StarMedia: South of the Internet Border
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On Wednesday, StarMedia reported its financials, showing yet again that the company is building itself into a dominant portal for Latin America.
For the quarter, revenues shot to $5.62 million, up from $1.65 million in the same quarter a year ago. There were 1.17 billion page views during the quarter, which is a 71 percent increase from the previous quarter and makes StarMedia the most trafficked hub in Latin America.
With its momentum and strong community, StarMedia has an opportunity to be the Yahoo! of Latin America. Accelerating the building process, StarMedia has aggressively pursued a mergers and acquisitions strategy, snapping-up leading Latin American sites like Zeke and Latin Red.
But StarMedia will not smother these sites by changing their name; rather, the sites will keep their brands intact. In other words, StarMedia is positioning itself to have a variety of top brands in Latin America.
In this deal, AT&T will provide the back-end ISP services (network capacity management, billing, dial-up access) and StarMedia will be the default portal. Both companies will market the service throughout Latin America and have a revenue split. With this partnership, StarMedia will have a recurring revenue stream that should grow rapidly.
So far, StarMedia relies on Internet advertising. This makes sense, as the Latin market is still in the development stage and users are not accustomed to e-commerce -- not yet, anyway. However, the growth of Internet advertising is strong. Internet ad revenues in Latin America are expected to grow from $51 million in 1999 to $1.6 billion by 2004 -- with the two biggest markets being Brazil and Mexico.
But the future for StarMedia is e-commerce. According to IDC, e-commerce revenues in Latin America are expected to surge from $300 million in 1998 to $8 billion by 2003. In fact, 29 percent of StarMedia users have already made purchases online and 59 percent are expected to make purchases in the near future.
In September, StarMedia entered a comprehensive agreement with Hewlett-Packard to provide e-commerce solutions to merchants within Latin America. With the technology, merchants can set-up shop within 24 hours.
There are also opportunities for wireless. For example, StarMedia acquired PageCell International Holdings, which will allow StarMedia to deliver its content on wireless devices, such as cell phones, pagers and personal digital assistants.
The mobile market has been explosive in Latin America. According to Pyramid Research, the market for wireless devices in Latin America has increased from 12.2 million subscribers in 1997 to 19.5 million by the end of 1998.
StarMedia even has a broadband division. To build this, the company purchased Webcast Solutions, to provide streaming media.
StarMedia wants to provide the complete solution for Latin America -- e-commerce, wireless and broadband. This is definitely smart. However, the big risk is not being able to manage the complexity of this plan.
But the company has been bolstering its management team, such as by hiring Gary Bonilla-Latoni, who was the vice president of Saatchi & Saatchi's Internet in Latin America. So assuming management is up to the task -- and so far they have been -- StarMedia's star should continue to shine.
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