QuePasa included in this:
Tuesday September 21, 5:06 am Eastern Time
Company Press Release
Internet Stock News Announces Investment Opinion on StarMedia
Internet Stock News Announces Investment Opinion: A Rising Star? Focus on StarMedia
SAN DIEGO--(BUSINESS WIRE)--Sept. 21, 1999-- INTERNET STOCK NEWS: ``A Rising Star? Focus on StarMedia' by Margot M. Amberg, ISN Writer Also available on the web at internetstocknews.com
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Hold Europe and Asia behind the ropes for a moment; there's a bigger fight brewing right here in our own backyard, and the fighting in the ring is over the Latin American Internet user. StarMedia Network (Nasdaq:STRM - news) hopes to battle the big guys and win.
StarMedia, founded in 1996, is currently Latin America's largest web portal. Through a host of websites targeting both Spanish and Portuguese speakers, the company is using its first-mover advantage to lock in those eyeballs. Their IPO was a hot property last May 26; from an initial price of $15 the stock subsequently shot to a high of $70 before trading down with the rest of Internet stocks, currently in the $40 range. Its main site offers the usual service array of email, home pages, chats and news, and is further broken down regionally to localize the over 20 countries that comprise Latin America. Interactive games were added last week. Premium Internet access is offered by its StarMedia Acceso service across Latin America (LA), and most recently the company has hooked up with AT&T (NYSE:T - news) in this regard, agreeing to pay it $4.3 million in 1999 and $16 million in 2000. Although it relies primarily on both advertising and e-commerce for revenues, it hopes ISP access fees will add to the mix.
It faces some formidable competition. Last December, America Online (NYSE:AOL - news) announced a 50/50 joint venture with the Cisneros Group of Companies, a leading provider of media broadcast, entertainment and telecommunications across LA. Cisneros brings big bucks (an infusion of $100 million to the project), and even larger connections; the company has joint ventures and partnerships with many of the largest advertisers and companies targeting LA. Its partnership with GM's Hughes (NYSE:GMH - news) through Galaxy Latin America's satellite TV service certainly bolsters AOL's recent investment in that area. Cisneros has broad-reaching investments in TV programming and cable operations across LA including Univision in the U.S. It has ties to the smart money Dallas firm Hicks Muse, Tate & Furst through a joint investment fund to acquire media properties in LA, Spain and Portugal. The AOL/Cisneros partnership begins this fall with AOL Brazil, an end-to-end ISP service providing the same bells and whistles of the proprietary AOL service here at home.
Yahoo! (Nasdaq:YHOO - news) also claims a corner of the ring. Similarly targeting Brazil, this spring it launched Yahoo!Brazil on its own. It has a marketing and promotional agreement with Canal Fox, a leading pay-TV cable channel in LA. Canal Fox is part of the Fox Entertainment Group (NYSE:FOX - news). Again, the usual attractions include email, search engine, chat, and news and entertainment geared towards the region. Yahoo! en espanol completes the offering for the rest of LA and the U.S. Spanish-speaking population.
Another investment offering in this field is quepasa.com (Nasdaq:PASA - news). Trading publicly on June 24 at $12, due to market conditions and the controversies surrounding the company it recently traded at around $10. This site specifically targets a U.S. Hispanic audience, secondarily LA, offering an English version as well. The same fare includes all of the above offered by Yahoo! Trouble here, however - the company recently terminated and is suing it's co-founder/ CTO Jeffrey Peterson and another employee David Hansen. The accused are cited for developing competing side-business interests on quepasa's time. Quepasa currently partners with 24/7 Media (Nasdaq:TFSM - news), Telemundo (the second-largest Spanish-oriented media giant) and Fox Sports. Recently, in an interview with Bloomberg on September 15, CEO Gary Trujillo stated that quepasa was open to selling the company, mentioning AOL as a potential buyer for a good fit. There's a lot happening there!
Interestingly, there are a lot of connections amongst all of these sites, and one has to wonder when the rope will be let down to enable all the players to step in and begin the final round. Both quepasa and Yahoo! have Fox ties. AOL and Yahoo! have the Canal connection, with Canal recently balking over their deal in France with AOL. Cisneros, throughout its vast holdings, alliances and ventures, deals with the likes of Anheuser-Busch (NYSE:BUD - news), Apple (Nasdaq:AAPL - news), AT&T, Disney (NYSE:DIS - news), GM Hughes, Televisa (NYSE:TV - news) and Virgin Records to name a few. StarMedia's largest advertisers and partners include BUD and AT&T, and it has strategic relationships with Netscape, Sun Microsystems (Nasdaq:SUNW - news) and eBay (Nasdaq:EBAY - news), the last three within AOL's orbit. Both eBay and Critical Path (Nasdaq:CPTH - news) -- a unit of CMGI (Nasdaq:CMGI - news) -- have invested in the company. The CMGI connection leads it naturally towards AltaVista's path.
Other well-heeled competitors include Telefonica S.A. (NYSE:TEF - news) and Telefonos de Mexico S.A. (NYSE:TMX - news). Brazil itself isn't quietly esting -- Universo Online S.A. had a recent offering through Morgan Stanley Dean Witter. Lesser sites, according to quepasa's view of the competition in their interview with Bloomberg, include yupi.com and ElSitio.com. StarMedia announced a deal last week (9/15) to acquire Webcast Solutions, a company specializing in streaming technologies to be intertwined in a new division called StarMedia Broadband. The next day they filed to sell 6.5 million shares, one million of which will be sold by present stockholders.
Latin America has demographic, structural and e-commerce fulfillment problems -- main drivers that have fueled the growth of the Internet elsewhere. Internet users are over-represented in more prosperous areas such as Brazil, Argentina, Chile and Mexico, and even those regions have much a long way to go before the huge monies invested to attract their upper classes will begin to pay-off. The development of a large middle class, crucial in any economy to become the main purchasers of goods and services, is still a long way off. Forester Research sees Internet advertising growing in the region from $20 million in 1998 to $259 million by the 2001. Internet usage in the area, according to StarMedia's most recent S-1 filing, is expected to grow from over 15 million today to 34 million at the end of 2000, using figures quoted from Audits & Surveys Worldwide. Political upset and unrest still dominate the region, but progress is slowly being made. But their demographics also wield a double edged-sword. It's the fastest growing area for the younger set, more attuned to all the web has to offer, and more culturally inclined to spend money. This makes it very attractive, comparable to other fast growing populations such as Asia.
For those companies getting their feet wet first, eventually their investments will pay off. LA investments in general have been a tease for the last few years. Long-term, the region will prosper if the important economic steps now being undertaken can hold and are politically viable. Trade agreements, by way of NAFTA and other open cross-border arrangements will help. LA is tied to the U.S. strategically and most importantly by its people's own wishes to connect with it in all it has to offer. U.S. companies have an advantage, both in proximity and psychologically. The 500 million potential Internet users is certainly a great attraction, and one can be certain it will be a fight to the finish, although not necessarily a 20 second knockout.
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