“TheStampede”

AreportbyRazorfishandTerra

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Hello.MynameisJosephCrump,andIamSeniorVicePresidentofStrategyandPlanningatRazorfish.IconsidermyselfoneoftheluckiestpeopleonearthbecauseIliveintwoofthegreatestciJesintheworld:ManhaLan,andRiodeJaneiro.

IamreallythrilledtosharesomeideaswithyouthatresultedfromaboutfivemonthsofquanJtaJveandqualitaJveresearchthatRazorfish,inpartnershipwithTerraNetworks,didinthethreemajormarketsinLaJnAmerica:Brazil,Mexico,andArgenJna.

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Asyoucanseefromthischart,Brazilwill,overthenextdecades,becomeoneoftheworld’sleadingeconomies.Assuch,it’sthefocusofmanyoftheworld’sbiggestbrandsandcompanies.Everyone,itseems,isinterestedindoingbusinessinBrazil–andinLaJnAmericagenerally.

Becauseofthis,Razorfish–inconjuncJonwithTerraNetworks,thelargestdigitalmediacompanyinLaJnAmerica,undertooka5‐monthstudyintothelargestsegmentofthepopulaJon:ThegroupknownthroughouttheregionatClasseC.

ThefollowingpresentaJonwillillustratewhyClasseCis,inouresJmaJon,boththemostpowerfulandthemostmisunderstoodgroupintheregion.

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Thisdocumentdoesn’ttalkverymuchaboutmarkeJng.Thisismaybeironic,consideringthatRazorfishisoneofthelargestdigitalmarkeJngfirmsintheworld.

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AndI’mnotgoingtotalkverymuchabouttheInternet.Again,thismaycomeasasurprise,sinceRazorfishwasoneoftheworld’sfirstpure‐playInternetagencies.

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Mostly,I’mgoingtotalkaboutlooking.AboutobservaJon.Andaboutpeople.ThisispreLymuchmyfavoritetopic,becauseIwastrainedasananthropologistandajournalist.Myfavoritethingtodoistostudyhumanbeingsandhowtheybehave,andtotrytodevelopinsightsandtellstoriesthatwillhelpdriveuser‐centeredinnovaJon.

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SojusttogetyouwarmedupandpayingaLenJon,here’saliLletest...

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Whatdoyouseeinthisphotograph?(Andno,ithasnotbeenPhotoshopped.)ThisphotographwastakenintheMorumbineighborhoodofSaoPaulo.Thisisaplace,likesomuchofLaJnAmerica,wherethephysicaldistancebetweentheveryrichandtheverypoorcanbemeasuredinfeet.

Sonowforthetest...

Ifyouweregoingtoguess,whichcommunityismore“digital”?WhichcommunityspendsmoreJmeonline?Whichcommunityrepresentsthebiggesteconomicforce?

Youdon’tneedtoeverhavevisitedSaoPaulobefore.Justgowithyourgut.TrytobeveryhonestandopenaboutyourassumpJonsandbeliefs.

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RazorfishhasbeenoperaJnginLaJnAmericanowforaboutthreeyears,andmanyofushavebeenlivingintheregionforfarlongerthanthat.ButneverhaveweseensucharapidchangeinthedigitalevoluJonofaregionlikewe’reseeingunfoldinLaJnAmericanow.

WeseeadigitalrevoluJonhappeningrightbeforeoureyes.Let’slookatsomenumbers.

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TherevoluJonishappeningfastestandmostextensivelyinBrazil,whichistheeconomicpowerhouseofLaJnAmerica–andontracktobecomingtheworld’sfourthlargesteconomywithin10years.

LaJnAmericahasaveryextensivesocioeconomicclassificaJonsystem,whichrankshouseholdsfromClassA(rich)toClassE(homeless).

Andonethingwefoundverysurprising,isthatinBrazil,ClasseC–thosearethepeoplewholivedintheslumsor“favelas”inthatphotofromMorumbi–havealreadyovertakenthemembersoftheClassesAandBintheiraccesstocomputers.

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Lookathowthingshavechangedin5years.Today,halfoftheBrazilianinternetusersbelongtotheemergingclasses(ClasseC,DandE).

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AndthisphenomenonisnotuniquetoBrazil.It’shappeninginMexico,too.

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Andalso,inArgenJna–thedigitaldifferencebetweentheupperandlowerclassesisbecomingveryhardtofind.

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HerearesomefascinaJngfactsacrosstheregion.

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TherearecertainlymassiveproblemstoberesolvedinLaJnAmerica.Weseethemintheheadlineseveryday.ButthereisacriJcallyimportantcounter‐storyplayingout,aswell.ThefactisthatmanyofourassumpJonsaboutLaJnAmericaareflat‐outwrong.Andnearthetopofthelist:Themostdigitalpeopleintheregionarenotwhoyouthinktheyare.

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AhermonthsofqualitaJveandquanJtaJvestudy,Razorfishbelievesthatit’sJmeforanyoneinterestedinLaJnAmerica–whethermarketers,manufacturers,retailers,poliJcians,academics–torethinktheirfundamentalassumpJons.It’sJmetorebootyourbeliefsandstereotypesandsegmentaJonmodelsandmediaplans.BecauseIcanpromiseyouthattheyarevery,verywrong.

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ForanyonewhohasbeenlivingandworkinginLaJnAmerica,orhelpingglobalbrandsoperatethere,thisisthestereotypicalimageofthemembersofClasseC.Theyarethepeopleonthebus.Inthekitchen.Theyarethepeoplewhocleantheoffice.Theyarethepeoplewholiveinthefavelas.Andonlyinaveryglancingway,dotheirpathscrosswiththe“upperclasses.”

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Butguesswhat:Thatstereotypeisterriblywrong.ClasseCisthemajorityofthepopulaJon–andthefastestgrowing.TheyunderstandthattheeducaJonalsystemintheircountryisawful–andsotheyareworkingextremelyhardtoeducatethemselves.Morethananyotherclass,theyareaddingskillsandmovinguptheeconomicladderthefastest.AndthemaindrivingforceofallofthisistheInternetanddigitalmedia.

