Get Big Fast

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StarMedia.com
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Launching a Latin American Revolution
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Overview

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

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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)

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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

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• 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

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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

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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)

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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

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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, BN,
  MPath, Viajo.com, FAO Schwartz and others.

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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
• ATT internet access

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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

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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

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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

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• 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

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Brands

• Finally decided to make StarMedia a serious
  portal, customerized portal

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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

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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.

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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

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GBF cont.

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

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• 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 its so wide open
  its 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

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After 2000

• The beginning of 2001 looked promising
• Ended up by losing 91 advertising clients (in 2nd
  quarter)
• 4th quarter couldnt 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

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Here and Now

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

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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

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Questions?