UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended: March 31, 2004

Commission File Number: 000-31181

AMERICA ONLINE LATIN AMERICA, INC.

6600 N. Andrews Avenue
Suite 400
Fort Lauderdale, FL 33309
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (954) 689-3000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

America Online Latin America, Inc.

Form 10-Q

INDEX

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   PART I. FINANCIAL INFORMATION

   ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

     Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to the accompanying consolidated financial statements and related footnotes to help provide an understanding of the financial condition, changes in financial condition and results of operations of America Online Latin America, Inc. (“AOLA” or the “Company”). The MD&A is organized as follows:

	•		Overview and recent developments. This section provides a general description of AOLA’s businesses, as well as recent developments that we believe are important in understanding our results of operations and future trends in our operations.
	•		Results of operations. This section provides an analysis of AOLA’s results of operations for the three months ended March 31, 2004 relative to the comparable period in 2003. This analysis is presented on a consolidated basis, but also discusses relevant segment basis figures and results.
	•		Financial condition and liquidity. This section provides an analysis of AOLA’s financial condition as of March 31, 2004 and cash flows for the three months ended March 31, 2004 and 2003.
	•		Critical accounting policies. This section provides a review of our accounting policies and estimates considered most important to our reported financial condition and results.
	•		Forward-looking statements. This section discusses how certain forward-looking statements made by AOLA throughout MD&A and in the consolidated financial statements are based on management’s current expectations about future events and are inherently susceptible to uncertainty and changes in circumstances.

     This MD&A may not be indicative of the results for the full year and should be read in conjunction with the sections of our audited financial statements and notes thereto as well as our MD&A that are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

     Overview and Recent Developments

     America Online Latin America, Inc. (“we,” “us,” “AOLA” or the “company”) is a leading interactive service provider in Latin America. Our goal is to be a leader in the development of the global interactive medium that is changing the way people communicate, stay informed, are entertained, learn, shop and conduct business in Latin America. We derive our revenues principally from member subscriptions to our AOLA country services, the AOL-branded service in Puerto Rico and our web-based interactive services. We also generate additional revenues from advertising and other revenue sources. Other revenue sources include programming services provided to America Online, Inc.’s (“America Online”) for its Latino content area and revenue sharing agreements with certain local telecommunications providers.

     Our AOLA country services and web-based interactive services provide our members with easy and reliable access to online communities, content and localized versions of certain of America Online interactive products. Our services enable members to access and explore the Internet and encourage members to participate in interactive communities through tools such as Spanish and Portuguese versions of AOL Instant Messenger, Buddy Lists, e-mail, web logs, public bulletin boards, online meeting rooms, conversations, chat and auditorium events. Our AOLA country services require members to use a client software program on their computers, whereas our web-based services do not require this software. Members can personalize their online experience through a variety of features, including customized news and e-mail controls. Our interactive services also provide members with local and regional content organized into channels, making areas of interest easy to find, and our AOLA country services also provide access to the extensive global content of the AOL service.

     Our markets in Latin America are Brazil, Mexico, Argentina and Puerto Rico. We have no current plans to expand to other markets in Latin America. In the table below, we provide the date on which we first launched our country service in each market and our market service coverage as of May 10, 2004.

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     Under an agreement with America Online, we receive the economic benefit associated with subscribers to the AOL-branded service in Puerto Rico and include these subscribers in our member totals. Subscribers in Puerto Rico are provided with both English and Spanish language content through the AOL-branded service.

     We launched our new web-based content and connectivity services in Brazil, Argentina and Puerto Rico in September 2003, October 2003 and February 2004, respectively. Our web-based services are priced at lower rates than our AOLA country services. We expect these new services to better allow us to compete on the basis of price in these markets, and, in Brazil, to allow consumers to choose the features they need. Our web-based Internet connectivity service in Brazil is segmented to address four broad categories.

     Unlike Brazil, in Argentina and Puerto Rico, we offer only one web-based product. In Argentina, our web-based product offering is called “AOL Web” and is full-featured and similar to AOL Total in Brazil. “Conexis” is the name of the web-based service we offer in Puerto Rico which provides basic Internet connectivity, one email address and minimal content. We continue to test a web-based service in Mexico, and our decision on whether or not to launch this service in Mexico will depend on these test results. We are primarily responsible for the hosting, technical support, development and billing for our web-based services.