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Allofusmarketersandbrandersarefocusedonthebulls‐eye.PeoplewholiveinnicehousesanddrivenicecarsandaLendniceschools.WewouldliketosuggestthatinLaJnAmerica,thebulls‐eyelooksreally,reallydifferent.

WewouldliketosuggestthatthepeopleknownasClasseCareabouttoruletheworld,andshockinglywedon’tunderstandthematallrightnow.

Weneedtofundamentallyre‐think–andinfact,re‐label‐‐thesefolks.Andinsteadof“ClasseC”–alabelwhichwehavebecomesocomfortablewith‐‐wethinkweshouldcallthemtheNewDigitalMiddleClass.Becausethat’sexactlywhattheyare.

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OurfirststepintheprocessofrebooJngourassumpJonswastore‐setthedemographicboundariesanddefiniJonswithinthethreemajormarkets:Brazil,Mexico,andArgenJna.ThisnewgrouprepresentsthemajorityofthepopulaJoninallthreecountries,isbetweentheagesof12and35,andhasahouseholdincomeofbetweenUS$,542and$,2892annually,dependingonthecountry.

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Ourbelief,however,isthatthenumericaldataabouttheNewDigitalMiddleClassonlytellsaparJallycompletestory.OneofthemostpowerfulanduniqueaspectsofourstudyhasbeentheethnographicworkthatwedidthroughoutLaJnAmerica.WespentJmeathomewiththeminthefavelaofRocinha,inRiodeJaneiro‐thelargestfavelainLaJnAmerica.

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AndinthefavelaofParaisopolis,inSaoPaulo.

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AndintheClasseCneighborhoodssurroundingBuenosAires...

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AndintheClasseCneighborhoodsoutsideMexicoCity.

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WelookedfortherhythmsandrouJnesoftheirlivesatworkandhomeandplay,andsupplementeditwithvastamountsofquanJtaJvedata.Sevenkeythemesbegantoemerge.Wethinkoftheseseveninsightsastouchstones,aspointsofinspiraJonforbrandsorcompanieswhoarelookingtocreateproductsorservicesorcampaignsthatbeLerservethisemergingmajorityintheregion.

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ThefirstinsightisthattheNewDigitalMiddleClasse(NDMC)hassomeveryuniquebehaviorsintheiruseofdigitaldevicesandchannels.

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Asitturnsout,thelongitudinaldataforBrazilismoreextensivethanitisforanyotherLaJnAmericancountry.SowetookalookatthedigitalbehavioroftheNDMCoverJme,beginningin2006.

Thenextfewpagesofchartsillustratechangesintheusageofvariousdigitaldevices…

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Sohereisthesummarychart:

1)  Aherminimalyear‐over‐yearchanges,thepurchaseofdesktopcomputersshotup15%inthelastyear,largelybecauselocalBrazilianmanufacturersarenowproducingextremelyinexpensivelaptopswellwithinthebudgetsoftheNDMC.

2)  Thenumberoflandlinephoneshasdropped17.2%,drivenprimarilybytheinverseincreaseby10.6%inthenumberofmobilephones.

3)  AndinteresJngly,despitethepenetraJonofmobilephones,theuseofthosephonestoaccessthewebhasincreasedonly2.4%.Thisisadirectside‐effectofthepriceofmobiledataplans,whichareprohibiJvelyexpensivefortheNDMC.

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ThisnextsequenceofchartsexaminesthephysicalaccesslocaJonswhereBrazilianmembersoftheNDMCaccesstheWeb,andhowthishaschangedbetween2006and2009…

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1) OverthelastfouryearsanincreasingnumberofpeopleareaccessingtheInternetfromhomeoranotherperson’shome.Thisislikelytheresultoftherecentriseincomputersales.

2) Asaresultoftheincreasingnumberofcomputersales,thenumberofpeoplewhoaccesstheinternetfromworkisdropping.

3) TheuseofLANHouses,orpublicinternetcafes,conJnuestobeahugeforceinBrazil.Therearemorethan90,000LANHousesinBrazil–comparedto,forexample,4,000movietheatres.

4) MobileissJllnotaviablewayforthevastmajorityoftheNDMCtoaccesstheInternet.

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AndthisfinalseriesofchartsillustratesthespecificdigitalacJviJesthatNDMCBraziliansareengagingin,andtheirevoluJon…

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1.  BrazilconJnuestobeagloballeaderintheuseofalmostallformsofsocialmedia.

2.  Downloadsofallforms–frommusictomoviesandgames–conJnuestorise.

3.  Andinoneofthemostimportanttrends,Brazilians–parJcularlyyouth–areusingtheWebtosupplementpoorpubliceducaJonsystems.(Moreonthatlaterinthereport.)

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AsweexaminedthebehaviorsoftheNDMC,webegantoseesomecommonbehaviorsamongsubsetsofthegroup.Eventually,weidenJfiedsixkeybehavioralsegments,andwethenusedquanJtaJvesurveystoestablishsomepreliminarysegmentsizesforeachofthesixgroups.

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Thefirstsegmentisthe“Digi‐naJves.”RepresenJngapproximately19%oftheNDMCpopulaJon,thisgeneraJonwasborninthe2000decade,typicallyinaverycrowdedurbancommunity.However,theirlifeexpectaJonsareverydifferentfromtheirparents.Economicgrowthandsocialadvancementwillhelpthemreachanewleveloflife.

Forthem,alltechnologyisfamiliarandtakenforgranted.Theirfamilieshavepurchasedallthetechnologywecanimagine:PCs,flatscreenTVs,broadbandInternetaccess,high‐endcellphones.EntertainmentisontheInternet,PlaystaJonorWii…alwaysplayingthelatestandcoolestgames.Onlyasmallpartoftheentertainmentisout‐of‐homeorontheTVset.

Ifweconsiderthattheliteracylevelof“Digi‐naJves”willbebeLerthaneverbefore,andthattheirlifeachievementexpectaJonsaremoreambiJous,productsinthefuturewillneedtobemoresophisJcatedandcommunicaJonsmoreelaborate.

