Evolution of Latin American Search Engine Industry

[Astroruler]

Please humor a non-techie by providing some insight into the 'globalization' and 'structural' make up of the search engine industry in Latin America.

In other words, what strategies are major U.S. search engines employing to break into these local markets? What types of alliances and partnerships are they forming locally? Are they making acquisitions? Forming strategic alliances? And with whom? ISP's? Local search engines? Third party providers? What might be the typical terms of these relationships? What is their primary objective? Gather content, be a provider or dominate the local market? How does the local partner benefit?.....for the sake of discussion maybe someone can pick a country that has gone through this process and we canuse it as an example......

Once a search engine has acessed a Latin market, what types of channels does say a 'Google' use to market its products like 'Adsense' and 'Adwords'? Do they work through multinational SEOs? Local SEO's? Advertising agencies? ISP's?

What are some of the major market differences/challenges they are encountering? Are the revenue drivers the same? If not, how do they differ? What are the key metrics used to track and measuring the performance in each channel? What types of support i.e. technology, information, $$, promotional activities do they provide to their partners? What has the experience been with PPC in Latin America vs. US/Europe and elsewhere?

I realize I'm throwing a lot of questions out on the table so if anyone knows of a good article on the subject, feel free to point me toward it. Also, I have taken the time to read most of the threads on the site but they don't seem to address my specific questions....of course there is always a chance I've missed one that is relavant.

Thanks for all your help.

[Nacho]

Hola Astroruler, welcome to SearchEngineWatch.com Forums!

Outstanding thread you're starting here. I can already see this will be a great one. Seems like you're going 1000 mph with so many questions there, perhaps we should slow down a bit and analyze them in sections.

First, what research have you done so far?

[orion]

Originally Posted by Astroruler

I realize I'm throwing a lot of questions out on the table so if anyone knows of a good article on the subject, feel free to point me toward it.

I understand that international management and marketing grad students as professors often look for useful resources. Try T-Bird grad school in AZ. They may help.

Orion

[Astroruler]

Sorry for the mind dump Nacho….I tried to drill down my issues and came up with the following:

1) What are the structural and cultural barriers to entry that global search engines like Google/Overture/MSN might encounter as they expand into local Latin American markets?
2) How might the current SE business models need to be adapted to overcome these barriers and support this expansion (or not?)

First let me back up a little….

While reading the Search Engine Marketing en Espanol thread, I came across came across the following quote which you posted about Latin American search markets:

== Like my good friend Lucas Morea (CEO of Monografias.com) says, "Getting into this market now is like going back in time (like Back to the Future), where you can predict what will happen next because these markets follow the U.S. very closely. It just takes time." ==

I realize I may be taking the statement out of context, but the disclaimer at the end really bothered me…a bold statement like that should address issues like ‘how’, ‘by whom’ and ‘when’. My sense is that the answers to these questions are a lot less ‘Predictable’.

I’m honestly not questioning whether or not Global SE’s can successfully expand into Latin America. If McDonald’s can do it, then MSN surely can. I’m just wondering if anyone has thought about how it’s going to happen, and what the price will be.

I’ve seen a number of threads discussing how to leverage technology to expand into foreign markets….adjust XHTML coding, use meta’s, tweek the algorithms so that the address different dialects, genders, generations, terminology, slang, geography etc.

There is no question that technology will have a role in the global SE’s expansion into Latin America. However, in my humble opinion, the real challenge for company’s like Google et al in Latin markets is on the commercial side of the business. They have to be able to commercialize their product and make money. Until they can, the Latin search industry probably won’t ‘follow’ the U.S. search industry anywhere.

I’ve listed a few ideas and specific areas that interest me below and I’m eager to hear from anyone who can provide some insight.

- How might traditional relationships between search engines and local ISP’s/Portals/Publishers change if the SE’s don’t have enough local advertising (I power your search engine, you display my advertising)? Could it provoke a trend of acquisitions if SE’s feel a need to develop new revenue streams or become more vertically integrated? Could the role of SE’s be limited to providing a service?

- How will the business model change at the local level? Will it be through ad sales? Do the economies of scale needed to support the pay per click model exist? Will there be enough diversity in the ad content to satisfy keyword searches?

- What channels will SE’s use to sell the advertising in Latin America? Do they already exist or will they have to be developed? Will they set up subsidiaries, establish direct sales forces and pound the pavement? Can SEOs and SEMs act as reseller’s in these markets? Will they go through traditional advertising agencies? How about sales promotions? ”Buy 1000 clicks/month and we’ll design and host your website for free!”

