Other countries in the region are also experiencing triple-digit growth. The typical cost of Internet access in Mexico, for example, has dropped from some $200 a month at the end of last year, to a near-U.S. level of $35 a month for unlimited access by second quarter of 1996. From stockbrokers in Buenos Aires to middle-class housewives in Santiago, Latin Americans are joining the wired world.
What are the dynamics of this transformation?
Internet growth will be fueled by companies operating in local languages. According to a 1995 Audits and Survey Pan-Latin American study, only 10% of the region's middle class considers itself proficient in English. In other words, 90% of the region's "wired-potentials" can't take advantage of today's largely English-only environment.
Latin American companies are jumping into the Internet content business. A proliferation of sites, both big and small, of good and middling quality, has begun. Much like the explosion in Internet content in the U.S. over the past 48 months, Latin America is poised to see a geometric growth in Spanish and Portuguese language content. This is the leading edge of the Internet revolution.
But of course much work must be done to make this potential a reality. Latin America is still a net consumer, not a producer, of technology. The Internet revolution thrives on innovation, constant change and leaps of consciousness. The creation of communities on the Net will require investment in both traditional and human forms of capital.
What is the model for the development of a healthy, profitable Internet business in Latin America? Advertising.
Unfettered by the legacy of subscription networks, such as Prodigy and America Online that preceded the Web in the U.S., Latin America is jumping into the Internet with both feet. According to Jupiter Communications, a market research firm, U.S. advertising revenue for Internet media companies is nearly doubling every quarter. With no competition from subscriber services, the Web advertising revenue model will dominate Latin America.
Marketers who seek to establish high quality relationships with the early adopters of new technology in Latin America by advertising on Internet media will benefit disproportionately by reaching an up-market, educated consumer with impressive efficiency. Because of a marked concentration of computer ownership among 30% of households, advertisers on the Net will reach consumers who are both desirable targets and expensive to reach with traditional mass media.
As a super-premium medium, with excellent levels of interaction and complete measurability, the Internet makes good business sense for marketers. Innovative companies will discover the power of a medium that delivers highly engaged consumers-prequalified by their access to an expensive gateway: the PC.
And by delivering new options for targetability and accountability, Internet media will create competition in Latin America's sometimes clubby, self-inflationary media market. Creating choice for companies will erode the quasi-monopolistic pricing policies of dominant media groups. Marketers will now have a sophisticated tool to measure efficacy more precisely, to customize offers by target group and build their brands in truly innovative ways.
Beyond the strategic benefits of reaching high-value consumers through an innovative advertising medium, marketers stand to benefit in another way. Associating themselves with the greatest revolution to hit Latin America since Simon Bolivar's wars of liberation, marketers will play a leading and crucial role in the creation of new pan-Latin American communities.
Fernando J. Espuelas is former AT&T managing director of marketing communications for the Americas. He is now chairman and CEO of StarMedia Network, a company that is developing Latin America's first commercial online service based on the World Wide Web. The site (http://www.
starmedia.com) is set to launch at the end of the year.