Bonfire of the e-Vanities

Tom Wolfe gets drowned out by the Latin dot-com hype

That lesson seems lost on the heads of Punto-com, which burned through a nice-size chunk of its most recent four-million-dollar infusion of private investment on this night alone. This at the tail end of a week that saw flurries of pink slips at highly publicized Latin dot-coms such as Salud.com, Submarino.com, and Miami's City Search -- not to mention the tanking of AOL Latin America's IPO on the stock market, despite its initial price being halved to attract skittish investors. Punto-com was still touting the glorious future of e-commerce down South, holding up as proof a (pre-April NASDAQ crash) report from NYC research outfit Jupiter Communications. That report's numbers are worth examining closely, particularly since it's cited with near-biblical reverence by so many Net business figures.

According to Jupiter, by 2005 Latin-American e-commerce is projected to total $8.3 billion, with some 66.6 million users online. What's rarely mentioned from the same study is that in 1999, e-commerce for that entire region only reached a paltry $194 million -- less than many major net companies' operating budgets. The forecast of a more than 400 percent growth rate for anything should be occasion to give pause, especially in light of the stock market's recent tremors and their chilling effect on the flow of venture capital. Moreover, if the future of the Latin-American Net is so rosy, why aren't companies such as Punto-com setting up shop there instead of hedging their bets and heading for Miami?

Contacted by phone, Jupiter's Lucas Graves, the company's senior analyst for Latin America, was a bit wary of how his own research figures were being used to buttress an if-you-build-it-they-will-come philosophy. "We werenever that bullish," Graves stresses. “If you look at the figures, Latin America has some severe obstacles to overcome when it comes to growing e-commerce.” He points to the low use of credit cards there, as well as Latin consumers' lingering fear of using them on the Net. Even more troubling is Latin America's persistent poverty -- broad masses of people still don't even have a home telephone. “The biggest obstacle is low penetration of the Internet,” Graves continues. “That's somewhat mitigated by the fact that people going online tend to be the wealthy, but nonetheless you're talking about a region where only two to three percent of the people are using the Internet today.”

Back at the Punto-com bash, a New York City publicist confided to Kulchur that her firm had been begging the magazine's editors to drastically downsize the event. In New York and San Francisco, the lavish launch party had become a victim of the NASDAQ crash. Fiscal responsibility was the new catchword, and any executive who would blow his company's precious funds on an extravagant fete clearly had his head stuck in the Silicon Beach sand. "We thought the press would kill them with this," she said, motioning incredulously to the sprawling array of gourmet food and liquor -- even a hunched-over cigar roller -- that circled inside the cavernous Ice Palace. “But people in Miami seem to love this stuff!”

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