Just Brazil alone has 102 million Internet users. Overall, Latin America will have nearly 300 million Internet users by the end of 2013 and nearly 400 million by 2017.
With these numbers, it should be pretty simple for a web brand to reap the revenues from such a large audience, right?
As one of the pioneers in Internet advertising in Latin America, we at US Media Consulting were considered to be, shall we say, a bit eccentric when we launched in 2003. No one believed that Internet would take off in the region any time soon, especially since the dotcom bubble had recently burst in more mature markets. But we saw the potential and have benefited from the growth. Along the way, we learned a few things—including the challenges that web brands face in trying to expand into Latin America. Some of these include:
More often that you would think, brands that are new to the Latin American market tend to see it as monolithic. It’s clearly not. Brazil, for example, not only has a different language but also a unique business climate that’s often quite protectionist. Setting up a local office to do business there can be quite a challenge, with issues ranging from tariffs and moving currency to how agencies operate. For example, in the United States you have creative agencies to produce ads and media agencies to handle the planning, buying and implementation of the campaign in media outlets. In Brazil, agencies do both, changing the operational dynamic and often complicating execution.
Market conditions are different in Argentina, and they’re also different in Peru, Mexico, Colombia and other markets. Each market has their own way of operating and distinct business climates that need to be navigated properly to avoid pitfalls that impede profits.
With Latin America there isn’t just a concern about the different currencies (reales vs. pesos vs. nuevos soles, for example), there’s also the IVA tax, the challenge of conversion and local laws regarding the movement of monies between countries. Tariffs, penalties and attorney fees can easily erase profits, thus sabotaging a nascent operation.
With the variety of markets and climates, a web brand may need to do some substantial hiring to find the right people to represent their brand in these markets. But it’s not easy for team members from outside the region to evaluate professionals in these markets and get a direct sense of their know-how and connections. And with multiple markets, multiple teams in different countries are needed, with a home office team also needed to ensure that things run smoothly. The costs for all of these team members can become quite significant, starting off operations with a loss on the books and what can be a substantial trial and error process as a brand learns each market, develops best practices and eventually (if all works out) turns a profit.
The rules for opening and operating subsidiaries in Latin America vary widely from country to country, as do tax laws and practices, not to mention human resources practices, the amount of holidays (did you know that Colombia has 18 national holidays every year?), employment terms and more. A web brand that’s flush with funding but is still growing may find itself hamstrung by all the steps needed to open a Latam office or office—plus all the fees to attorneys and other professionals just for navigating the basics.
Another concern is determining whether the revenue model for your brand is applicable to Latin America. While a CPM campaign is pretty much the same here or there, obviously different sites have their own advertising models cued to user behavior. And without a clear understanding of the markets in the region, you could find yourself trying to make an unworkable model work.
The Strategic Solution
Rather than going it alone when expanding to Latin America, many web brands opt to find a partner. That’s where a firm like US Media Consulting can make a huge difference. Here’s how:
- Extensive market knowledge going back more than 10 years
Solves: multiple market concerns, revenue models
- Local offices in 6 Latam markets
Solves: logistics issues, currency concerns, billing, collections and moving monies
- Local sales staff, all online specialists
Solves: learning local markets, building contacts, hiring/employment problems
- Company headquarters in Miami
Solves: management in multiple markets, marketing
To find out more about how we can help web brands maximize Latin America’s 300-million audience of Internet users, please contact us.