     We believe our new web-based services in Brazil and Argentina will become our primary products in those countries, although at present the majority of our members in those countries use the AOLA country service. We no longer actively promote the AOLA country service in Brazil and Argentina, although they are still available. We do not expect our web-based product offering in Puerto Rico to become our primary product offering. We expect to experience migration of membership from our AOL Brazil and AOL Argentina country services and our AOL-branded service in Puerto Rico to our new web-based services. To date, approximately 33% of subscribers to our web-based services have migrated from our AOLA country services in Brazil and Argentina and the AOL-branded service in Puerto Rico.

     Our future membership levels and our economic performance will be highly influenced by the extent of success of our web-based product offerings. To date, growth of our web-based services has been slow. Approximately 15% of the membership totals as of March 31, 2004 were subscribers to our web-based interactive services. Initial results in Brazil indicate that membership turnover is slightly lower for our web-based offerings than for our AOLA country services, although we cannot predict whether the improved turnover rate will continue or will be sufficient to enable us to achieve economic viability.

     We launched our broadband service in Brazil, AOL MAXX, nationally in August 2003. Our new broadband service is a full-featured product offering subscribers faster Internet access through DSL and cable and unique content designed for delivery through high-speed channels. The pricing of our broadband service in Brazil varies depending upon our telecommunications partner. We are also testing broadband products in Mexico and Argentina, although at present we do not have plans to launch nationally in these countries. A decision on whether or not to launch our broadband service in Mexico and Argentina will depend on the test results.

     We anticipate launching AOL 9.0 in Mexico during the second quarter of 2004, bringing the latest client software to that market. We expect the launch of AOL 9.0 to be an important enhancement for our members in Mexico. In relation to this launch, we plan on increasing our marketing expenditures to promote this new version beginning in the second quarter of 2004

     In June 2000, we entered into a ten-year strategic alliance with Banco Itaú, one of the largest banks in Latin America. Banco Itaú is obligated to market and promote a co-branded version of our interactive services in Brazil as the principal means of accessing Banco Itaú’s interactive financial services. Banco Itaú customers who become subscribers to the co-branded services are currently entitled to a 20% discount off the standard price for the unlimited, bundled service plan.

     In December 2002, we amended our strategic marketing alliance with Banco Itaú. Under the terms of the revised agreement, we now oversee, in large part, the marketing activities for the co-branded service. Banco Itaú is obligated to establish kiosks and point-of-sale displays in hundreds of its bank branches for the promotion of the co-branded services, which are staffed by promoters trained by AOL Brazil. Potential subscribers are able to sample the co-branded services and register in the bank branches. The number of promoters varies depending on the success of the marketing efforts, which are reviewed every three months. If the marketing efforts do not meet specified goals, the number of promoters will be decreased, subject to a floor on the number of promoters. Conversely, if the marketing efforts exceed specified levels, the number of promoters will be increased, subject to a maximum number of promoters. Banco Itaú is also required to distribute, at our direction, CDs containing the software for the co-branded AOLA country service via in-branch promotions and direct mail. Banco Itaú must also produce and broadcast a certain number of television commercials promoting the co-branded services and provide exclusive online banking benefits to subscribers to the co-branded services. Banco Itaú is responsible for the cost of these marketing efforts.

     The modified marketing arrangements will remain in effect through March 2006, although the ten-year term of the agreement did not change. Banco Itaú is obligated to make cash payments to us if minimum annual revenue targets and marketing commitments are not met through March 2006. The maximum aggregate amount that Banco Itaú will be required to pay us if these targets are not met, which we refer to as reference payments, is $21.0 million and $13.0 million in 2005 and 2006, respectively. Banco Itaú met the March 24, 2004 targets and was not required to pay any penalties to AOLA. We expect to receive only minimal amounts from Banco Itaú for any potential failure to meet revenue targets for the March 24, 2005 measurement date.

