|While thousands converge on Comdex, other Internet leaders meet in
Miami, strategizing over how to capture the fastest growing market of all --
November 15, 1999 1:55 PM PT
This week, while thousands of tech-heads have converged on Las Vegas for the Comdex tradeshow, more than 100 international Internet leaders are huddled in Miami, strategizing over the hottest growth market on the Web -- Latin America.
With increasing attention being paid to skyrocketing Internet use in Europe and Asia-Pacific, Latin America has, so far, played primarily only a sideline roll.
But that's about to change, according to industry leaders and leading analysts.
Research firm International Data Corp. estimates Latin American Web commerce will surpass $8 billion by the end of 2003.
Moreover, Latin America shows the fastest growth anywhere in Internet usage -- from 4.8 million users in 1998 to an estimated 19.1 million by 2003, a fourfold increase.
"Latin America is definitely one of the faster growing regions, but it has some natural roadblocks in place that need to be resolved before it can really blossom," explained Annika Alford, program manager for IDC Latin America.
Those "roadblocks" promise to be hot topics at this week's invitation-only "eCumbre" conference (in Spanish, cumbre means "come together at the top, exchange ideas, gather"), which runs through Tuesday at a resort just outside Miami.
Business leaders and researchers point to the relatively high cost of computers and Internet access as a major problem to expanding the Web audience beyond its current, mostly upper-middle-class base.
"The typical user in Latin America is spending more than any other region, which isn't a good thing because they're at the lower end of the gross domestic product, per capita wealth scale," said Alford.
There is some encouraging news. The average cost of a desktop PC in Latin America was $1,340 in the final quarter of 1998, down from $1,500 at the beginning of the year.
PC shipments up slightly
More recently, IDC predicted the shipment of PC's to the region would increase 1.5 percent in the first quarter of 1999 -- despite earlier predictions that shipments would fall because of the weakened Brazilian real.
Many experts believe that problems with telecommunications companies that charge by the minute for Internet access are unlikely to remain an issue for long.
They predict Latin America will follow in the footsteps of Europe and Asia and leapfrog many of the access issues that have plagued modem-bound users in the United States.
"In Argentina, cable modems are becoming increasingly popular," explained Clive Cook, former chief operating officer for the Latin American financial portal Patagon.com, and now a partner in South Beach Venture Partners, a venture capital firm specializing in Latin American Internet companies.
"In Mexico City, we're seeing wireless technology you don't even see in the U.S."
But not everyone thinks the elite status of Latin America's users is a problem.
For many companies, the ability to communicate directly with a highly educated, wealthy audience in a market with comparably little competition is a dream come true.
"In Latin America, about 10 percent of the population controls all wealth and knowledge. We're targeting that group. They're a premium group," explained Radames Soto, executive director of Wall Street Journal Interactivo, the online Latin American edition of the Wall Street Journal.
Unlike its English-language counterpart -- which is one of the most successful subscription-based sites on the Web -- WSJ Interactivo does not charge for its content. But Soto says that may change.
The site will roll out subscription-only areas over the next 1 1/2 years, he said. "(We'll) see how the culture reacts to subscription -- if it doesn't work, we'll continue to be free."
"The opportunity really lies in Latin America, where none of the big companies have established themselves. Which means a small brand with lots of money actually has an opportunity to become a major market shareholder," agreed Kyle McNamara, CEO of Spanish e-commerce portal, Espanol.com.
With an estimated 392 million Spanish speakers in the world, McNamara's hope for an open playing field isn't likely to remain a possibility for long.
Already, such major brands as Yahoo! and America Online have established a strong presence in the region.
And when Spanish portal darling StarMedia debuted on the Nasdaq last May, its initial public offering netted the company $105 million at an offering price of $15 a share. Shares hit a high of $70 on June 30.
E-commerce barriers remain
Not everything about the Latin American Internet scene is quite so rosy.
Significant barriers still remain preventing the easy execution of e-commerce transactions. The use of credit cards, a key ingredient in buying things online, isn't nearly as widespread as in the United States.
Tariff barriers and customs regulations make shipping items in between countries a logistical nightmare. And customers are still hesitant to put their trust in making online purchases.
"Consumer confidence is a big issue there," said David Taggart, partner in South Beach Venture Partners. "Consumers just don't have a hell of a lot of rights there. Compound that with not being able to interface with them and compound that with having to put your credit card online -- most companies are trying to figure out how to clear that major hurdle."
"The companies that are going to be successful have to really invest in logistics," reiterated McNamara of Espanol.com. "You're either looking at a partnership or a warehousing strategy."
The multilingual Web
Establishing those strategies early on will be a major part of the discussions during the eCumbre conference. With millions of Spanish-speaking Internet users at stake, it's an area companies aren't willing to ignore.
"As 392 million Spanish speakers really come up to speed and get online, they're really going to make an impact," said McNamara.
"I think you'll see over time as the Web becomes multilingual, you'll see people demanding that it be in their own language," predicted Cook.