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StarMedia

StarMedia.com. internet. business models. text and cases. Kristin Belanger. Launching a Latin American Revolution. Overview. Introduction History Road Blocks Strategies Stakeholders Get Big Fast! 20-20 Hindsight. Introduction.

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StarMedia

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  1. StarMedia.com internet business models text and cases Kristin Belanger

  2. Launching a Latin American Revolution

  3. Overview • Introduction • History • Road Blocks • Strategies • Stakeholders • Get Big Fast! • 20-20 Hindsight

  4. Introduction • September 1996 – Fernando Espuelas and Jack Chen opened the first office of StarMedia.com in Riverside, Conneticut • Wanted to prove that people in the western world had great power in society thus the birth of StarMedia • Wanted to be first in the race to hit Latin American (before AOL would)

  5. Introduction cont. • December 1996, first internet page w/ advertisements • No V.C. except for Jack and Fernando • V.C.’s were worried about Yahoo! and AOL in L.A. • Eventually Flatiron Partners signed on as well as other V.C.’s • Including Chase Capital Partners which invested $3.5 million

  6. The underlying idea for StarMedia is community. When I first spoke about the idea of the Internet being that historical moment that would allow us to reconnect the people of L.A., to give them a bridge to communicate, people literally thought I was out of my mind. Because for the last 200 years, since the war of Independence, the ruling classes of L.A. have told us that we were all foreigners to each other – that across the border were alien beings. I never meant that the borders would disappear necessarily. What I meant was that the mental borders would disappear, that people given the opportunity to share ideas and connect and debate each other and do commerce with each other would jump at the chance. -Fernando Espulas

  7. Road Blocks • In L.A. most were illiterate • In 1999, only 13% had a phone line • Local laws on monopolies in the current area • Wireless phones exploded in L.A. • 1999 only 4% were online • Low credit penetration

  8. Strategies • Expanded network functionalities • Added numerous strategic partnerships • Promoted the brand in new ways • Received more money from strategic investors • Developed local operations • Went public May 1999 – raising $120 Million (and founders $400 million each)

  9. Networks • Translated their information into local languages • Indicate where you lived, then placed cookies • Were able to target the audience in languages and content • La Quiero - feedback

  10. Strategic Investors • Negotiated dozens of partners including • Netscape (browser) • RealNetworks (streaming audio and video) • By the end of 1999 • Ziff-Davis, Fox Sports Latin America, Disney, CDNOW, Reuters, eBay, NBC, Hearst Communications, Cyberian Outpost, Latin Grocer, Fininvest, B&N, MPath, Viajo.com, FAO Schwartz and others.

  11. Strategic Investors cont. • Had exclusive advertising rights and agreements • Had exclusive rights to content that featured Spanish and Portuguese markets • Teamed w/ SkyBox for e-commerce • Launched a H.P. agreement for small business in L.A. a “virtual store” • Visa International (credit card use) • Dell for direct-to-market computer sales • AT&T internet access

  12. Promotion • Dedicated the first $2 million to advertising and promotion • Advertised in Wall Street, NY Times, L.A. Times, Miami Herald • Billboards, cinemas, star-studded launch parties • Became the “Bill Gates of Latin America”

  13. Money Money Money • May 26, 1999 raised $120 million on an IPO • 4 ½ months later raised $200 million more • Jan. 1, 2000 had more than $300 million in cash

  14. Acquisitions • Added PageCell International Holdings (mobile services), Webcast Solutions (streaming media) • New Brands: StarMedia Mobile, Star Media Broadband • Telemig – wireless internet, e-mail, stock, sports, lottery, horoscope connections (had 600,000 subscribers) • “Bud House” in Puerto Rico

  15. “More people in Latin America are purchasing mobile communication devices than hardwire telephones. Handheld mobile devices will likely be the first way many people experience the Internet.” - Betsy Scolnik

  16. Brands • Finally decided to make StarMedia a serious portal, customerized portal

  17. Competition • Three different types: • Spanish and Portuguese based portals • Yahoo!, AOL • National sites often affiliated with ISPs, media, or telecom companies • Telefonica/Terra, Telmex/ Prodigy/ Microsoft, • Competing pan-regional start-ups • Universo Online

  18. Stakeholders • Customers • Both the paying customers as well as the paying investors • Non paying customers that used StarMedia portal • Investors • Those who owned stocks, those who were paying investors for the company • Employees • In 1999 had over 700 employees located in Canada, U.S.A., and L.A.

  19. Get Big Fast! • StarMedia followed through with a GBF strategy (slow to start) • Network effects • With the portals (no network effect) • With service (strong effects) • Scale of Economies • Medium to strong (allowed people to work in a large market) • Had highest revenue per thousand pages in 1999

  20. GBF cont. • Customer retention rates strong • Portals (low) – StarMedia.com • Internet (Strong) (StarMedia Broadband) • Services (moderate to strong) (Netscape Guide by StarMedia)

  21. There is no such thing in business as going to fast. You can think of it as a wide-open field where you can see your goal in the distance. The idea is to run as fast as possible, cover as much ground as possible, claiming the land for yourself. You may go off in the wrong direction every so often, but because it’s so wide open it’s much more important to keep moving forward and shifting your direction. Making mistakes and correcting them is more important than getting everything right but moving more slowly. -Jack Chen

  22. After 2000 • The beginning of 2001 looked promising • Ended up by losing 91 advertising clients (in 2nd quarter) • 4th quarter couldn’t break even • .Com failures hurt StarMedia, slow down in economic in L.A. (Argentina economic crisis), heavy L.A. portal • Have since replaced the CEO • Transformed the strategy into a “wireless internet”

  23. Here and Now • StarMedia is alive and well • Many different prospects and joint ventures • StarMedia just created StarMedia Viajio (as of Sept. 20, 2005)

  24. Summary • I believe this company will do very well • Constantly changing business • Many different brands to target different people • Helps with the ever growing L.A. population • Keeps changing = Success

  25. Questions?

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