     In January 2003, we entered into a five-year agreement with McDonald’s in Brazil to market our service via kiosks in hundreds of McDonald’s restaurants in Brazil. We paid McDonald’s an initial fee of approximately $2.1 million and are required to pay an annual fee of up to $1.0 million over the term of the agreement. In addition, we also are required to pay McDonald’s a fee for each new member who becomes a paying member of our service in Brazil. We launched the project in a limited number of restaurants in October 2003, but the implementation of this agreement has been subject to a number of delays and has not been fully implemented.

     In March 2004, we modified our agreement with McDonald’s under which, among other things, McDonald’s is now required to hire, train and deploy in the restaurant kiosks, for a period of one year and at its cost, 300 promoters who will be exclusively dedicated to the project. In each of 2004 and 2005, we have the right for AOL Brazil to be promoted in two of McDonald’s national advertising campaigns. As part of the restructured agreement, we are not required to pay a maintenance fee to McDonald’s related to the first year of the contract (estimated to have been $0.9 million), and McDonald’s is no longer required to pay us penalties for their failure to establish kiosks on a timely basis (estimated to have been up to $0.8 million). Furthermore, McDonald’s is required to establish functioning kiosks in 550 of its restaurants by August 31, 2004. Based on the current rate of implementation of kiosks in its restaurants, we do not expect McDonald’s to

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meet this target and they will be obligated to refund to us a portion of our initial investment of $2.1 million. Implementation under the terms of the modified agreement is currently behind schedule, but our goal is to achieve full implementation of the agreement by the first quarter of 2005. To date, the productivity rates have been low in restaurants where kiosks have been established. We still hope McDonald’s will become an important member acquisition channel. Excluding our agreement with Banco Itaú, our planning is premised on McDonald’s becoming our most important member acquisition channel. Failure to successfully implement this agreement or achieve adequate productivity levels would negatively impact our future membership levels.

     In 2002, we implemented measures designed to better target higher-value members by focusing on targeted groups that have a greater likelihood of becoming members who pay on a timely basis and remain subscribers to our services for an extended period of time. This allowed us to increase the cost efficiency of our member acquisition marketing efforts and reduce the overall cost of our marketing activities, primarily through the elimination of the mass mailing of CDs containing our software. Instead, we now focus on more targeted activities such as the use of kiosks in high traffic retail and bank locations and distribution of our software through original equipment manufacturers and direct customer interaction channels. Our greater selectivity in the acquisition of new members has resulted in fewer new registrations, but which we hope will eventually be of higher value. We also took steps to block access to our network and terminate members who were delinquent in the payment of their fees to us. This allowed us to reduce our costs of revenues by reducing the scope of our network and call center support operations in line with the resulting reduced membership base and lower peak demand.

     As we have reduced our spending on acquisition marketing activities, we have increased our reliance on co-branded and joint marketing arrangements, where a third-party partner is responsible for implementing a significant percentage of the marketing effort. Our two main marketing arrangements are the marketing agreements with Banco Itaú and McDonald’s, both in Brazil. In Mexico and Puerto Rico, we have continued our reliance on existing distribution channels, focusing primarily on targeted increases in the number of kiosks located at retail locations. Our reliance on the marketing efforts of strategic partners has reduced the rate at which we use cash and has lowered our sales and marketing expenses, since costs incurred by our partners are not accounted for in our results. However, reliance on third-party arrangements has also increased the potential for unforeseen delays over which we have limited control, as has been the case with McDonald’s in Brazil. Failure to successfully implement the McDonald’s agreement or to achieve the subscriber targets in the Banco Itaú agreement would negatively impact our future membership levels.

     At March 31, 2004, our ending membership base was approximately 433,000 members, down from approximately 462,000 members at December 31, 2003. Membership in our Banco Itaú co-branded service was approximately 104,000 members at March 31, 2004, as compared with approximately 103,000 members at December 31, 2003, and accounted for 24% of our total membership base. The decline in total membership during the first quarter of 2004 was due to low levels of new member registrations, which were insufficient to offset membership losses from attrition. Strong price competition from providers of free and paid Internet services in Brazil, as well as increased price competition in Mexico and Argentina, continue to negatively impact member acquisition and retention. Registration rates also continue to be negatively impacted by the slow rate of implementation of the McDonald’s marketing agreement and low productivity in restaurants where kiosks have been established. Our membership turnover rates have apparently stabilized in Mexico and in the Banco Itaú segment of our Brazil business, although not sufficiently to stem losses from reduced levels of marketing activities and continued competitive pressures. Excluding the Banco Itaú portion of our business, membership turnover has not improved in Brazil. In addition, membership turnover has not improved in Argentina or Puerto Rico.