Nowadays,eventhepoorestfamiliesaregivingcellphonestotheirkids.WhileforparentsthisisamaLerofsafetyandcommunicaJon,forkidsit’sasymbolictool:thecellphonemeansfreedomandinclusion.Theyusemobiletechnologyformusicandgames,enjoyingonlytheonestheycanexchangeviaBluetooth.Thisgroupisalreadydigital,andtheywillbedigitalextrovertsinthenearfuture,always‐on,updaJngtheirprofile,daJngonline,communicaJngandentertainingthemselvesonlineaspartoftheirdailyrouJne.

Thisboyis10yearsold.HelivesinParaisópolis–afavelainSaoPaulo‐‐withmom,dadand3olderbrothersina30squaremetershouse.HismotheristhefirstPaulistana(borninthecityofSP)inthefamily.Theyarrived10yearsago,aherafloodintheirhometowninthenortheastofBrazil.Hishousehasallsortoftechnologies,includinggames,cellphones,PCandlaptop.HehashisownOrkut&MSNaccount.

Intheotherphoto,thereisaLanHouseinoneofthepoorestandmostviolentareasofBuenosAires.ItisbeauJfulSundayahernoon,andtheboysareplayingasoccergameonline,insteadofdoingitoutside.

ThesecondsegmentoftheNDMCisthe“E‐nthusiasts.”Thisgrouprepresentsabout20%oftheNDMC,andtheyaretechnologyenthusiasts.TheInternetisadoortoaworldofopportuniJes:fromeducaJontoeasycommunicaJonwithfriendsandfamilies.

Thisgroupismobilecentric,butthePCsJllplaysapartintheirconnecJon,especiallywhenwearetalkingabouteducaJon.Duetolowliteracylevels,thisgroupisregardedasproficientontheweb,butactuallytheybasicallyuseonlyMSNandOrkut.Theyreadandunderstandaround3,000‐5,000words.

Womeninthisgroupareshywhenplayinginternetgames(theymustbeatalowlevelofchallenge),andmenaremoreproficientgamers.Theyworkhardduringthedayandgotocollegeatnight,sotheyhaveliLleJmetoenjoystayingonline.

SincetheyarethefirstgeneraJonofnaJveurbansorbeingintheurbanslumssinceveryyoung,theydon’twantthesamedesJnyastheirparents:alifeJmeofunderpaid,low‐statusjobs.Theywanttotakecontroloftheirlives.Forwomen,theideaoftakingthepathtoIT‐relatedjobsissJlladistantdream,buttoyoungmenitseemstobetheway.SinceNGOsandschoolsrecognizetheneedforanIT‐relatededucaJon,manyofthemofferdigitalliteracycoursesasastarter,andundergradschoolsoffercerJficaJonsandprogrammingcourses.TheselowlevelcoursesopenthedoorforbeLerjobs,whichwillhelpthemtopayundergradandpost‐gradcoursesinthefuture.

Elkyres(inthepictureabove)comesfromaruralarea.Sheis24andlivesinSãoPaulo.HerparentsdecidedtomovetothecityinordertoimprovetheirchancesofabeLerlife.Elkyreshadthechancetogotoapublicschool.Attheageof16shestartedtoworkasamaid,butneverdroppedoutofschool.PartofthemoneysheearnedwastopayanITcourse.Nowadayssheworksasadminstaffinasmallfirm.Asyoucansee,shelovescellphones!Shejustboughtthisone,anditcomeswithTV,OrkutandMSN.However,sheohendoesnothaveenoughcreditstouseallofthis.ElkyresusesOrkutandMSNinadailybasis,andplaystheapp“ColheitaFeliz”withfriendsthatliveinherneighborhood.

SebasJánis19yearsold,andlivesinMataderos,aslumareawith2.5millionpeoplenearBuenosAires.Hehashadacellphonesincehewas5yearsold.Hismomgaveittohiminordertoknowwherehewasduringtheday.Whenheturned10,hissistergavehimacomputer.Henevergoesouttoplayball,hepreferscomputergames.Hehasrecentlyfinishedacomputerprogrammingcourseat@Programar.Heismaking2.500pesosamonth,andisplanningtogoontoanundergradITcourse.

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The“Climbers”areourthirdbehavioralsegment,andmakeupabout14%oftheNDMC.Mostofthisgroupareparents,withseveralkidsathome.Bothmenandwomenwork.However,thechallengeofraisingkidsinanexpensivecityarises,andleadseithermenorwomentobecomeentrepreneurs–ohenmanagingthisseparatecareerinaddiJontotheir“day”jobs.

TechnologyiscentraltotheentrepreneurialstreakintheClimbers.MenohenstarttheirownLanHousesusingtheirsavingstobuythefirstcoupleofcomputers.Somepayforthebroadbandaccess,othersdon’t.Womenbehavedifferently,usuallyaskingforhelpfromfamilyandfriends.Theycanalsogotoaskformicrocreditinbanks.

However,makingtheLanHousebusinesssucceedishard.TheinternetaccessbusinessisconstantlychallengedbygovernmentsandmarketiniJaJvesfordigitalinclusionandtheincreasinglyeasyaccesstolessexpensivePCbrands.Becauseofthis,thisgroupofentrepreneurshastoimprovetheirdigitalliteracyinordertoofferotherservices,insteadofsellingonlyinternetaccess.

Womeninthisgrouphavediscoveredhowtousetheirrecentlyacquiredskillswithtechnology.TheyuseMSNandOrkutase‐commercetoolsandsellcosmeJcs,lingerieandclothestopeoplefromtheircommunitywhodon’thaveJmetogotothebricksandmortarstores.NaturaandOBoJcarioarethebrandsofchoiceforfemaledigitalentrepreneurs.

Forthisgroup,creditisachallenge,buttheyarefinanciallycreaJve.Theyknowthevalueofmoney,anddonottrustloaninsJtuJons.Theyorganizetheirfinanciallivesaroundtheircreditcardlimitsandpersonalsavings.

ThisfamilyisoriginallyfromBolivia.TheyhavelivedinBue,aslumoutsideBuenosAires,since1980.

Monica–ontheright‐‐isasinglemomandsheownsaCiberCafe.

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HermotherworksattheCiberCafe,andspendsmostofherdayonline.

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Thefourthsegment,the“E‐Advantagers,”isatthehighestfinancialrungoftheNDMC.Theymakeupapproximately21%oftheNDMCpopulaJon.

