Google, Terremark, SafetyPay finding rapid growth in Latin America
From Google to data centers and online pay systems, internet companies are booming in Latin America, often growing at faster rates than the United States, a panel of high-tech executives said at WorldCity’s Global Connections on Oct. 29.
Consider Google. The search engine giant launched its Latin American division in Brazil in 2005, opened in Argentina in 2006 and now has 400 employees throughout the region. It is considering a Miami office too, said Alexandre Hohagan, regional managing director for Google Latin America.
Miami-based Terremark, which operates secure data centers worldwide, has a large presence in Brazil, recently opened in Dominican Republic and is growing business in Colombia “at a rate surprising for us,” said Xavier Gonzalez, director of corporate communications.
Growth in Latin America is fueled by a mix of factors: an economic rebound faster than the United States, a rising middle class and, in some cases, a leapfrogging in technology. For example, more people have cell phones than landlines in many Latin American nations, so they can jump to remote banking – without ever having installed a traditional phone in their home, participants said.
Miami Beach-based SafetyPay illustrates those leaps. Its online payment system lets users without credit cards buy on Amazon.com or other U.S. Web sites that require U.S. credit cards to pay. How? It works with banks in Latin America, so their online banking clients pay for a purchase by debiting their bank account. The cash goes into a SafetyPal account. SafetyPal pays with its own credit, while sharing a fee with the bank, said Ronald Wieselberg, vice president of business development.
“Merchants love us, because we reduce fraud” by securing payment in advance, he said. “And banks love us, because we pay through them, give them a cut and monetizing their online payment system,” which is usually a cost center and not a source of revenue, said Wieselberg.
Just how fast the region is adapting to the internet can be seen in trends in online advertising.
Google earns most of its money from clicks on ads next to its searches, so it closely tracks online ad spending worldwide. In the United States, it took seven years for online ads to grow from roughly 4 percent to 12 percent of total ad spending. In Latin America, it should take about three years – starting from now – for the same growth to 12 percent of total ads – about half the time, Hohagen said.
“There’s a big opportunity for us to drive and move investment from the offline and traditional media to online,” the Brazilian executive told dozens of participants at the Global Connections meeting.
Social media also is exploding in Latin America, offering new opportunities. Facebook and Twitter are popular, but in Brazil, about 70 percent of internet users are active on Google’s Orkut. “We’ve seen Indians in the Amazon connect to the internet because of Orkut,” said Hohagen.
Challenges remain, of course. While mobile phones abound in Latin America, few are connected to the internet, because the cost of data plans is high – as much as $200 a month for unlimited minutes in Brazil. And some countries present business risks, notably Venezuela under President Hugo Chavez, where the government keeps a tight lid on how many dollars can be taken out, participants said.
Still, there’s plenty of room to grow and profit in Latin America. For example, just 30-35 percent of banking customers in Latin America have online accounts, compared to 55-60 percent in the United States, said Wieselberg. And it’s simpler to expand in a region with just two main languages – Portuguese and Spanish, compared to areas like Africa or Europe with more language groups, Google’s Hohagen said.
Emerging technologies also offer frontiers for growth, including internet-linked TV. Google sees the next generation using three screens for the internet: computers, cell phones and TVs. It aims to connect you to “all those screens, no matter where you are,” said Hohagen.
Global Connections is one of six event series that WorldCity organizes to bring together executives on international business topics. The Global Connections series is sponsored by Florida International University School of Business Administration and real estate company Waterford at Blue Lagoon. The next Global Connections meeting is set for Nov. 19, featuring Ryder CEO and Chairman Greg Swienton.