     We expect that our membership base will decrease by 30,000 members in the second quarter of 2004, to approximately 400,000, driven by strong competition in Brazil and by delays in the implementation of the McDonald’s marketing agreement in Brazil. Furthermore, we now expect our membership base to continue declining at least through the end of 2004. Future membership will be significantly influenced by the success of our new web-based interactive services and our success in identifying alternative member acquisition channels.

     Total membership counts include members of our AOLA country services, in our web-based interactive services and broadband service, as well as members of the co-branded Banco Itaú service and members to the AOL-branded service in Puerto Rico. Our membership totals also include members participating in free trial periods and retention programs. As of March 31, 2004, 84% of our members, including members still on their trial periods, had selected credit cards, direct debit and other non-cash payment options, which have a better rate of collection than cash-payment methods, as compared with approximately 81% at December 31, 2003. Approximately 13% of our total subscribers at March 31, 2004, were in free trial periods or member retention programs, compared with 14% at December 31, 2003.

     During the first quarter of 2004, we experienced a decrease in our subscription revenues as compared with the first quarter of 2003. This reduction was driven by declines in Brazil, Mexico and Argentina, partially offset by an increase in Puerto Rico. The decreases in Brazil, Mexico and Argentina were driven by reductions in paid membership. Future subscription revenue performance will be highly influenced by the extent of success of our web-based product offerings in reducing membership turnover and in attracting new members. We now expect our subscription revenues to decrease throughout the remainder 2004, driven by the continued reduction in paid membership and by the expected increase in subscriber selection of our lower-priced web-based services, rather than our higher-priced AOLA country services.

     Advertising and other revenues also continued to decrease in the first quarter of 2004. We expect our advertising and other revenue to continue decreasing throughout 2004 as a result of our reduced membership base, our lack of success in attracting significant commitments from

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traditional media advertisers and the expiration of long-term contracts in 2003. Other revenues are expected to decrease due to the expiration of our agreement to provide programming services to America Online for their Latino content area.

     Although we expect our revenues to decrease throughout the remainder of 2004, we also expect our costs to continue decreasing as well. Telecommunication costs are expected to decrease, primarily as a result negotiated reductions in network unit prices and capacity achieved in 2003. Sales and marketing expenses are expected to continue decreasing as a result of lower average number of kiosks in operation and additional reductions in the distributions of CDs. As a result, we continue to expect to further reduce our losses in 2004 as compared to 2003. Available cash on hand at March 31, 2004 was $29.3 million, as compared with available cash on hand of $32.9 million at December 31, 2003. We expect available cash on hand will be sufficient to fund operations into the first quarter of 2005, based upon our current operating budget.

     We believe regulations relating to local telephone pricing are likely to be modified in Brazil, upon their expiration in January 2006. At such time, rules governing interconnection fees between telecommunications providers may also be modified. If such rules were to be modified, we would expect our costs to increase because we would not receive payments we currently receive from telecommunications providers for routing our traffic over their lines. We cannot predict at this time whether or not these regulations will be enacted or, if enacted, what form of alternative rate pricing might be adopted, or what any potential effect on our business could be. These changes would also likely impact the competition for interactive services in Brazil, although we cannot predict what the impact may be.

     In May 2004, “Internet Brasil,” an association of paid Internet service providers in Brazil, filed a complaint with the Ministry of Justice alleging anticompetitive practices by incumbent telephone companies and their affiliated free Internet service providers. The complaint requests the incumbent telephone companies to grant equal treatment to all Internet service providers. We do not expect this complaint to be resolved in the near future. Furthermore, there can be no assurance that the resolution of this complaint would benefit us in any manner.

