November 16, 1999
AOL Cracks Latin America
With Plan for Brazilian Site
By PETER FRITSCH
Staff Reporter of THE WALL STREET JOURNAL
SAO PAULO, Brazil -- America Online Inc. will take its first big step into
Latin America's online market with the launch Tuesday of a
Portuguese-language Web site in partnership with closely held Venezuelan
media conglomerate Cisneros Group.
But the leading U.S. provider of Internet services will find a slew of slick,
local competition well-prepared -- and well-capitalized -- to face the
coming onslaught.
The role of underdog in a country home to the world's largest non-English
Web site doesn't seem to faze AOL President Robert Pittman. Mr.
Pittman says that while Brazil's Internet market is already among the
world's most sophisticated, "the game has barely begun here." Promises
Gustavo Cisneros, chairman of Cisneros Group: "We will spend what is
needed to be a market leader."
Both men declined to comment on market expectations that
AOL-Cisneros will stock its Latin America war chest next year by selling
as much as $500 million of stock in a public offering of its regional
operations. A flurry of Latin American Internet offerings are expected in
the coming months.
Last December, Cisneros Group agreed to invest $100 million to fund a
50-50 joint venture with AOL to bring AOL to Latin America, where the
online community is expected to triple to more than 35 million users during
the next four years, according to Jupiter Communications, an Internet
consultant. Brazil's Internet market is by far the largest in the region,
estimated at almost six million users.
Local competition is fierce. Brazil's online market is dominated by
Universo Online SA, or UOL, which is controlled by Brazilian publishing
groups Abril SA and Folha de Sao Paulo SA. With over half-a-million
paid subscribers and growth of 12% a month, UOL is the world's largest
non-English web site. Fully 80% of Brazilian net surfers visit its site daily. It
also boasts a growing war chest, having raised $100 million in September
by selling a 12.5% stake to a group of investors led by Morgan Stanley
Dean Witter & Co., of New York. A Nasdaq Stock Market offering is
expected shortly.
UOL is followed by ZAZ, owned by Spanish telecommunications group
Telefonica SA, which controls one of every three phone lines in Latin
America and aspires to dominate the region's online market through its
Terra Networks unit -- which also plans a public offering. Brazil is already
Latin American Internet specialist StarMedia Network Inc.'s largest
market, and popular portal Yahoo! Inc., of Santa Clara, Calif., recently
launched its own Portuguese-language site in Brazil. Finally, Microsoft
Corp., of Redmond, Wash., plans next year to launch its own service in
partnership with Brazil's largest media group, Organizacoes Globo SA,
taking advantage of Globo's extensive cable operations and blue-chip
brand name.
Given the competition, Internet pricing in Brazil is cut-throat. Monthly
connection charges average almost $15 for unlimited access, with
providers such as ZAZ charging as little as $10 -- well below the flat $22 a
month AOL, of Dulles, Va., charges in the U.S. That is important because
online advertising and commerce revenues are relatively insignificant here.
Mr. Pittman declined to discuss AOL's rate structure for Brazil, except to
say: "We are rarely the cheapest service, but we are always the best
value," given AOL's ability to leverage its global content and sophisticated
data networks to create a reliable, user-friendly product. |
