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QuePasa Becomes First Big Latino ‘Dot-Com’ Flop

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TIMES STAFF WRITER

Bilingual portal QuePasa.com announced Wednesday that it will liquidate its assets, becoming the first big “dot-com” targeting the Latino market to crash and burn and heralding tough times ahead for similar companies.

The publicly traded portal is the latest casualty in the dot-com shakeout. But signs are that Latino-oriented Internet companies are having an even tougher time making ends meet.

Advertising dollars targeting the U.S. Latino market are small to begin with. About 75% of the $2.4 billion spent this year went to broadcasters, according to Hispanic Business magazine. After print outlets took their share, that left a tiny slice of the pie for Internet firms.

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The language issue has also taken a toll: While many Internet sites have blown through tens of millions of dollars to reach Spanish-speaking consumers in the United States, studies have shown that the majority of Latinos online here prefer English.

QuePasa became the second Latino-oriented portal to go public in the summer of 1999--and the first that exclusively targeted U.S. Latinos. But its trading high of $25.88 in July 1999 didn’t last long.

It spent aggressively to build a brand from scratch but couldn’t generate enough revenue to stay afloat. The Phoenix-based company has been looking for a buyer since May. It reported steep third-quarter losses. And last week, it received a delisting notice from the Nasdaq market for falling below a $1 bid price for 30 consecutive days. Trading was halted Wednesday at 9 cents a share.

The company’s board of directors approved a plan to sell off assets, which include the portal along with subsidiaries Real Estate Espanol, Etrato.com and Credito.com.

“They ran out of money,” said Roth Capital Partners analyst Glenn Powers. “Probably the biggest reason is the decline in advertising rates in Internet media generally. A lot of sites are dropping their prices 90% and 95% to sell their space. There aren’t a lot of industries that do well in that kind of pricing environment.”

To be sure, the instability among Latino market sites mirrors the trend for dot-coms. A report released Wednesday by international outplacement firm Challenger, Gray & Christmas Inc. showed 10,459 Internet job cuts in December, a 19% increase over the previous month. About a fifth of those were due to company closures.

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QuePasa reduced its work force from 58 to 20 in November and will continue to scale back as it liquidates. Other Latino-focused sites are struggling too.

Miami-based Yupi Internet Inc. announced last week that it received a much-needed $5-million capital injection but simultaneously said it will lay off half its U.S. staff.

New York-based StarMedia Networks, which targets Spanish and Portuguese speakers in the U.S. and Latin America and was the first Latino portal to go public here, has pared staff and seen its stock price plummet.

The company reported a third-quarter net loss of $32 million. But it remains popular with analysts. The company attracts one of the largest online audiences in Latin America, as well as major non-dot-com advertisers, according to a recent Robertson Stephens report.

It has cash on hand and has grown largely through acquisitions, so its recent 15% work-force reduction was not a sign of weakness, said Lehman Bros. analyst Michael Simpson.

Spanish behemoth Terra Networks Inc., which recently acquired U.S. search engine Lycos Inc. to become Terra Lycos, also has plenty of capital behind it.

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In contrast, companies such as QuePasa that target U.S. Latinos exclusively have had a hard time attracting a critical mass of users and an even harder time wooing advertisers, who are more likely to put their Latino market dollars into television and radio.

Moving away from a dependence on ad revenue, San Francisco-based portal Latino.com last week began charging a subscription fee of $4.99 a month for access to its original content.

“We have higher mountains to climb,” said President and Chief Executive Lavonne Luquis. “There is a smaller pool of interactive dollars for Hispanic-focused sites.”

The market’s dive hasn’t helped. Like general market companies, the Latino-oriented sites are going through their own shake-out, said Gene Bryan, president of Hispanic-Ad.com, which tracks the Latino online industry.

But Bryan said he believes companies such as Terra--the Internet arm of Spain’s telecom giant Telefonica de Espana--and Univision.com, the Web venture of Univision Communications Inc., are more likely to weather the storm.

The Latino market will develop further here as more Spanish-speaking Latinos come online, he added.

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