News Column

Tangled Web

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The going continues to get tougher for Hispanic-oriented Internet sites.

By Derek Reveron
HISPANIC BUSINESS® magazine, Dec. 2001

The top Hispanic dot-coms, like their general-market counterparts, continue to survive because they have the deep corporate pockets to outlast the industry's advertising downturn.

"Those backed by conglomerates have the capital to withstand the lack of traditional Internet advertising, and develop value-added subscription-based services," says IDC analyst Mark Alexander.

Several top Spanish-language Web sites are either creations of large corporations or independents that later merged with a conglomerate. Univision launched Univision.com. Spanish telecommunications giant Telefonica started Terra Networks and later acquired Lycos to form Terra Lycos. Mexican Web portal T1MSN, a joint venture between Microsoft and Telmex, acquired Miami Beach–based Yupi Internet earlier this year and launched Yupi/MSN. AOL Latin America is a joint venture between AOL Time Warner and Venezuela's Cisneros Group. El Sitio merged with a joint venture of Cisneros Group and Dallas-based leveraged buyout firm Hicks Muse Tate & Furst to create Claxson Interactive Group. StarMedia, the only major Hispanic Web site that remains independent, continues to struggle.

The survivors face a bleak advertising market. Total online advertising for the first half of 2001 totaled $3.7 billion, down 7.8 percent from the same period in 2000, according to a report by the New Media Group of PricewaterhouseCoopers. Analysts expect spending on advertising for all of 2001 to grow only marginally.

That's why Hispanic Web sites are pursuing non-advertising sources of revenue. Terra is having some success. Online advertising accounted for 62 percent of revenue during the second quarter, a 4 percent increase from last year. Subscriptions provided 38 percent of revenue, a 152 percent rise. Paying subscribers increased from 24 percent of total users to 29 percent.

Meanwhile, the company increased total second-quarter revenue by 34 percent and trimmed net losses by 50 percent over the last three quarters. Terra Lycos Executive Chairman Joaquim Agut says the company is on track to "continue our major efforts to reduce costs and reconcile growth with profitability."

Says Gene Bryan, CEO of HispanicAd.com, which tracks the Hispanic online industry: "Terra and Univision are probably the best among Hispanic sites at positioning themselves and creating valuation."

In September, Univision.com attracted more U.S. Hispanic Internet users than any other Spanish-language Web site, according to New York–based Nielsen/NetRatings. The site has more than 7 million users, the Audit Bureau of Circulation reports.

Despite Univision.com's popularity, its losses continue to mount. The Web site lost $10.8 million in the second quarter, compared with $7.5 million last year. For all of 2001, the operation will lose $30 million to $33 million, Univision announced.

StarMedia, one of the first Hispanic dot-coms, faces an uncertain future. The company had predicted it would post a profit by 2002, but later backed off its statement. Subsequently, president Enrique Narciso replaced company founder Fernando Espuelas as CEO, although Mr. Espuelas retained his title as chairman.

Estimated 2001
Internet Revenues ($M)
Terra Lycos                        $373.83
StarMedia Network Inc.     $67.30
Yupi/MSN                               $9.48
Univision.com                         $4.78
Source: HispanTelligence®,
the research division of Hispanic Business Inc.
StarMedia's second-quarter revenue rose to $14.2 million from $13.8 million. However, revenue from bartering of advertising and services accounted for $3.6 million, or 25 percent of the total, up from $1.9 million, or 14 percent, last year. Revenue from wireless subscribers accounted for more than 10 percent of overall revenue, according to senior vice-president Betsy Scolnik. The company narrowed its second-quarter loss to $30.6 million from $41.5 million last year. Still, in documents filed with the Securities and Exchange Commission, the company said it could run short of working capital within 12 months.

StarMedia has been cutting costs and services to shape up its balance sheet, possibly for an eventual merger, industry analysts contend. Says Ms. Scolnik: "We can remain independent, but we look at anything that makes sense from a shareholders' perspective."

El Sitio failed in its effort to survive independently on advertising and ISP revenue. In its last earnings report prior to the merger, El Sitio posted second-quarter 2001 revenues of $2.9 million – $1.9 million from advertising and $1 million from ISP subscriptions.

Claxson plans to use El Sitio primarily as a complementary marketing and media content provider for its broadcast operations. "The site is moving away from the advertising model and focusing on subscriptions," says Claxson spokeswoman Jennifer Gery.

Related article: Hispanic Internet Sector on Slide in 2001 (December 28, 2001)



Source: HISPANIC BUSINESS magazine


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