News Column

Hispanic E-commerce Market Expands

Page 2 of 1

By Derek Reveron

More than 8,000 Hispanic-oriented Web commercial sites existed at the end of this year’s first quarter, and the number is doubling every 13 or 14 months, according to a recent survey.

That explosion of sites – which range from mom-and-pop storefronts to giants such as StarMedia and quepasa.com – is reflective, in part, of the entrepreneurial traditions of Hispanics, according to Tony Dieste, president of Dallas-based Dieste & Partners, which conducted the survey.

"Whether you are Cuban, Puerto Rican, or whatever, everybody hangs out a shingle and sells something. Instead of doing it in stores or on street corners, tiny businesses put up Web sites. The quality of them has improved dramatically within the last year," notes Mr. Dieste, whose company handles advertising, including Internet placements, for a number of Fortune 500 firms.

The scramble for the Hispanic online audience also is being driven by an increasing recognition of their potential spending power online.

According to a recent Hispanic Business/Zogby poll, 37.8 percent of Hispanics say they spent more than $100 online in the previous three months, compared with 15.8 percent of Anglos.

As of March, 50 percent of U.S. Hispanic households could access the

Internet at home, school, work, the library, or another location, according to a survey by Forrester Research, a Boston-based research firm. That figure compares with 46 percent for Anglo households. Forty percent of Hispanics could access computers at home, compared with 38 percent of Anglos.

"The growth rate of U.S. Hispanics online is parallel to that of whites," says Forrester analyst Ekaterina Walsh.

Potential returns always attract investors, and major international Internet, telecommunications, media, and financial institutions have ponied up millions of dollars to acquire sites or build them. Cisneros Group, the Caracas, Venezuela-based media conglomerate, teamed up with America Online to develop Web offerings. Cisneros also owns part of El Sitio.com (www.elsitio.com), a Buenos Aires-based network that targets the United States as well.

Spain’s largest bank, Banco Santander Central Hispano, recently paid $529 million in cash to acquire 75 percent of Patagon.com. The Miami Beach-based site provides Spanish- and Portuguese-speaking nations with financial information and online stock trading. Telefonos de Mexico SA, Mexico’s largest phone company, teamed up with Microsoft to develop portals in the United States and Latin America.

Univision was expected to introduce its Web site in the first part of this year, and although few doubt it will have a major impact on the industry, dominance in television doesn’t automatically translate online.

Sites also continue to attract mainstream investors, and several have gone public. Recently, ElSitio.com and Terra Networks SA, a subsidiary of Spanish telecommunications giant Telefonica, joined quepasa.com and StarMedia among the major content-focused sites to launch IPOs. And while this route remains attractive to many sites, the road from IPO to riches isn’t always smooth.

StarMedia originally targeted Latin America before expanding to the United States last year. The company has been the subject of takeover rumors, but in March, Wall Street analysts downgraded StarMedia’s stock because of concerns about rising costs in Latin America. CEO Fernando Espuelas defended the stock, noting that the company remained on target to turn a profit by the last quarter of 2002. Still, StarMedia’s stock plunged more than 30 percent in one day, although observers predicted that the stock would eventually bounce back.

In February, Quepasa.com reported a loss of $28 million in its first full year of operation. The loss represented more than half of the $48 million the company raised in its IPO last June. Company officials blamed marketing and hiring expenses to build business and name recognition. Nevertheless, the company’s stock has continued to suffer.

Terra Networks SA is Europe’s largest publicly traded Internet company and one of the world’s biggest providers of Spanish-language online access and content. Earlier this year, Terra Networks targeted U.S. Hispanics with a multiservice site (www.terra.com). Television and print advertisements pitch the site as sensitive to the linguistic and cultural nuances of diverse Hispanic populations. In March, Terra announced a five-for-one stock split to make purchases easier for individual investors.

El Sitio.com raised more than $131 million through a public offering earlier this year. Investors include Cisneros Group and venture capital firm Hicks, Muse, Take & Furst.

Wall Street expects Yupi.com, a Miami-based portal, to go public soon. Sony is a major investor in Yupi.com, which promotes itself in English on mainstream network television. Several other companies, including Subasta.com, also hope to go public this year.

As the field becomes crowded, the competition for the audience becomes fiercer. When Subasta.com (www.subasta.com) launched a Spanish-language auction site for Latin America a year ago, the company had no real challengers. By early 2000, however, the Fort Lauderdale-based business faced at least two serious competitors: Miami-based MercadoLibre (www.mercadolibre.com) and Deremate.com (www.deremate.com) in Mexico City. "Another 8 or 10 competitors could pop up by the end of this year," says Subasta.com marketing director Riccardo Costa.