     We consider countries in which we have launched our AOLA country services or web-based interactive services as operational segments and internally report our operations on a country-by-country basis. Although amounts for Argentina are not currently material and are not expected to be material in future reporting periods, we have decided not to consolidate Argentina with our corporate and other segment in order to facilitate historical segment comparisons. Each of our operating segments, except for Puerto Rico, derives its subscription revenues through the provision of interactive services and also from advertising and other revenue sources. In Puerto Rico, we derive our subscription revenue from our arrangement with America Online whereby America Online transfers its net economic interests from members to the AOL-branded service in Puerto Rico to us. Our Puerto Rico segment also derives revenue from advertising and other revenue.

     Results Of Operations

Consolidated Results of Operations

     Table 1 shows the consolidated results from operations for the three months ended March 31, 2004 and 2003.

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Revenues

     Total revenues. Table 2 below shows our revenues by type and by operating segment.

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     Subscription revenues. Table 2 presents our subscription revenues on a consolidated and segment basis for the three months ended March 31, 2004 and 2003.

     We derive our subscription revenues from members paying fees to subscribe to our AOLA country services and to our web-based interactive services, and from revenues received from America Online related to subscribers to the AOL-branded service in Puerto Rico. Subscription revenues do not include amounts paid to us by Banco Itaú on behalf of its customers for subsidies that it chose or was required to make. Such receipts from Banco Itaú were netted against and recorded as a reduction of marketing expenses and thus were not accounted for as subscription revenues. Amounts paid directly to us by subscribers that exceeded any time subsidized by Banco Itaú were included in subscription revenues. Under the terms of the revised marketing agreement, Banco Itaú is no longer required to subsidize its customers who are subscribers to the co-branded service. As a result, subsidies from Banco Itaú for its customers have not been material after the first half of 2003, nor were they material in the first quarter of 2004. We do not expect subsidies from Banco Itaú for its customers to be material in future periods. For subscribers that have elected to pay their subscription fees with credit cards, we begin to recognize subscription revenues when the fees become due and are confirmed as collectible. For subscribers that pay through means other than credit cards, we begin to recognize subscription revenues when we receive payment.

     Subscription revenue for the quarter ended March 31, 2004 was $13.5 million, a decrease of 9.9%, or $1.5 million, from $15.0 million in the first quarter of 2003. The decline in subscription revenues versus the prior-year period was driven by the loss of paid members in all operating segments except Puerto Rico. The overall decrease in subscription revenue as compared to the prior-year quarter was primarily due to losses in paying subscribers as a result of increased competition, which resulted in members lost through attrition. New member registration rates were lower than necessary to replace membership attrition, negatively impacted as well by the slow launch of the McDonald’s initiative in Brazil. For the first quarter of 2004, subscription revenue in Brazil decreased to $4.8 million, down $0.7 million, or 12.4%, from $5.5 million in the prior year period. Subscription revenue in Mexico decreased to $4.6 million in the first quarter of 2004, down $1.1 million, or 19.2%, from $5.7 million in the first quarter of 2003. Subscription revenue in the first quarter of 2004 in Argentina fell to $374,000, a decrease of $25,000, or 6.3%, from $399,000 in the prior year period. Subscription revenue in Puerto Rico, however, increased to $3.6 million in first quarter of 2004, up $0.3 million, or 10.0%, from $3.3 million in the fiscal 2003 first quarter.

     In constant currency terms, subscription revenue decreased by an amount greater than the reported decrease of 9.9% during the three months ended March 31, 2004. In constant currency terms, subscription revenue declined by 15.2% as compared to the prior-year quarter. The favorable translation impact of a weaker U.S. dollar reduced the impact of lower local currency revenues on reported subscription revenue by $0.8 million. Information on a constant currency basis excludes the effect of foreign currency translation on reported results and is provided to help explain variations in reported results and provide insight into the underlying operational performance of our business. On a segment basis, in constant currency terms, subscription revenue in the first quarter of 2004 decreased by 27.4% in Brazil, 17.8% in Mexico, and 14.0% in Argentina, as compared with the quarter ended March 31, 2003.