Aheralongjourney,thesemen(predominantly)foundawaytogetabeLerpaycheck.Theydon’taimtowardsocialclimbinglikethe“E‐nthusiasts.”TheywantabeLerlifeforthemselvesandtheirsignificantothers.Fromalmostdead‐endjobstoadministraJvestaff,theyusededucaJontoreachbeLerposiJons.ManyfoundtheirwaybylearningIT‐relatedskills,andnowpursueundergradandpost‐gradcoursestoreachtheirgoals.Theyhavethehighestincome(asindividuals),andworkalldayintechrelatedjobsand/orwithtechtools.

TheyarenotheavyusersofMSNorOrkutorFacebook.TheirmainonlineinterestsareresearchandinformaJon.TheyuseemailastheirmaincommunicaJontool.

TheysJllwatchalotofTV,butaredigitalliteratesandhavethebestreading‐comprehensionskillsofallthegroups.TheyalsoenjoybeLerbenefitsfromtheiremployers,suchashealthinsurance.

ThesearethebigspendersoftheNDMC.CosmeJcsandclothingareluxuriestheyafford,andprovidefortheirsignificantothers.

Carlos(inthepictureabove)is27yearsoldandmarried.HeworksasadminstaffatthemobilecarrierTIM,inSãoPaulo.Hecompletedhistwo‐yearundergradprograminJuly2010,andwantstoconJnuehisstudiesbydoinghispost‐gradinIT.Carlosisawarehissalarywilldoubleifhedoesthat.BothCarlosandhiswifeusetheinternetforstudy,search,entertainment(includingonthecellphone)ande‐commerce.Theybuyexpensivebrands,andusetwoormorecreditcardstodoso.Theirdebtincludesahouse,acarandexpensiveitemsforthenewbornbaby.

Ernestois26,andanArgenJnian.Hewasorphanedattheageof5,andlivedonthestreetworkinghardjusttosurvive.3yearsagohediscoveredthePH15programinBuenosAires,whichtrainsyouthonvariousformsofdigitalmedia.Helearnedhowtotakedigitalpictures.Todayheisaphotographyprofessor,andhehaswonimportantinternaJonalawardsinphotography.HisexhibiJoninGermanywasasuccess.Hehasfansallovertheworld,andsellshisartphotographyfromhisFacebookpage.

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The“HardWorkers”areourfihhsegment,atalmost17%oftheNDMC.Todaytheyliveintheurbanslums,butlifewasnotalwayslikethis.Comingfromrural(alwayspoor)partsofthecountry,theyarrivedinthebigciJeshopingforabeLerlife.Fromthewarmandlessviolentruraltownstothecoldandviolenturbanlandscape,theyperformthelow‐statusjobsthatthecitydependson:Maids,doormen,handymen,bricklayersandthelike.WithinthehighlyhierarchicalLaJnAmericanculture,theyareregardedas“secondclassciJzens”.Butthelast10yearsofeconomicstabilityandgrowthhavehelpedthemtoimprovethepathfortheirchildren,the“E‐nthusiasts.”TheyaremorepoliJcallyconservaJveandreligious.TheywatchalotofTV,andusethecellphoneasonlyacommunicaJontool.TheydonotusePCswithoutassistance,buttheyknowthecomputer’svaluebecausetheyseethedifferenceithasmadeinthelivesoftheirchildrenandgrandchildren.

AhergeneraJonsbelowthepovertyline,ourfinalsegment–the“Strugglers”–havefoundawaytoreachabeLerfuture:aregularjobthathelpstopaytuiJonforaninexpensiveundergradschool.Atabout8%oftheNDMC,forthemtechnologyisacruciallyimportantpartofsocialandprofessionaladvancement–butthecostmustbefactoredintotheexpensesofdailysurvival.Theystrugglejusttopaytheelectricitybills,forexample,andohenunplugtheirrefrigeratorsatnighttoreduceconsumpJon.Buttheinternetisneverdisconnected:Fortheirchildren,theInternetistheJckettothefuture.

Kidspreferonlinegames,andcartoonsontheTVandonline.Forthem,listeningtomusicontheircellphonesisabigpasJme.

Theparentsfromthe“Strugglers”usetheinternettodoresearchandhomework,eventhoughtheirreading‐comprehensionskillsarelimited.TheyprefertowatchlessTVandenjoyhavinginformaJonandentertainmentthroughtheweb.

The”Strugglers”seeabeLerfuturethroughthecombinaJonofeducaJon(inIT,becauseitoffersmoreopportuniJes)andhardwork.

ClaudiaCantero,26,worksasaProgrammerandinTechnicalSupport.Sheisamotheroftwo,andattheageof16hadherfirstchild,Aymara,thegirl.ShelivesinLaMatanza,asluminthesuburbsofBuenosAires.HerfamilycomesfromtheprovinceofChaco,oneofthepoorestandlessdevelopedareasinArgenJna.

ShemovedfromChacotoBuenosAireswhenshewas10yearsold.Thefirstcomputershesawwasinthepublicschoolyearslater,whenshewas15.Shespentherdaystakingcareofherfamilyathome,andhadalreadypostponedtheideaofstudying.ButthingschangedayearagowhenshesawapamphletforProyectoProgramarinviJngthosewithsecondaryschoolbutnouniversitystudiestotrainthemselvesinprogrammingandtechnicalsupport.Claudiawrotedownthenumberonhermobilephone,andafewweekslatershewasfacingaPCandtryingtounderstandhowamouseworks.Aheralotofeffort,shegraduatedatthetopofherclass,andwashiredbyPragmaConsultores.Now,thewholefamilyisproudofher.BeforethisprofoundchangeinClaudia’slife,herhouseholdincomewasonly$700pesos.Today,itis$2,700pesos–andshecan’twaittostartherundergradITprogram.

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YoumightthinktheNewDigitalMiddleClassispoor,andyoumightthinkthepooraren’tyourcustomers.Youwouldbewrongonbothcounts.

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Thereare37millionMiddleClassfamiliesinBrazil,withamonthlyincomebetween3and10JmesthenaJonalminimumwage.

