and mass marketers.

Following trails blazed in recent years by multi-nationals like McDonalds and IBM, using marketing techniques honed by media companies like MTV and Univision, empowered by cheaper and better telecommunications and new trans-national tools such as call centers and express package delivery, a slew of the world’s top internet companies are scrambling to tie together vastly bigger communities of Spanish and Portuguese speaking consumers than ever before.

Their efforts are already paying off. Spanish-speaking consumers—whether they live in the Pampas, the Altiplano, or for that matter Los Angeles, Manhattan, or Madrid—are able to read the same news, comment on the same issues, and visit the same websites. And right now they are able to view advertisements aimed at them by companies ranging from Mobil Oil to IBM to Amazon.com.

Entertainment and information, it would seem, are quickly becoming Hemisphere-wide phenomena. Even without counting Spanish- speakers in the United States and Europe, there are at least 2.5 million people in Latin America who are already online, and some estimates put the number at four times higher. By 2003, many expect the total to explode to nearly 40 million people.

In time, the result will revolutionize both the markets—and manners of marketing—in the region. For the time being, however, anyone trying to manage the actual sale and transport of physical goods across the borders of Latin America knows that the region’s markets remain nearly as fractured as ever.

LATIN SELL

Efforts to sell products into multiple Latin American markets are not new.
Soon after the invention of radio, soap opera scripts were being mailed to radio stations from Havana to Santiago, to be read by local actors. In recent years, Brazilian and Mexican telenovelas, or soap operas, have become staples of nightly entertainment in more than a dozen of the region’s countries.

Jet-age travel. meanwhile, has allowed affluent and even many middle class Latin Americans to keep in touch with the latest fashions and consumer items through regular visits to the United States and Europe.

Over the past two decades, the process has sped up with the arrival of more mass-market consumer products—such as Pizza Hut pizzas. Equally important have been such technological advances as satellite
fed cable television systems, which can broadcast news and music and Nike ads from a single point to viewers across the hemisphere.

Nevertheless, almost all companies other than giant multinationals such as Coca Cola and Procter & Gamble have found there are very real limits to branding and selling in multiple Latin markets at the same time. The fact remains that consumers in Peru, Argentina, the Dominican Republic and Mexico often act in very different manners. Brazil is a universe unto itself.

The internet, however, can at least take care of the first challenge, by linking small pools of consumers in multiple markets. When the thousands of companies looking for business-to-business online connections are thrown in, the market can seem extremely promising.

Little wonder then that America’s biggest web companies are eager to grab a piece of Latin America’s online pie.

Not surprisingly, Microsoft was the first portal to install itself. In Brazil, the company currently has deals with more than 19 sites posted on its MSN Brasil online network. In August 1999, Microsoft and Brazil’s Globo announced a $126 million joint venture to offer broadband internet services in Brazil through a cable subsidiary called Globocabo.

Yahoo! also is working to set up Brazilian sites from its new office in Sao Paulo. In Mexico, meanwhile, Yahoo! recently joined forces in Latin America with Prodigy Communications and the Mexican telephone company Telmex.

Prodigy, meanwhile, was one of the first companies to launch a bilingual website. Aimed largely at the U.S. Spanish-speaking community, the service has become one of the most popular of the Spanish language operations.

For its part, America Online since 1998 has been working to set up Latin America Online to provide online access to Latin American citizens in Spanish and Portuguese. After an initial heavy investment in Brazil, the company is now focusing much of its development efforts on Mexico and Argentina.

To develop the Latin American service, the Dulles, Va.-based internet company signed a 50/50 joint venture deal with Cisneros Group, the Venezuelan conglomerate that has become an important player in Spain’s media and internet markets. Cisneros invested $100 million to fund the start-up.

Like AOL in the United States, the new Latin American service provides a multimedia interface, e-mail, chat rooms and integrated Internet access, as well as AOL’s popular Instant Messenger and “Buddy List” features. The service is also being promoted to Spanish and Portuguese-speaking customers in the United States.

NON-NORTH SERVICES

Not all the new Internet services hale from the U.S. market. One of the main players is Brazil’s Universo Online, owned by two of the country’s biggest media companies, Grupo Abril and Grupo Folha de Sao Paulo. Though lacking the history of a Microsoft or AOL, UOL is not hurting for funds. The company raised $100 million in a private placement offering last summer, and is now preparing for a larger initial public offering to global investors.

