Internet ground fertile in calmer Latin America

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Latin America is emerging as fertile ground for Internet advertising. Just ask pioneers doing business there.

StarMedia, a Spanish- and Portuguese-language Internet content service that debuted in December 1996, has deals with dozens of marketers, ranging from BMW to Citibank to Intercontinental Hotels, from $10,000 banner-ad tests to $1 million marketing programs.

Separately, Microsoft Corp. plans to roll out Spanish- and Portuguese-language sites for the region by October.


With the calming of the region's financial and political seas, opportunity exists for early investors.

"[The Internet] is going to change the way we do business in Latin America, more than the way we do business in the U.S. or Europe," said Ken Richard, president of LatinRep Associates, Oakland, Calif., talking about how Latin American Web users are taking advantage of faster modems and more advanced technology. LatinRep staged last week's Latin Channels computer and Internet conference in Coral Gables, Fla.

StarMedia, which provides news, e-mail, chat, Web site-building and electronic commerce applications, racked up 60 million page views a day by July, up from just 800,000 13 months earlier, said Betsy Scolnik, VP-business development with the New York-based company. It had 1.5 million users by mid-September, triple the number from just five months earlier.

Microsoft is considering opening a Miami office for regional content development and advertising sales, said Katherine Randolph, manager-international online sales.

Latin America, especially Brazil, is similar to another "early development market" in which Microsoft became active, she said.

"We view Latin America similarly to where Japan was three years ago," as a strong potential growth market, said Ms. Randolph. Microsoft has content and site development in six markets around the world: Australia, Canada, France, Germany, Japan and the U.K.

This from a company that doesn't even have a Spanish-language model for the U.S.

Advertising is ramping up, too.


Some $20 million in Internet ad sales--1% of the global total--were conducted in Latin America in 1997, according to Forrester Research. That number is expected to top $645 million, 4% of the global total, by 2003, noted Ms. Randolph, a director and chairwoman of the International Internet Advertising Bureau, which is working to develop a reporting model for Latin America.

Latin America "leapfrogged" through the developmental stages by reaping benefits from technology and business models developed in the U.S., Ms. Scolnik said.

Services look for more interactive ways to engage uses, she said. StarMedia experiences 1% to 7.5% click-through on its ads, vs. 1% in the U.S., she said.

With an estimated 7 million to 10 million Internet users in Latin America and 65% of the population being under the age of 30, Latin America is a rich region for Internet penetration, experts say.

In fact, research from Nazca Saatchi & Saatchi, Puerto Rico, notes that the number of users should grow to 35 million by 2000.

Already the Internet is having an impact on traditional media.

Research from Jupiter Communications notes 38% of Latin American Internet users watch less TV, and spend less time reading magazines (12%) and newspapers (10%), attending the cinema (9%) and renting movies (10%).

This is not lost on advertisers. StarMedia's ad partners include Citibank, Compaq Computer Corp., 3Com Corp., Intercontinental Hotels, DirecTV, General Motors Corp., Ford Motor Co. and Chrysler Corp.--some of whom have spent as much as $1 million to reach the service's 1.5 million users.

One issue that continues to dog the region is per-minute telephone access charges. While StarMedia enjoys an average 20-minute stay by users, it also taps the highest economic demographic, Ms. Scolnik said. The masses will go online only when infrastructure changes improve functionality and service to offset the phone bill.

Copyright September 1998, Crain Communications Inc.

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