     Sequentially, reported subscription revenue declined by 2.5%, or approximately $0.3 million, from the $13.8 million recorded in the quarter ended December 31, 2003. All segments, except Puerto Rico, contributed to the sequential decrease, with Brazil declining by $0.4 million, Mexico declining by $0.2 million and Argentina declining by $18,000. Puerto Rico subscription revenue increased by $0.2 million

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in the first quarter of 2004, as compared with the fourth quarter of 2003. The loss of paying members was the main factor resulting in the reduction of subscription revenue as compared the fourth quarter of 2003.

     Future subscription revenue performance will be highly influenced by the extent of success of our new web-based product offerings in reducing membership turnover and in attracting new members and by our ability to successfully develop new acquisition marketing channels. We expect our subscription revenues to decrease through the end of 2004, driven by the continued reduction in paid membership and by the expected increase in subscribers to our lower-priced web-based services rather than our higher-priced AOLA country services.

     At March 31, 2004, we had deferred subscription revenues of approximately $4.3 million, as compared with $4.5 million at December 31, 2003. Deferred subscription revenues consist of fees for subscription services received or confirmed as collectible from credit card accounts and prepaid subscription plans in advance of our having earned those subscription revenues.

     Advertising and other revenues. Table 2 presents our advertising and other revenues.

     Our advertising and other revenue is derived principally from:

	•		advertising arrangements under which we receive fees for advertisements displayed on our interactive services;
	•		advertising sponsorship or co-sponsorship arrangements that allow advertisers to sponsor an area on our interactive services in exchange for a fee;
	•		fees we receive from America Online for programming services we provide to America Online for use on their Latino content area;
	•		representation fees we receive from America Online for selling advertising on their interactive services; and
	•		revenue sharing arrangements with local telecommunications providers. Because local telephone service in Latin America is often metered, the utilization of our AOLA country services and of our web-based interactive services by our members results in incremental revenues to local telecommunications companies. To encourage incremental traffic on their local networks by our members, some local providers of network access have entered into agreements compensating us for routing our traffic on their networks.

     For the quarter ended March 31, 2004, revenue derived from advertising and other declined to $0.5 million, a decrease of $0.8 million, or 59.0%, from the $1.3 million recorded in the first quarter of 2003. The overall decrease was driven primarily by decreases in customer advertising revenue. All our segments, except the corporate segment, reported declines in advertising and other revenue. The small increase in our corporate and other segment was primarily due to revenue received by us from America Online for content programming services that we provided to America Online for use on their U.S. Latino content area. Currency exchange rate fluctuations in Latin America did not have a material impact on reported advertising and other revenue during the quarter ended March 31, 2004, as compared with the prior-year quarter.

     Sequentially, advertising and other revenue in the first quarter experienced a decrease of $0.5 million, or 50.0%, from the fourth quarter of 2003, driven by lower customer advertising. We expect advertising and other revenue to continue to decrease throughout 2004, despite an improved online advertising environment in Latin America, driven by our reduced membership base, our lack of success in attracting significant commitments from traditional media advertisers and the expiration of long-term contracts in 2003. Other revenues are also expected to decrease due to the expiration of our agreement to provide programming services to America Online for their Latino content area, although we are currently negotiating a new agreement with America Online. There can be no assurance that we will be able to reach agreement with America Online regarding our potential provision of these services.

     During the three months ended March 31, 2004, we had advertising and other revenues from affiliated companies of approximately $77,000, as compared with $0.7 million for the first quarter of 2003. Advertising and other revenue from related parties consists primarily of revenues received from America Online for programming services we provided to them for their Latino content area, representation fees we receive from America Online for selling advertising on their interactive services and advertising by Banco Itaú on our AOLA country service in Brazil.

     At both March 31, 2004 and December 31, 2003, we had deferred advertising and other revenues of approximately $0.3 million. Deferred advertising and commerce revenues consist of payments received in advance of our delivery of the related services and are recognized as income as the services are delivered.

Costs and expenses

     Total cost and expenses. Table 3 below shows our total costs and expenses on a consolidated and segment basis for the three months ended March 31, 2004 and 2003. Our total costs and expenses consist of cost of revenues, sales and marketing, and general and administrative expenses.

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