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GOING GLOBAL

11.10.99  
An Ex-Spook in Latin Cyberspace
Headed by a former CIA official, startup Zonafinanciera aims to be a financial portal for all of Latin America 

In late 1998, Greg S. Keough and his team of Latin finance veterans spent two months in Colombia persuading the country's largest banks to let his Web site post their interest rates on savings accounts, certificates of deposit, and mortgages. The banks kept stalling. Unlike U.S. banks, which use such information for in-your-face marketing, Colombia's old-fashioned financial houses reserved it for customers who made appointments -- on the theory that it's harder to comparison-shop that way. Eventually, Keough, who is CEO of Zonafinanciera.com, a financial site for Latin American consumers, persuaded the banks that for every customer they might lose to a brick-and-mortar competitor, they would pick up two or three on the Web.

Since they began to see things his way, says Keough, the Colombian banks have signed up 10% to 25% more customers for those products. And productivity is up, since employees who once spent six to eight hours a week trying to divine competing banks' rates can concentrate on more useful tasks.

Founded and run by Americans in Fairfax, Va., Zonafinanciera illustrates the sudden evolution of the Web into a global medium from one that mostly has served the major industrialized countries. Its startup tale is a catalog of the cultural and financial risks entrepreneurs will encounter as they seek their fortunes beyond U.S. shores. Yet seek they will, because building a new U.S. Web brand from scratch is almost prohibitively expensive and because emerging markets are poised for exponential Web growth. That's why investors have put $10 million so far into Zonafinanciera -- Spanish for the "financial zone." They include America Online CEO Steve Case, Netscape co-founder Marc Andreessen, and former Republican Presidential candidate Jack Kemp. Kemp, an entrepreneurial enthusiast who sits on the boards of nine other startups and advises two venture-capital firms, is chairman of Zonafinanciera's advisory board.

HERCULEAN TASK. Keough, once a Central Intelligence Agency official in Central America, founded Zonafinanciera in December, 1997, with his brothers Jonathan and Timothy. He promises a lot. Visitors to the site can comparison-shop for (and occasionally buy) products in five categories: banking, securities, insurance, automobiles, and real estate. The site lists its offerings in the region's 18 countries in Spanish, English, and Portuguese. Listings are more comprehensive for the bigger, wealthier countries. Visitors can, for example, set up accounts online with brokers in Brazil and Mexico, and buy mutual funds. They can scan condominium listings in Costa Rica or price the latest Dodge pickup in Colombia. In Chile and Argentina, you can do all this and apply online for a mortgage from a BankBoston affiliate. For poor countries such as Bolivia, Zonafinanciera's offerings are limited to basic information such as interest-rate listings. The site also publishes articles on financial topics.

Assembling the information has been a Herculean task. At first, the brothers only provided interest-rate information on bank products in Colombia, Argentina, Mexico, Brazil, and Chile. They hired people in each country for about $200 a month to collect rates from the top 10 banks and feed them biweekly to Zonafinanciera. "We were sitting in the basement with no money, so we had to be very judicious," says Keough.

Half a year later, they began offering real-time quotes by building dedicated lines to stock exchanges. Then they moved on to real estate, automobiles, and finally insurance. Their strategy was to lure the market leaders. For instance, they got U.S. auto makers to list the vehicles they sell in Latin America. Keough and his team then contacted dealers with the largest market share in the first five countries they covered. "I'd jump on the plane and do the sales calls myself," says Greg Keough, the only brother who is fluent in Spanish.

Zonafinanciera's revenues still total less than $1 million a year, and it has yet to deliver profits. Those revenues come from advertising, sponsorships, co-branding relationships with Net portals, and commissions from listings or sales of financial products. The site gets 4 million page views a month, and viewership is growing by nearly 20% a month, Keough says.

His timing seems good. Net usage is still low in Latin America: By yearend there will be 7 million people online there, according to market researcher International Data Corp. That's small compared with the 80 million in the U.S., but IDC estimates that over the next three years the number will nearly triple.

