Yes, even with Latin America mired in recession, there are jewels to be found there–provided you look in the globe’s most promising industry. StarMedia isn’t the only Internet service provider doing so. Yahoo!, AOL, PSINet and other U.S. giants are all on the prowl, too. But with its U.S. roots and its Latin focus, New York and Miami-based StarMedia may be the most interesting of the companies racing to bring Latin America online. “I am Latin American,” says Fernando Espuelas, the 33-year-old founder and CEO. “Most of our staff is Latin American. We conceived of this company as Latin American from the beginning.” Born and raised in Uruguay, with a degree from Connecticut College, Espuelas believes that he is not just carving out another Internet niche, but rebooting an empire. “People forget that Latin America was unified for more than 300 years and divided for less than 200,” he says. “The Internet is bringing us together again.”
With more than a little help from Espuelas. Since founding StarMedia in 1996 he has scooped up half a dozen Net companies, from Chile to Venezuela. Cade?–meaning “where is?”–was a particular coup. Started in 1995 by Gustavo Viberti and Fabio de Oliveira, a pair of former college buddies, Cade? is now Brazil’s hottest search engine, with ad sales of more than $1.5 million in 1998. And Espuelas’s online shopping spree is far from complete. Last May he raised $105 million in a splashy IPO in the United States, and he has added another $35 million since then, all to finance the company’s push south of the border.
Given the competition, StarMedia’s likely to need every penny. Last month So Paulo-based UOL, the largest Internet provider in South America, raised $100 million in its own IPO. The Brazilian company, which was formed by two leading publishers, Folha de Manha SA and Editora Abril, is now opening offices in Argentina, Chile, Venezuela and Colombia. Brazil’s giant TV Globo has jumped into the fray, announcing a cable modem Net service. With the norteamericanos in the hunt as well, small but promising Net businesses from Chile to Mexico are seeing more dollars and deals waved at them than they ever imagined. “Now’s the time to get in. There’s no time for delay,” says Philippe Kuperman, president of PSINet Latin America. “A month is like a year in the Internet business.”
Of course, for many people in Latin America, a month is still more like a week; they’re waiting for their first telephone, not their first Web browser. And if most U.S. Internet companies have yet to turn a profit, the challenges are even more daunting in Latin America, where high shipping costs hinder e-shopping and even computer-savvy people distrust on-line transactions. The International Data Corp. counted only 7.4 million Internet users in Latin America by mid-1999. The good news is the rate of increase: 85 percent over a year earlier, on pace to hit 19.1 million users in four years. Online purchases for the continent totaled $170 million last year, with IDC predicting $8.02 billion by 2003. (In the United States, by contrast, there are 63 million Net users, and last year e-commerce transactions totaled $20 billion.)
What will all those predicted new users want to do on the Net? Like the rest of the world, Argentines, Brazilians and Mexicans go online to do their homework, shop (albeit for carnival costumes as well as groceries), bank and, of course, chat and gossip. Some of this they do more intensely. Few chatrooms are as packed as those in Spanish and Portuguese. But whether it’s fofoca or buzz, it’s still gab in any tongue.
Yet different accents seem to be important. Like jokes or poetry, the largely Americanized idiom of the Internet suffers in translation. Even today, more than half of Latin Internet traffic is driven by locally produced content. One rule of thumb for expansionist-minded Internet companies is surely this: know and respect thy local Web. In a survey, Cade?’s executives found that almost 45 percent of their users didn’t even speak English, the putative lingua franca of cyberspace. And polyglot foreigners might still not get it. It’s hard to imagine nerds from Seattle bringing much to the content on Mangueira.com.br, the official site for a premier Rio carnival competitor. Which is Espuelas’s point exactly. “We do not adapt our product for Latinos. We are creating a Latin American product,” he says.
The need for local product, of course, is why all the outsiders want to buy those small local companies. The question is how many locals will survive in the consolidation now underway. El Sitio.com, an Argentine-born Web site, aims to be one; it’s buying aggressively into Portuguese- and Spanish-speaking markets. “You have to find your market,” says Jack London, a Brazilian independent, who recently sold a virtual bookseller, BookNet, and started his own online auction site. “But the courtship is intense.” It may prove irresistible. Could Cade? have succeeded on its own? “Two maybe three years, but then what?” says Oliveira, now on StarMedia’s payroll. “Basically we’re moving into a field with a bunch of mom and pop stores,” says Kuperman of PSINet. “The vast majority are not going to make it.”
One holdout is Edgard Nogueira, founder of Aonde.com, a Brazilian search engine. He runs it on a Pentium II from a spare room in his parents’ house. He got the Internet bug while watching a Brazilian telenovela, where a business mogul romances a gypsy queen on the Web. Every day after school, when his sister isn’t tying up the phone line with her boyfriend, Edgard goes to work, answering e-mail and monitoring the traffic on his Web site. In two years, he has parlayed his hobby into a thriving company, with 85,000 hits a day and $6,300 (12,000 reals) in monthly ad revenue. Venture capitalists are not exactly beating down his door–yet–but he did turn away one pushy U.S. buyer. “I wouldn’t sell for less than a million reals,” he says. Well, he can probably afford to wait a month or two. He’s only 16.