TheseMiddleClassfamiliesareresponsibleforUS$242,869billionofallBrazilianincome.AndifweaddtheClassesDandEtothissum,wewillhaveanotherUS$228,347billion.Thatmeansmorethan2/3ofthetotalofR$1,38trillionin2010comesfromthese3classes.(SOURCE:2010TrendsoftheMajorityStudybyDataPopularInsJtute)

TheMiddleClassproducesUS$233,560billionoftheMexicaneconomy.InMexicoitrepresents26.7%ofClasseMedia,includingC,DandE.(SOURCE:hLp://www.inegi.org.mx/inegi/contenidos/espanol/prensa/comunicados/enigh2008.asp)

InArgenJna,ifyoualsoincludetheClasseMediaBaja(whoseaverageincomesactuallyfelljustoutofourNDMCrange)thesenumbersjumpto61.1%ofthenaJonalincome.(SOURCE:INDEC)

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TheNDMCisespeciallysurprising–andcreaJve–inthewaytheyspendtheirdisposableincome.

Forexample,thecombinaJonofthedollaratalowcurrencyrateandtheavailabilityof“mini‐cruises”(whichareshorterpackagesofduraJonaround3to4days)madethecruiseindustryseeaboomintheNDMCmarketduring2009‐2010.ThedemandwassohighthatforthefirstJmethecruiseshipswerestayingalongtheBraziliancoastunJlMay,extendingthecruisingseasoninBraziltoeightmonths,whichhadneverhappenedbefore.

“TheNewMiddleClassdiscoveredthemini‐cruises,whichareidealforthisdemographic,sincethesevacaJonpackagesaremoreaccessiblethanthetripsofsixorsevennights.”saidAdrianUrsilli,markeJngandcomercialdirectorofMSCCruises.

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A2009studybyAvenidaBrasilComunicaçõesrevealedthatthepopulaJonwithincomesunderR$1,700represented69%ofthecreditcardmarket.AndClassesC,DandEwereresponsibleforR$111.8billionintransacJons.AccordingtoABECS(BrazilianAssociaJonofCreditCardCompanies),ClasseCalreadyrepresents38%ofthe140millioncreditcardsinBrazil,whileClassesDandEownsanother20%.

Between2000and2007,thetotalMexicancreditgrewfrom6.5%to13%.InClasseC(ormiddleclass)thegrowthinthenumberofuserswentfrom63%to74%andinClasseD+(orlowmiddleclass)thechangewasfrom41%to61%.

SOURCE:hLp://eleconomista.com.mx/notas‐online/finanzas/2009/06/09/avanza‐bancarizacion‐mexico‐visa

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AstudybyDataPopularInsJtuteaffirmsthatitdoesn’tmakesensefortheNDMCtodeposittheirmoneyintosavingsasaformofinvestment,becausethepurchasestheywouldbemakinginstead(i.e.newclothesforajobinterview,aPCtohelpwiththeirchildren’seducaJon)areseenasmorevaluablewaysofinvesJngtheirmoney.

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BrazilianbanksnevergaveasmanyloansastheycurrentlydototheNDMC.AccordingtonewrulesestablishedbytheBancoCentral(BrazilianCentralBank),banksmustdirect2%ofallthedepositstomicrocreditorkeepthismoneyasfrozenassets.InAprilofthisyear,R$1,6billion(orUS$800million)wereofferedtomicrocredit.ThismeansBrazilianfinancialinsJtuJonslend62%fromtheR$2,7billion(US$1,8billion)availableforthiskindofoperaJon.InApril2009,theyoffered56%ofthebudget.

Atotalof100thousandcontractsaredonemonthlyandtheaverageamountisR$1,300.00(US$750.00).Microcreditisusedinmajorityforsmallbusinessentrepreneurs.Theseentrepreneursdon’twanttohaveabossanylonger,anddon’twanttodependonregularemploymentpracJces.TheyunderstandthattheNDMCisgrowingandneedsnewservices,andthatthebestpeopletoservethemcomefromthesameclass.(SOURCE:hLp://economia.estadao.com.br/noJcias/not_22646.htm)

Brazilianwomentakeoutthemajorityofmicrocreditloans,holding53%ofallcontracts.NDMCwomencontributeanaverageof41%toallfamilymonthlyincome,whilethericherwomenfromtheClasseAcontributeonly25%.(SOURCE:hLp://noJcias.r7.com/economia/noJcias/mulheres‐dominam‐microcredito‐no‐brasil‐20100328.html)

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Picturedabove:ElektrastoresinSanMar}nTexmelucaninMexico,andRecifeinBrazil(SOURCE:photobyFabianoAccorsi,ÉpocaNegóciosMagazine,July2008).

InMexico,microcreditsaregrowingby20%.Therecentfinancialcrisismade533thousandMexicanscanceltheirsavingaccountsduringthefirstthreemonthsofthisyear,becausetheyfearedlosingtheirmoneywith“trusted”banks.

BancoAztecamakescreditmoreaccessibleandeasytogetfornearly10millionpeople,andthiscreditcanbeobtainedwithasliLleas$50pesos.TheyevenensurethatthecondiJonsoftheloansarethebestavailableforthatmarketsegmentandthatthereisnorisktotheconsumer:theydon’traisetherates;theydon’taskforadvancedpaymentdeadlines;andtheconsumertakesonafixedweeklypayment.It’sthatsimple.

GrupoSalinas–alsotheownerofElektraStores–sellslow‐costhouseholdproductsandgivesopportuniJestotheboLomofthepyramidtogetaccesstobasicgoodsandservicesthroughinstallmentplans.

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TheNDMCisbothrealisJcandpracJcal.Theyunderstandthatthepublicschoolsystemsarenotverygood–andiftheirchildrenaregoingtogetagoodeducaJon,it’sbecausetheyusedspecialweaponsandtacJcs–liketheInternet.

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AlunoIntegradoisaprojectfromtheDepartmentofEducaJonoftheBraziliangovernmentstartedin2010.Theprogram,whichtargetshighschoolstudentsfrompublicschools,intendstoteachICTssothesekidscanusetheirknowledgetocreatedigitalprojectsthatcanhelptheirschoolsandcommuniJes.