Other local upstarts haven’t had the staying power, however. Instead of fighting the invaders from the north for market share, some companies have simply sold out. This was the case, for instance, with Brazil’s “Cade?,” which last year was gobbled up by New York-based StarMedia for $5.3 million.

Nor are all of the internet players offshoots of English-language parents. Yupi.com, one of the leading Spanish-language sites, is based in Miami Beach. To lure in users around the region, Yupi.com provides a proprietary search engine, 12 navigational channels, e-mail, chats, and forums. greeting cards, homepage creation and hosting.

Last August, the company added a service enabling its users to translate text and browse the web in any language using services powered by e-lingo. a San Mateo, Calif.-based Internet infrastructure company that develops and hosts private-label, real-time language translation.

Then there’s StarMedia, which has become famous for its rapid growth and ability to gather investment funds. The company set a record in October 1998 with its $80 million private equity placement. It followed up with a successful IPO in May 1999.
StarMedia has also been on the forefront of efforts to link internet services to the provision of harder infrastructure. The company has joined forces with telecom giant AT&T to offer unlimited Internet access to Brazilians for $16.65 per month.

Under the alliance, AT&T provides the StarMedia network with infrastructure, operational assistance, billing services and customer service. The service, named StarMedia Accesso, is scheduled to be available soon in 33 cities in Brazil, and the company wants to expand the service to Mexico, Argentina, Chile and Colombia.

In similar tie-ups, Microsoft has teamed with Brazil’s Globo, while Prodigy and Yahoo! have tied up with Mexico’s Telmex.

BOLD BRAZIL

That so much of this activity has been centered in Brazil shouldn’t be a surprise. The region’s biggest market by far, Brazil has proven to be the real driving force behind Latin America’s foray into e-commerce. According to a July 1999 study by the Boston Consulting Group, online purchases by Brazilians accounted for 88% of the $160 million in total internet sales in Latin America.

Research by Cade? attributes this to the fact that Brazil offers by far the biggest group of affluent buyers within a single country in the region. Their study found that 72% of the Brazilians who use the internet have a credit card, and 58% of them have used it to buy something online.

“There are now enough Internet users in Brazil to support a viable domestic e-commerce economy,” says the Boston Consulting Group report, which based its opinion on the fact that Brazil’s banking system is leading the way to making e-commerce a viable and attractive option for consumers.

Beyond Brazil, however, one large question looms: Will the Latin American market live up to expectations?

Maybe not, says Bernadette Burke of Nua, a Dublin-based internet consulting and development company.

“Much that is written about the Internet in Latin America assumes that it is inevitable that the market will resemble that of the U.S.,” Burke wrote in a recent online article. “This can be forgiven as the U.S. has effectively set the global internet standard—they are the realized potential of the Net for other economies. However, while this potential may exist in theory, in practice it is unlikely to come to fruition in the medium—and possibly, the long-term.”

Burke argues that most market estimates do not take into account the vast differences in the wealth of the individual Latin American countries, or the dramatic differences in the governments that rule them.

Consequently, she says, important questions remain to be answered before the future of the Internet in Latin America can be confidently predicted.

For instance, Burke asks: Will U.S. multi-nationals, private domestic businesses, or the Latin American states control the internet in the region? Is a domestic e-commerce market viable anytime soon? What measures are being taken to bring the youth of the region online?

And, finally, can internet access in the region ever be expected to reach the average consumer? Or will the internet in Latin America serve only to widen the gap between rich and poor?

Despite her doubts, Burke sees no real alternative but to work the market.

“Current projections and predictions give the impression that there is little to be done but to sit and back and wait for the great Latin American Net economy to bloom,” she says.
“Nothing could be further from the truth. As was the case with the American pioneers, the West held gold in the hills for just a few. For the rest toil and hard work brought its fruition to bear. The Latin American internet market will be no different.”

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"I get by with a little help from my friends," says Hope, who gives special thanks to:

• MICHAEL GIBBS, website illustration and design: www.michaelgibbs.com
• MAX KUKOY, website development: www.maxwebworks.com
• STEVE BARRETT, portrait of Hope on Bio page: www.stevebarrettphotography.com

Contact HOPE KATZ GIBBS by phone [703-346-6975] or email.

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