There’s Silicon Valley in California, Silicon Prairie in Chicago, and there may soon be Silicon Beach–with Miami becoming the Internet-services hub for Latin America.
The companies that quietly have begun to cluster here offer a wide array of services, from e-mail, chatrooms and search engines to e-commerce and Spanish and Portuguese-language content specifically designed for Latin American and U.S. Hispanic audiences. Others are Internet service providers, or ISPs, intent on linking an increasing number of Latin Americans to the World Wide Web.
Last year only 10 million Latin Americans had surfed the Net, but analysts say they are the fastest-growing group of technology users in the world. From Argentines who frequent the CyberCafe in Buenos Aires to the Peruvian businessman who goes to Consejero.com to check prices on the Lima stock market and pick up some personal-finance tips, more and more Latin Americans are discovering the on-line world.
According to one estimate, there could be 34 million Latin American Internet users by the end of next year.
“The Internet market in Latin America is probably where we were two or three years ago in the United States,” said William Plasencia, the director of Consejero.com.
And no one wants the bus to leave without them, including companies like Yahoo! Inc., America Online Inc. and Prodigy Communications Corp., which have all created versions of their products in Spanish and Portuguese.
But local start-up Yupi.com; newly public StarMedia of New York, which has located its global sales, business development and e-commerce office in Miami Beach; and IFX, a Chicago company that runs its Internet operation out of Miami, also have aspirations of becoming as ubiquitous in Latin America as AOL and Yahoo! are in the United States.
Add Consejero.com, a sister company of Bank Rate Monitor in Espanol; El Sitio, based in Argentina but in the process of hiring 25 employees for its Miami office; eHOLA, the Internet subsidiary of Global DataTel in Delray Beach; and FirstCom Corp., a Coral Gables developer and operator of phone networks in Latin America that has branched out to Internet access service, and you have the beginnings of an Hispanic Internet hub.
There are also many locally based Hispanic-oriented Web sites, from Latin music links to those specializing in Cuban history, Latin American politics and job hunting. Miami’s LatPro.com, for example, is a clearinghouse for management jobs that require Spanish or Portuguese as well as English skills.
With stock in U.S. Internet companies trading at astronomical prices, some investors have begun to regard Latin America as the next frontier.
When StarMedia, the largest Internet service provider in Latin America, went public in May, its stock almost doubled in price on the first day of trading–giving the company, which hasn’t yet turned a profit, an initial capitalization of $1.3 billion.
Although many of the companies that have set up shop in South Florida are going after the same Latin American Internet customers, Mario Habib, president of eHOLA, says he welcomes StarMedia’s successful IPO: “It helps us to get people to believe in the Latin American market. We don’t want to be the only ones in the Internet market. Users need choices.”
Miami Beach’s Yupi.com, which was founded in 1996 with private funding, also is attracting the interest of investors.
The Spanish-language Internet network, which provides users with a search engine, e-mail, chatrooms and 12 navigational channels such as news, sports and entertainment, got a $10-million infusion in May from Interprise Technology Partner, a Miami venture capital fund that targets investments in information technology. IFX also has invested $3 million in Yupi.com, whose Spanish name translates not as Yuppie, but yippee.
The investments not only validate Yupi.com’s vision but also will take the company to the next level in terms of marketing, research and development, and future acquisitions, says Oscar Con, president and CEO.
What is drawing the companies to South Florida is the area’s reputation as the crossroads of the Americas, the ease of travel to points South, and its pool of bilingual and trilingual workers.
“I think there was probably about 10 minutes of discussion over whether we should put our U.S. office in Los Angeles or New York. Miami was the obvious choice,” said Paola Prado, a vice president of El Sitio, which was launched in Argentina in 1997 and also offers country specific news and information for Brazil, Mexico, and Uruguay.
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Now it’s gearing up to provide content tailored for the U.S. Hispanic market by late summer. Content for Chile, Venezuela and Colombia will be added before the end of the year.
“We want to be the best country-specific content provider in Latin America,” said Roberto Cibrian-Campoy, a former architect and the co-founder and CEO of El Sitio. “We also believe strongly in interactivity.”
So El Sitio offers a window called “Relationships” where users share their work problems, their love lives and their sexual problems. Editors cull the best stories from 500 e-mails that arrive daily and put them on-line.
El Sitio raised $44 million Wednesday from three American sources: A unit of GC Companies, which operates General Cinema Theaters, investment bank Bear Stearns and a U.S. fund for Latin media which features Dallas-based Hicks, Muse, Tate and Furst.
EHOLA, which was launched April 22, also wants to be known for its local content. The portal offers links to more than 300 Latin American newspapers and users can also hear radio broadcasts from 40 Spanish- and Portuguese-language stations. Within two months, eHola hopes to have signed agreements with 100 radio stations.
It also offers Internet access service and on-line shopping through its eTiendas.com site.
Even though Internet usage in Latin America is still in its infancy, there are hundreds of local ISPs competing for the same very small market the South Florida-based companies are going after.
In Brazil, the largest Latin American Internet market, there are more than 400 ISPs.
Most of the Latin American-based ISPs are very small operations. But others aren’t. The two largest ISPs in Brazil, for example, are Universo Online, a joint venture of the Folha de Sao Paulo newspaper and Editora Abril, and Zaz. Telefonos de Mexico SA also has unveiled on-line services, and Telefonica de Espana offers Internet access in several Latin American countries.
“The U.S.-based companies are getting in at a time when the market is already very competitive,” said Jamila Xible, a senior analyst for the Yankee Group in Boston. “Many of the North American companies have the advantage of being well-capitalized, but they’re starting later than the ideal, considering all the competition.”
With so many players, a shakeout is inevitable. “As large U.S. companies look to other areas for growth, there’ll definitely be mergers and acquisitions,” said Joel Eidelstein, CEO of IFX. “There’s a rush to get economies of scale and efficiencies.”
The mergers and acquisitions have already started, with some of the Miami-based companies buying ISPs and content providers.
And two months ago StarMedia acquired two Brazilian Internet search engines for about $13 million. In May, it agreed to purchase Wass Net S.L., an on-line service based in Spain, for $17 million.