Eachstudentmusttake180hoursofclassesduring5months;thefirstclassisin‐personandtheotheronesarevirtualized.

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AnyonewhothinkstechnologyisnotthecareerofchoiceinLATAMismistaken,evenifin2008ComputerSciencewasonlythe10thcareerofchoiceinBrazilianuniversiJesandcolleges–with112,857enrollments–thenumberofnewtechnologicalschoolsthatopenedinthelastfewyearsinthecountrywashuge.

Thesetechnologicalschoolsteachabunchofprofessionalcourses,whichareusuallyfastandshortwhencomparedtoundergradcourses,whichareabouttwoyears.ThishelpsfulfilltheneedsoftheNDMC,whoareworriedaboutfindingajobASAPtohelpwiththeirfamilyincome.

Bothgovernmentandprivatecompaniesarejumpingonthetechschoolsbandwagon.TheBraziliangovernmentplansoninvesJngR$1,1billionthroughtheendof2011.Currentlythereare219,000enrolledstudentsinthefederaltechnologicalschools,thisnumberis93%higherthanthoseregisteredin2003,whentherewereonly113,000students.Alsoin2002therewere140federalschoolsofthiskind,todaytheyare214.

TheprivateeducaJonalcompaniesarealsointerestedinthistrend,andtheseprivateschoolfranchisesgrew34%in2010,accordingtoaresearchbytheconsultancyRizzoFranchise.Forthisyear,354newschoolsareexpectedtoopen.In2009,whenthecountryhadonly1,044insJtuJonsofthiskind,thegrowthratewas26%.AccordingtoMarcusRizzo,oftheconsultancyRizzoFranchise,thebiggestdemandisforinformaJcscourses,becausenowadayseventhesimplestjobsrequirecomputerknowledge.

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InBrazil,morethan3,7millionNDMCchildrenandteenagersaregoingtoprivatehighschools.Theyrepresentmorethanhalfofthe5,5millionBraziliankidsaLendingtheseinsJtuJons.

ThenumberofNDMCundergradstudentsalmostdoubledsince2002,whentheyrepresentedonly16,2%.

TheprojecJonsfororganicgrowthforthenextfiveyears(2015)arethatthenumberofNDMCcollegestudentswilldoubleagain,makingtheNDMCthemajorityofhighereducaJonstudents.

(SOURCES:EducaçãoMagazine,#156,2010‐hLp://revistaeducacao.uol.com.br/textos.asp?codigo=12881

EnsinoSuperiorMagazine,#134,Nov2009‐hLp://edumeduem.blogspot.com/2010/01/classe‐c‐chega‐universidade.html

EstadodeSãoPauloNewspaper,Nov2009‐hLp://www.conjur.com.br/2010‐fev‐07/segunda‐leitura‐chegada‐classe‐ensino‐superior)

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DespitetheperpetualcrisesintheArgenJneeconomy,theArgenJnegovernmentannouncedanambiJousplaninApriltobuyanddistribute3millionlaptopsforallstudentsinpublichighschools(~4,800publichighschools).Theplanwillbecompletedin2012.OtheraspectsoftheplanincludetheimprovementofInternetaccessaroundtheschools(theinstallaJonof~1200serversinschools)andthedigitaltrainingofteachers.Teacherswillreceivespecialface‐to‐facetrainingthatwillbeorganizedbyeachprovinceandfundedbytheTechnicalEducaJonAct.

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NGOsarefighJnghighschooldrop‐outratesandfulfillingthedesperateneedforITprofessionalsbyoffering3‐4monthITcoursesto16‐25yearoldsfromhighriskareas.Manystudentsgototheseprogramswithoutevenknowingwhatprogramming(asaword)means!Theygetintotheseprogramsandbecomefascinated.Thedrop‐outrateisamongthelowestforanygroup,inanysubjectarea.

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InSeptember2007,theSecretariadeEducacionPúblicaofMexico(DepartmentofPublicEducaJon)introducedanOpenEducaJonPla�orm,withmorethan131educaJonalestablishmentsinthecountry.

Morethan131publicinsJtuJonsnowhavethecapacitytoeducate40thousandstudents‐‐thankstotheuseofnewtechnologies.ThesenewvirtualclassroomsallowstudentstogotoclassfromanywhereatanyJme,theonlybarrieristheneedforacomputerwithInternetaccess.

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ThestudyrevealedaninteresJngpaLerninthewaytheNDMCadoptsdigitalmedia.ItseemstooccurinthreedisJnctphases.

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ThefirstphaseisDiscovery–whentheNDMCunderstandthat,forthefirstJmeintheirlives,theWebputstheenJreworldattheirfingerJps.TheabsolutecoreacJvityduringthisphaseissocialmedia.

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ThehighlysocialnatureofLaJnAmericancultureplaysanimportantpartintheriseofsocialnetworksintheregion.Alongwithe‐mailandIM,socialnetworksofferanimportantwayforusersintheregiontostayintouchwithfriendsandfamily,bothintheirhomecountryandabroad.TheheavypenetraJonofsocialnetworkinginthisregionisalsoplayinganimportantroleinfacilitaJngthedisseminaJonofothertypesofWeb2.0content.

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Orkutreaches72%ofallBrazilianinternetusers.InApril2010Orkutreached30milliondailyuniquevisitors,with70%ofitsusersyoungerthan34yearsold.InJune2010,Orkuthad60.7%ofallthevisitstosocialnetworksinBrazil.

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LaJnAmericalovesTwiLer,withBrazilleadingtheworldintheadopJonofthepla�orm.

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FacebookistremendouslypopularinMexico.

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Aherthe“Discovery”phase,theNewDigitalMiddleClassbeginstounderstandthatsocialmediaanddigitaltechnologycouldalsobetheprimarycatalystsforentrepreneurshipandfinancialadvancement.AhugepercentageofNDMCstartbusinessessuchasLanHouses,repairstoresforcellphones,ITcourses,andresellingofconsumergoodsthroughsocialnetworksandinstantmessengers.

