[May 17] America Online (AOL) signed an agreement with the second biggest private Brazilian bank, Itau, and is redesigning its strategy for Brazil and Latin America that, according to Steve Case, AOL’s CEO, is a priority market for the company.
Case is right to think this way because, even with its perpetual economic uncertainties, Latin America is a real gold mine when the subject is Internet. According to IDC, there are today 16.2 million Internet users in the region and this number is expected to skyrocket to 37.8 million in 2003. Only in Brazil alone it is expected that Internet is accessed by six million people.
The association of AOL and Itau comes in the right time for the American ISP. Second biggest private bank in Brazil, Itau has 10 million clients, 1.1 million already use the bank’s online service.
Joining Itau, AOL will be able to leverage its subscriber base, from today’s 103,000 to around 700,000, according to AOL’s officers expectations, thus being able to fight for leadership in all Latin America — against Universo Online (UOL), that presently relies on a 690,000 subscriber base.
According to the agreement, Itau will buy 15% of AOLA, AOL’s Latin American branch, and will make investments on the AOL operations in Brazil in the next 10 years. In exchange they will receive AOLA stakes, that is making preparations to its IPO, through which expects to raise around US$ 575 million.
The partnership will help to give more strength to AOL in Brazil, a critical point to the expansion of the company for other South American countries. From now on, all Itau clients will see Itau’s site on AOL.
There are some marketing actions like the offering of free access in the first month for Itau’s clients that become AOL’s subscribers, and also prizes and access to special content, such as financial analisys data, job channels and financial tools.
Since it started its operations in Brazil, AOL has had many difficulties. At first what hindered its conquer of the biggest Latin American market was the offer of free Internet access by banks and private companies.
Soon after this, in a mistaken marketing strategy, AOL tried to attract subscribers sending free CD-ROMs that eventually caused problems in computers and a lot of trouble for many users, and thus immediately annoyed them.
This strategy — that had been adopted not long ago by the biggest Brazilian ISP, UOL, also with catastrophic results — took the job from Francisco Loureiro, who had been hired to lead AOL in Brazil.