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AOL moves into Latin America

Through its 50/50 joint venture with Cisneros Group, AOL will bring its online services to consumers in Latin America.

America Online, the world's largest Internet service and content provider, just got a little bigger.

The Dulles, Virginia-based company today announced that it is forming a 50/50 joint venture with Cisneros Group of Companies, a leader in media, entertainment, and telecommunications in Latin America, to bring AOL to consumers in the region.

The Cisneros Group will make an initial investment of $100 million to fund the venture, which initially will operate local services in Latin America's rapidly growing online markets, including Brazil, Mexico, and Argentina. Other markets will be added in the future.

Although plans for the venture have yet to be finalized, AOL said it expects it to launch the initial service about a year from now, with services in additional Latin American countries coming later.

"Latin America is fast embracing information technology," said Gustavo A. Cisneros, chief executive of the Cisneros Group.

The region's population is close to 460 million, with about 200,000 people online in 1995 and 2.5 million online currently, according to Cisneros.

"We have projected to reach about 5 million by 2000," he said. "The market is really there, will accelerate given the fact that we will give users a lot of local content."

The AOL-Cisneros joint venture will provide the same AOL-branded services available to consumers who use the service in the United States, including email, chat, integrated Internet access, and Instant Messenger.

The Latin American services will be available in both Spanish and Portuguese. They also will be accessible to AOL members in the United States and elsewhere around the world.

AOL is by no means marching into a region starved for online services.

While the online giant is indeed the dominant player in the United States, Japan, Australia, and Europe, it will be playing catch-up in Latin America against New York-based StarMedia.

"StarMedia has really targeted the Latin market unimpeded for a good year, year-and-a-half," said Patrick Keane, an analyst at Jupiter Communications. "They are a pretty aggressive and well-funded venture."

StarMedia follows the Yahoo model by aggregating content that is the "best of the breed" in different countries, said Keane.

"[StarMedia] has a strong start and has inked some strong partnerships, but AOL can definitely walk in and potentially upseat them," he added. "AOL has been more savvy lately in getting out of the content game and letting partners shoulder that burden rather than create it themselves."

While StarMedia has deals with Rupert Murdoch's News Corporation, AOL will have the content resources of the Cisneros Group, which already has extensive media and entertainment reach in Latin America.

"AOL has also proven some success internationally at displacing other brands," said Keane, citing AOL's victory over CompuServe (which it later acquired) in Europe. "Is AOL late? I would argue no.

"[AOL] has the cash and the brand to expand in Latin America," he added.

AOL noted, however, that Star Media and AOL offer different services.

"We are talking about offering complete end-to-end service," said AOL president Bob Pittman. "Star Media is a portal site with sites in the U.S. and in some places worldwide."

Added AOL chief Steve Case: "For more than a decade we have been talking about building mass markets, and a portal is just a piece of that puzzle. We think what we will provide is significantly broader and more in synch with the needs of emerging markets than existing competitors in those markets."

The success of AOL's far-flung Internet content operations depend heavily on the localization of content. As with AOL operations in Europe, Japan, Canada, and Australia, AOL in Latin America will be a local service with local management.

AOL said the content of the new services will reflect regional preferences as well as local customer service and pricing, but will give Latin American users access to its exclusive content and the members of AOL's other global services.

The joint venture also will be responsible for the development of the CompuServe brand in Latin America.

In related news, AOL said it plans to launch a Chinese- and English-language service in Hong Kong in 1999 with partner China Internet Corporation.