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ConsiderElizelma,inSaoPaulo.FouryearsagoshebarelyknewhowtousetheInternet.TodaysheusesOrkutandMSNasare‐sellerofNaturaproducts,theBrazilianleadingmanufacturerandmarketerofskincare,cosmeJcs,perfumeandhaircareproducts.Naturahasan"army"ofmorethan1,500womensellinggoodsalloverBrazil.Theyeducatedthesewomenintheuseoftheweb,andasaresulttheyincreasedproducJvityanddiminishedallsortoferrorsinthepurchasesystem.Besidesdoingdoor‐to‐doorsales,ElizelmasellsgoodsthroughMSN(showingclothesinthewebcam)andusesOrkuttodisplayforthecosmeJcsandperfumesshesells.

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Unsurprisingly,themobilephoneisnotonlythelifelinefortheNDMC,itisincreasinglytheirkeybusinesstool,aswell.Andwhenthecellphonebreaks–unlikeourbehaviorintheU.S.–theydon’tsimplyreplaceit.Theytakeitintogetitrepaired.ThefavelasandpoorcommercialareasthroughoutLaJnAmericaarefilledwithJnyrepairshopslikethisoneinMexicoCity.Andthis,inturn,hasspawnedasecondaryindustryinthetrainingofpeopletoperformcellphonerepairs.ThisJny“school”offersbasic,intermediate,andadvancedtraining.

TheBasicmoduletakes20hours,costsUS$200.

TheIntermediateisa12hourscourse,andcostsUS$450.

TheAdvancedtake8hours,andcostsanotherUS$400.

Attheend,thepersoncanstarthis/herownrepairshop.ItisahugeinvestmentfortheaverageNDMCperson,buttheadvancedmoduleassuresgraduatesthattheircellphonerepairbusinesswillhaveatleasta30‐40%margin(greaterthandrugdealing).

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ThethirdphaseofdigitalparJcipaJonfortheNDMCiscalled“TransformaJon,”andit’swhentheybegintousedigitalmediaandtacJcstoinfluencetheirculture,theircommuniJes,andtheirpoliJcallandscape.Digitalbecomesaforceforchange.

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OnofthebestexamplesofthisoccurredinChile.AsecondgradestudentnamedMariausedFacebookandSMStoorganizeaprotestagainsttheeducaJonalpoliciesofChile’spresident,MichelleBacheletandtheeducaJonminister.MariaencouragedallthestudentsinChileto“SkipSchool”onMay30.600,000studentsprotested,makingitthelargeststudentstrikeinChileanhistory.AuthoriJeswerestunnedbytheorganizaJonoftheprotest,nowwidelyknownas"themarchofthepenguins"‐inreferencetotheprotesters'schooluniforms.

Usingtheinternetandcellphones,thestudentshaverewriLentherulesofdissentwiththeirabilityinstantlytoorganizemarchesandmakecollecJvedecisions.Theorganizersaretypicallyveryyoung,withanaverageageof16,andtheirsupportgoesallthewaydownto11‐year‐olds,whoorganizedforumsanddebatetherighttoafreeeducaJon,turningtheirschoolbreaksintoacivicslesson.

Hundredsofcollegeswereoccupiedandclasseswerecancelledforupto10days.AlliancesbetweenpoorstudentsatstateschoolsandpupilsintheprivateeducaJonsystemerasedtheusualclasslinesthatmarkChileansocialprotests.

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MexicohasalsouseddigitalmediatostagemajorpoliJcalprotests.Justthisyear,theMexicangovernmentwantedtochargea3%taxonInternetservices.Thissparkedahugesocialmovement–ciJzensusedsocialnetworkstocommunicatewitheachotheranddirectlywiththeSenate,askingwhythegovernmentwouldchargemoreforaservicethat’s“essenJal”toallciJzens.

TheprotestoccurredalmostenJrelyinTwiLer,withthe#internetnecesariotag.“Ifyouwantyouropiniontobehearduse#internetnecesario.YouaretheInternet.”

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In2007,12Brazilianmotorcyclecouriersusedtheirmobilephoneswithcamerastotakepicturesandmakevideosofbikeandcaraccidents,badroadcondiJons,poliJcian´spromisesthatnevercometrue,etc.EverythingwaspublishedinrealJmeonthewebsitewww.megafone.net/SAOPAULOwithtagschosenbythesecitychroniclersofSãoPaulo.Theprojectwaslatertransformedinadocumentary.

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TheFichaLimpa(CleanRecord)Lawwasdeliveredin2010totheBrazilianNaJonalCongressbyapopulariniJaJve,requesJngthatpoliJcalcandidatesfoundguiltyofcommi�ngseriouscrimessuchasmoneylaundering,drugdealing,corrupJon,useofpublicfundsandelectoralinfringementsbeforbiddenfromrunningforpublicoffice.

Morethan3millionBrazilianssignedanonlinepeJJonforapprovalofthelaw.WhensomepoliJciansintheBrazilianCongress–notinterestedinpassingthelaw–startedtosuggestthepostponementofthevoteonthelaw,morethan41,000e‐mailsweresenttoeachoneoftheBrazilianCongressmen.ThecampaignforthepeJJonwasdonethroughe‐mail,TwiLer,FacebookandOrkut.Infact,FichaLimpabecameatopTwiLertrendingtopicforaweekinBrazil.

Thankstotheeffortdonebydigitalcampaigners,thelawpassedthroughtheBrazilianCongressinrecordJmeandwentintoeffectinOctoberofthisyear.

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Mobileisakeytrendforalmostanysocialclassinalmostanyregionoftheworld.ButRazorfishbelievesthattherearesomeuniquedynamicsplayingoutinmobileamongtheNDMCinLaJnAmerica.

MobilepenetraJoninLaJnAmericaandtheCaribbeanwasapproximately80%inearly2009,wellabovetheworldaveragewhichwasabout58%.Severalcountries,includingArgenJna,Jamaica,Uruguay,andVenezuelahavepassedthe100%penetraJonthreshold.

With458millionpeopleowningamobilephoneinearly2009,LaJnAmericaandtheCaribbeantogetherholdapproximately12%oftheworld’s3.97billionmobilesubscribers.

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TheNDMCdon’tnecessarilywantsmartphones–theywantphonesthataresmart.