HIGH-POWERED CREDENTIALS. Keough and his brothers got the Web bug in the U.S. with a product they called LoanLocator, which let home buyers apply for mortgages online. They sold the technology in 1996 for $600,000 to a U.S. company Keough won't name. He used $400,000 to start Zonafinanciera. Timothy, the company's chief technology officer, has designed systems and software for Arthur Andersen Consulting and Intuit Inc. Jonathan, the site's chief content officer, was the Webmaster for AOL's Canadian division. Greg is the Latin hand of the bunch. After his stint with the CIA, he founded a business in El Salvador that distributed packaged food for companies such as Land O' Lakes and General Mills Inc.

Surviving in Latin America will test the Keoughs' skills. Most governments there have radically modernized their economies and financial systems since the dark days of debt crises and hyperinflation. Still, the region is plagued by such upheavals as Brazil's currency devaluation and Colombia's escalating civil war. Deep poverty also means few phones -- there's only one for every 10 people on average -- and Internet access. And consumers pay $21 a month for Web access, on average, more than twice the U.S. figure, though prices are coming down. Most worrisome for Zonafinanciera is the crowded field. At least half a dozen other sites are trying to do what it does, to one degree or another.

Keough and his brothers are still struggling to mesh their concept with economies that are only partly computerized. Today, consumers in Mexico, Brazil, Chile, Argentina, and Colombia can use the site to open brokerage accounts and place orders, but local brokers execute the trades. Getting real estate agents to put their listings online has also been a challenge because agencies keep them on paper, not computers. Home buyers can comparison-shop for mortgages in most countries via Zonafinanciera, but to apply they must go to a mortgage broker. The site only offers online mortgage applications for two countries, Argentina and Chile.

Despite such difficulties, traffic has grown steadily, as has the number of financial institutions listing products. Zona has expanded to 100 staffers (from three in 1997), including some with high-powered credentials. Most recently, Zonafinanciera hired Richard Child, former president of MasterCard International's Latin America and Caribbean operations, as executive vice-president for marketing.

RACING FOR PARTNERSHIPS. Keough says he'll need to raise about $80 million in the next couple of years to boost traffic and online transaction capability. After that, he hopes to go public. For now, however, Zonafinanciera's funding is a fraction of that of its closest competitor, Patagon.com, a Buenos Aires startup that offers financial information and lets customers place stock buy or sell orders online through brokerages it owns in Argentina, Brazil, Chile, and Venezuela. Patagon, which has some $70 million from Chase Capital Partners and Flatiron Partners, among others, plans to add other financial services such as insurance and mortgages. "A new generation of people is demanding these products," says Wenceslao Casares, Patagon's chairman and CEO. Both companies claim to have been first to market. Patagon.com first started executing trades online in the spring of 1998. Currently, it has about 1.7 million page views a month, about half what Zonafinanciera claims.

Both companies are racing to promote their brands through partnerships. Patagon.com is the financial channel for New York-based StarMedia, the leading Latin American portal. Zonafinanciera has partnered with the smaller Argentina-based El Sitio and Miami-based Yupi.com and signed a content deal with Brazil's UOL, a top Latin American Internet service provider. Zonafinanciera is also the personal finance channel for the Wall Street Journal Interactivo, the paper's Spanish-language financial news portal.

Some analysts are skeptical about the prospects for regional financial sites -- particularly for trading. "It's a very small market and mostly still depends on advertising revenues," says William Landers, director of Latin American research at Lehman Brothers in New York. Keough, however, is convinced that the market will flourish. In the next year, he claims his site's page views will grow about eightfold, to 30 million a month. He expects online sales of financial products -- now about a sixth of total revenues, or $170,000 -- to grow more than a hundredfold in the next year. "You have to be in the game now, and you have to be a leader now in order to be successful over the long term," he says. And for Zonafinanciera, that means slogging it out, country by country.


By Jeremy Quittner in New York
jeremy_quittner@businessweek.com


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