What Went Wrong in Brazil?
If one were to look just at the headline that came across the wire, they'd have to wonder what was going on. "DoubleClick Closes in Brazil." Less than a year after setting up in Brazil, Internet advertising company DoubleClick Inc. said it was closing its media sales operations there because of disappointing growth in online advertising.
Interestingly enough, according to eMarketer's eLatin America report, Brazil's 3.9 million Internet users account for 40% of the region's total internet usage, which is, by far, the most of any country. The main question now would be, what went wrong for DoubleClick?
According to Noah Elkin, a Senior Analyst at eMarketer, "one of the potential problems is that although net use is growing, TV remains the dominant medium." He says this is due to the way the phone lines are set up in Brazil. It is much more expensive to make a call there, than it is in the U.S. In fact, most on-line purchases in Brazil are made after 9 p.m., when the calling rates go down.
Elkin also noted the drop in on-line ad spending, saying, "if there are warnings in the US, there will be a ripple effect around the world, especially in a less mature market."
That being said, a DoubleClick representative did say that they were still doing business in Brazil, they just closed their offices there, saying, "we feel we can better serve out clients out of America." The company will maintain a presence by keeping a Sao Paulo-based team to serve clients' technology needs.
Elkin feels that serving Brazil out of New York is a good idea, saying, "it may have been premature to open an office in Brazil."
Brazil has an annual Gross Domestic Product of about $500 billion, South America's biggest economy. That being said, only about 8% of its 170 million people have regular access to the Internet. While they may be growing in that category, the speed of that growth just wasn't as fast as DoubleClick would have hoped.
- Adam Bernard may be reached at AdamBernard@mediapost.com