Thecheapandawfuldoesn’tinterestthem.Theywantthebestdevicesthatfittheirlifestyle.iPhonesandBlackBerrieshavetoomanyirrelevantfeaturesandfuncJons,andtheywouldprobablyjustgetstolen.

So,insteadofpurchasinglow‐endfeaturephones(likesimpleflipphones)orthetopsmartphonesinthemarket,theNewDigitalMiddleClasslooksforaspecifickindofproductthatmeetstheirfuncJonalneedsandalsogivesalotofstatus(anotherbigconcernforthem):theNet‐phones.

Thesemobiledeviceslooklikethebestsmartphones:theyaretouch‐screen,accesstheweb,haveanaLracJvedesign,acamerawithlotsofmegapixels,radio,mp3player…andallthatforanaffordableprice.Manyofthemalsohavebuilt‐intelevisions.

SomegreatexamplesaretheMotorolaCUBO,theSamsungStarandLGScarletandtheChineseknock‐off“iPhones”.

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LaJnAmericansareaccessingalotofsocialmediaandentertainmentcontentthroughthemobileweb,andtheirpotenJalforbeingheavyusersofmobileinternet,liketheyalreadyarefortradiJonalweb,ishuge,buttherearetwomajorbarriers:

1.  Safety–ManyoftheNDMCliveinneighborhoodsthatarenotenJrelysecure.Theyarenervousaboutpullingoutanexpensivephoneonthestreetoronthebus.

2.  Cost–DatachargesforthemobilewebareprohibiJvelyexpensiveformostmembersoftheNDMC.

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AsignificantpercentageoftheNDMCusesphoneswithwebaccesscapability,butonlyafracJonofthesepeopleareactuallytakingadvantageofthiscapability.ThedataplansareextremelyprohibiJve,pushingtheMiddleClassawayofthemobileweb.

SOURCES:May2009ReportAboutHabitsoftheMexicanInternetUsersbyAMIPCI;and2009SurveyontheUseoftheICTsinBrazilbyNIC.br.

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AgainandagainwehaveseenhowtheNDMCisreallycreaJveinsolvingtheirfinancialdilemmas.Themobilewebisanotherexample.TheNDMCareheavyusersofBluetoothtechnologytocircumventcarrierchargesandsharecontentwitheachother.Movies,games,MP3s,videos–ifitcanbeshared,theNDMCwillbesharingitbyBluetooth.Thisoccursfromphonetophone,andalsofromphonetoPC.Bluetoothisthepla�ormofchoicefortheNDMC.

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ThisphotoisfromoneofthedozensofboothsoutsidethemaintrainstaJoninMexicoCity.Butitcouldjustaseasilyhavebeenfromanyofthecommercialdistrictsinanyofthepoorcommercialareasinthefavelas.TheseboothssellanyHollywoodmovieorPlaystaJonGameyoucanimaginefor5‐10pesos–alltransferredonthestreet,viaBluetooth.

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TransfercelisadebitcardJedtoacellphoneapplicaJon.Thecompany’stargetareMiddleClassMexicanswhocan’thaveabankaccount,andMexicanslivingintheUSwhowanttotransfermoneytotheirfamiliesbackintheirhomecountry.TheuserscantransfermoneythroughtheapplicaJonatUS$5.00,insteadofpayingtheusual$35forthebank.TheTransfercelcardisnotJedtoanybank,anditrequiresuserstopressonly2keysontheircellphones.

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WomenaretheCTO,CFO,andgenerallyearlyadoptersofNewDigitalMiddleClasshousehold.

NDMCwomenarehardworkerswhousuallyhavemorethanonejobandarealsoresponsibleforthefinancesathome.Becauseofthat,theyaretheoneswhomakethepurchasingdecisions,includingthetechproductsfortheirhomes.TheyunderstandthepowerofdigitaltoimprovetheirqualityoflifethroughaccesstoinformaJonandeducaJon,tochangetheirchildren'sfutureforthebeLer,andtobeatoolforentrepreneurismandgeneraJonsofnewincome.

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AllacrossLaJnAmerica,womenhaveachievedparitywithmenintheiraccesstodigital.

(SOURCES:Amipci‐InternetUsers2006,Amipci‐InternetUsers2009,IbopeNet/RaJngsSeptember2006,IbopeNet/RaJngsApril2010,D’AlessioArgenJnaIROLInternetenlaArgenJna)

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Retailers–bothonlineandoffline–understandthatwomen,notmen,arethemaindriversofpurchasingdecisions.ThisfliesinthefaceofmanypaternalisJcstereotypesofLaJnAmerica.

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EvenmoreinteresJngly,inBrazilwomenaresubstanJallymoreentrepreneurialthanmen.Again,thisdatarunscompletelycontrarytoconvenJonalwisdomabouttheroleofwomenintheculture.

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TheInternetplaysahugeroleinthelivesandself‐percepJonofwomen.TheyviewtheWebasnotonlyasabeLersourceofentertainmentthan“oldmedia,”butalsotheprimarymeansoftangiblyimprovingtheirlivesandthelivesoftheirfamilies.

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SooneofthelargermessagesofthisstudyisthecentralroleofwomeninthedigitalevoluJonoftheNDMC.ThebeaJngheartoftheNewDigitalMiddleClassisfemale.WomenarebreakingdownthegeneraJongapandbringingdownthedigitaldividebyacJvelyusingtheWebandbeingtheprimaryeconomicengineoftheemergingclasses.

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Atlast,wereturntothetestfromthebeginningofthereport.Ifyouarelikemostpeople,andifyouweretruthfultoyourinsJncts,youprobablyassumedthatthe“mostdigital”groupwasthepeopleontherightsideofthisphoto.ItwouldbeareasonableassumpJon.ButRazorfishhopesthatnowyoumightbewillingtoadjustyourbeliefs.

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ShouldyouhavequesJonsorcomments,pleasefeelfreetodropmealine.

JoeCrump

SeniorVicePresidentofStrategyandPlanning,Razorfishjoe.crump@razorfish.com

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ThisstudycouldnothavebeenpossiblewithoutthesupportofourgoodfriendsatTerra,thelargestdigitalcommunicaJonscompanyinLaJnAmerica.WearegratefulfortheirconJnuedfriendship.

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