Outlook 2019: The Latin America POV

How the unintended consequences of technology are playing out in the LatAm region

By Florencia Crosta, Santiago Garces , and Felipe Kopaitic

Editor’s note: this is a special regional POV that dissects the four technology and media trends from our Outlook 2019 report. We’ll have more POVs coming up from each of the key global regions, so be sure to check back in the following weeks.

Unintended Consequences

In the Latin American (LatAm) region, so far, there is no backlash against the tech industry regarding privacy, a topic that dominates discussion in other regions of the world. This may be because, as of now, no major data breach has occurred in the region. The idea of a person’s data being leaked or misused is not considered a real threat to many consumers in the region.

While the region is not a pioneer in privacy laws, regulations created overseas are having an impact on the entire digital world. The GDPR rules, established by the European Union, went into effect in May 2018. The regulation requires that companies adhere to rules that limit the storage of user data to only essential information; and then, all of that information must be encrypted. Even with these contributions, companies in the region are far from ready to implement updated privacy policies, and governments far from being ready to enforce the rules. In Mexico, for example, more than 40% of corporations are just starting to analyze the impact these laws may have.

Unbundling Social & Search

In North America, Facebook’s disastrous 2018 presented the possibility that consumers might look elsewhere for social media experiences. While a wholesale replacement for FB is unlikely, we’re beginning to see the emergence of an archipelago of smaller, vertical-specific communities that are deeply specialized and highly engaged. Similarly, Google will remain king of web search for the foreseeable future. But, as search input evolves to voice and cameras backed by AI, new competitors will rise to challenge their dominance.

In Latin America, the unbundling of search and social is also starting to take shape. The shift to voice activation and AI technologies is set to transform how consumers search and discover products and services, but the slow adoption of products that use these technologies means this transformation will take place slowly. Voice assistants and other connected home appliances are still a novelty. Until prices drop significantly, massive reach will be a challenge.

Because Android devices account for more than 70% of the market in Latin America, Google will likely remain the most popular search platform there for the foreseeable future. Even if search turns toward voice, it will be done through Google’s operating system, thanks to the prevalence of Google Assistant on Android handsets.

Unlike to Google’s stronghold on search in the region, Facebook, the leading social platform in LatAm, may see competitors stepping up. A perfect example of this is Twitch, the gaming platform that has millions of users accessing it daily to consume gaming and eSports content. In some LatAm countries, such as Brazil, Twitch has more than 7 million unique users, and has been delivering triple-digit growth. As new social platforms continue to amass users and build out their own social graphs to map various interest-based communities, these new entrants are starting to slowly chip away Facebook’s dominance in the region.

Media Haves and Have-Nots

As the late majority tilts its media consumption from traditional to digital, media business models are adapting and expanding to serve everyone. While this is obviously both good and necessary, the proliferation of content options and breakdown of gatekeepers is having an unexpected side effect: the creation of a media class system, where the more educated and wealthy can pay to preserve their data privacy, ensure the accuracy of their news content, and access all entertainment. Meanwhile, less-educated or less-wealthy consumers leak data, see more ads, and are fed fake news.

The negative effects are even more pronounced in the LatAm market, due to the economic reality in most countries. While people are willing to pay for a Netflix subscription in order to watch specific content, they feel they are getting ripped off if they have to pay to watch the same content on YouTube or other ad-supported platforms. As a result, in Latin America, people are willing to trade off privacy in order to get content for free, even if this means having no clue of what that company will do with their data. Consumers are coming around to the idea that, ultimately, they must pay or endure seeing advertising messages.

In Latin America, one possible resolution to mitigate this issue could be the adoption of Super Bundles: By paying for one media subscription bundle, people can get access to quality content across TV, movies, music, and news, all at an attractive discount. As global companies like Apple and Disney get set to launch their media bundle services, it will be interesting to see how long they extend such offers to the region and how the LatAm consumers will respond.

The lack of trust in media is also a major challenge in the LatAm region. Older generations tend to rely heavily on traditional platforms to receive their news, which in Latin American countries typically consist of two or three TV stations and one or two newspapers. In contrast, younger consumers tend to challenge information provided by the traditional networks, resorting instead to information sources they can access online. The tumultuous political reality in Venezuela in recent months can be partly attributed to the loss of trust in state-controlled media among the country’s younger generations and the widening media consumption gap.

Every Brand is a Lifestyle Brand

As consumer trust is challenged in one realm, it’s driving brand trust as a primary motivator in every other area, encouraging consumers to double-down on the brands they trust most. Those brands are given unprecedented access to consumers. But to satisfy that demand, brands often have to expand their business model and embrace creating media and branded experiences in order to maintain constant contact with their best consumers.

But creating lifestyle brands is a challenge in Latin America, where most brands are local brands, operating in specific locales where they have a deep understanding of the consumer base, but limited to their own verticals. They may have a good understanding of how their current products and services fit into a customer’s life, but most are not recognizing the opportunities that exist beyond those borders. Limited technological capabilities also hinder local players’ ability to extrapolate authentic insights from the data about their audience’s values and priorities to inform their lifestyle branding.

In contrast, global brands, which have a broader base, along with better technological capabilities and larger data infrastructure, will have the upper hand in Latin America. Local brands will struggle to build the necessary infrastructure to mine consumer data and create bespoke products that allow them to laterally expand their business. Meanwhile, the global players will have an opportunity to fill the gaps and identify how to expand their presence and influence in their customers’ lives.

Trust is another big issue for Latin American brands to tackle, as consumers grow skeptical of sharing personal data with local brands. They prefer the appeal of globalized products and services, which are perceived to have a more robust toolset for data protection and privacy. In emerging markets, where ecommerce still has huge growth potential, trust will be a key factor in whether consumers make a purchase. In Mexico, for example, reputation is the second most important consideration for consumers when buying a product online, just behind price, according to a joint study by UPS and Comscore.

Automation Interrupted

In the U.S., just as we’re seeing public sentiment turn a cynical eye toward tech, the first driverless cars are hitting the road for testing, and purpose-driven AIs are starting to automate basic services. Automation will be the true test of how government oversight and consumer opinion will affect how technology is allowed to disrupt, and how quickly. And the results may also vary culturally from region to region.

It’s interesting to see how the application of autonomation technologies will play in Latin America. As the region begins to enjoy AI-powered products like Google Home and Amazon Echo, allowing Latin Americans to visualize an automated future similar to The Jetsons, there are realities to face.

For LatAm workers, a cheap labor force could forestall this workforce replacement. In addition, LatAm consumers prefer being helped by real people, as opposed to some cold software voice. Brands need to be cautious in how they deploy these replacements, as it may result in resistance from audiences and damage brand reputation.

At the moment, the only backlash that has occurred has been when automation threatens to eliminate jobs, and a strong union presence in the region may further deter the application of automated services. Uber is one such example: in some LatAm countries, it took years for the regulators to legalize the ride-hailing service. Governments originally blocked the platform in order to protect traditional transportation services represented by strong unions, such as taxi and bus companies.