- What will the role of imported/exported advertising content be? i.e. a small resort on the coast of Peru wants to target German tourists. Google Peru makes a sale, and ‘exports’ the ad to Germany. Similarly, Google Chile might ‘import’ Disney adds sold by Google U.S.

How will the earnings and costs be allocated between countries and business units? Are we talking about transfer pricing and offshore earnings?

- How will that little Peruvian lodge on the coast to compete for the keywords and phrases it needs to achieve a ranking similar to large travel agencies, global hotel chains or even airlines that are targeting those same Germans?

- Could wireless carriers leapfrog the internet and become a more lucrative outlet for targeted ad content? The number of mobile subscribers tends to exceed the online population in most Latin Counries. Take Mexico for example. There are 37 million mobile subscribers vs. an online population of 11.1 million http://cellular-news.com/story/11814.shtml. Furthermore, prepaid service allows cell phones to penetrate all socioeconomic sectors. Also, since phone numbers belong to a specific individual with a name, address, income level, GPS etc. content could become much more targeted. U.S. based Star Media has already begun offering location based content/services in Brazil http://www.cooltown.com/cooltown/mpu...tinamerica.asp

I realize that instead of providing answers I’m raising even more questions. Probably out of line for a newbie. To answer your question on research….my interest in the SE industry is recent and I haven’t seen much information on these topics. Thanks

Originally Posted by orion

I understand that international management and marketing grad students as professors often look for useful resources. Try T-Bird grad school in AZ. They may help.

Orion

I hope that your mention of Thunderbird is an honorable suggestion and not a reference to my email address. I would be deeply offended by any suggestion that my interest in this topic is a 'charade' for academic research. or anything other than personal.

In addition to being a Thunderbird Alumni I have 14+ years of senior management experience with Fortune 100's, which I acquired working as an expat in six Latin American countries. The region has undergone dramatic structural, technological and cultural changes in the last 15 years and most industries have had to adapt their buisness model to survive. I am merely trying to establish if there is a correlation between my personal experience in other industries and the challenges the SE industry mayh be facing.

AR

[Nacho]

I hope this latest news about Yahoo! Buys Brazilian PPC Search Network help you answer some of the [many] questions we all have with regards to the evolution of the Latin American search engine industry.

[Nacho]

Originally Posted by Astroruler

1) What are the structural and cultural barriers to entry that global search engines like Google/Overture/MSN might encounter as they expand into local Latin American markets?

I'll take a shot at your first question. I believe that search engines expanding into international markets such as Latin America will require very close management attention and resources. For example:

• The mayor challanges that is caused by distance, language and cultural differences. Especially if doing business with foreign agencies and governments. (eg. Google has build great partnerships to index print sources from the Stanford library, but what about any library from Mexico or Brazil?)
• Difficulties in developing products and services in different languages and for different cultures.
• They may encounter longer payment cycles in some countries.
• Credit risk and higher levels of payment fraud.
• Legal and regulatory restrictions.
• Currency exchange rate fluctuations that may in turn bring additional profits or contribute losses to the end result.
• Foreign exchange controls that might prevent search engines from repatriating cash earned in these countries.
• Political and economic instability and export restrictions.
• They may see potentially adverse tax concequences.
• Higher costs associated with doing business internationally.

I'm sure there can be many more. This is why I've always said, they should be doing a lot more with the US Hispanic market since it avoids most of these risks. Still, they will eventually have to take the pan by it's handle and get on with it. If one lags, the others will be rewarded with higher market share.

Hello,

I work for Kompass.com in Chile, a Search Engine for Importers and Exporters.

About your two issues:

1) What are the structural and cultural barriers to entry that global search engines like Google/Overture/MSN might encounter as they expand into local Latin American markets?

a. Technological Barriers: The gap is still important, even if the technollogy exists there is a technolgical illiteracy at every level (corporate, government, people).
b. Cultural Barrier: Internet is still seen as a marginal sales channel, the less important of most sales channel. It might take couple of long years before this changes.
c. Economic Structure: South America is a place where there are few huge economic groups that account for 95% of investment and advertisment and a lot of very small companies which do not feel involved in this e-revolution. Given the present structure of South American economies, I find it difficult to come up with economies of scale in the medioum term.

2) How might the current SE business models need to be adapted to overcome these barriers and support this expansion (or not?)

It is not a matter of overcomming these barriers. These are economic,social, political and cultural processes. Things are changing. THe technological gap is slowly narrowing, culture is changing and the economic structure is also evolving. Probably in a couple of years the market will be mature for Search Engine businesses.

Today, the challenge for Google, MSN, Overure (or Kompass!) is to be there, get a grip on those potential custommers and be sure to be on "Top of Their Mind" now when it is easier, because tomorrow it is going to take a lot of effort!