Unlike Subasta.com, MercadoLibre and Deremate.com also target U.S. Hispanics. The two offerings are among a fast-growing number of sites and portals aimed at Spanish speakers worldwide. "There has been an explosion of major Web ventures directed at Hispanics," says Lucas Graves, an analyst with Jupiter Communications, a San Francisco-based research firm.

The frenzied growth of Spanish-language Web sites is receiving a boost from the digital maturation of the nation’s 31 million Hispanics, industry analysts say. "An entire palette of Web ventures are chasing the Latin America market but see U.S. Hispanics as a good jumping off point due to their higher income and greater Internet access. They are the low-hanging fruit," says Mr. Graves.

The Latin American market holds huge promise but remains undeveloped. Analysts say that Internet use in the region is growing 50 percent per year. However, they add, total market penetration remains at about 4 percent, owing to challenges including high tariffs and online charges, erratic delivery, lack of secure online payment methods, and poor customer relations.

Meanwhile, Hispanics in the United States and Puerto Rico account for about half of the world’s Hispanics with Internet access. And they are ripe for the Internet picking because they are quickly closing the so-called "Digital Divide" – the disparity between Hispanics and Anglos with access to Internet technology, cited in a 1998 U.S. Commerce Department report. The breach is narrowing because of dropping PC prices and widespread Internet access in venues outside of homes.

Here’s a sampling of sites that are vying for Hispanics’ attention online:

Intelligent Life Corp., formerly Bank Rate Monitor, owns consejero.com (www.consejero.com). Based in North Palm Beach, Florida, the personal finance site targets business people and consumers in Latin America, while the U.S. Zona Financiera Inc. site (www.zonafinanciera.com) offers information on loans, insurance, and Latin American stock markets. Hipoteca.com is an online mortgage service.

BI Financial Inc., a Miami Internet financial services company, along with Orlando-based Metro Savings Bank, plans to launch an Internet-only bank for U.S. Hispanics (www.bancointernet.com) this year.

Medical self-help sites include www.graciasdoctor.com, New York-based MedicoUno (www.medicouno.com), and Buenos Aires-based Salutia.com. The latter two sites recently completed a $75 million merger and moved their combined headquarters to Miami.

ZONAi Network (www.zonai.com) is aimed at U.S. Puerto Ricans who want to keep up with friends and news from Puerto Rico. UnoDosTres.com serves U.S. Hispanics and their friends and families worldwide. Soloella.com targets U.S. Hispanic women with content, shopping, and lifestyle tools. San Francisco-based Latino.com, founded in 1995, offers much culture-related content. Loquesea.com (www.loquesea.com) is geared toward teenagers and young adults.

Miami-based SportsYA! Inc. (www.sportsya.com) serves the United States and Latin America; investors include Chase Capital Partners and Flatiron Partners, two New York venture capital groups.

Eritmo (www.eritmo.com) is a Miami-based music portal that offers videos, merchandise, and concert tickets. The founders are CBS-Telenoticias president Francisco de la Torre and Raul Vasquez, former Sony Latin America vice-president of finance. Investors include Telemundo Group chairman Roland Hernandez, former CBS chairman Michael H. Jordan, and Derek Reisfield, former president of New Media, CBS.

Espanol.com (www.espanol.com) is a Boston-based e-commerce site.

Miami-based Unlimited Latin Flavors operates www.latingrocer.com, which sells Hispanic and Caribbean foods. EHola.com is a portal and Internet service provider run by Global DataTel Inc., based in Delray Beach, Florida.

Lalibreria.com (www.lalibreria.com), based in Boca Raton, Florida, is an online book retailer.

Perhaps the biggest challenge facing Hispanic-oriented sites is appealing to the broad diversity of U.S. Hispanics. Some of them surf the Web in Spanish, while others do it in Spanish and English or just English. Industry observers predict that site-use habits will evolve much as they did in the Spanish-language television and print markets: Hispanics will use Spanish-language sites along with – not in place of – English-language sites.

But even for that to happen, the sites have to do a lot more than present themselves as Spanish-language alternatives. They must specialize, experts say. "You still see a lot of generic sites for Hispanics. That’s not good enough," says Ms. Walsh. "Besides the language and cultural appeal, the sites must give you a compelling reason to visit, or they will die, just like English-language sites," she says.

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