(FORTUNE Magazine) – If you've noticed a series of brightly colored ads lately--everywhere from the New York Times to Fox TV--they're the leading edge of the latest Internet invasion. Spain's Terra Networks, one of the largest content and access providers in the Spanish-speaking world, has established its U.S. beachhead (www.terra.com) and is ready to battle for the potentially lucrative Hispanic Internet market.

It won't be easy. Terra--a subsidiary of Spanish telecom and media giant Telefonica--will have to take on Wall Street darling StarMedia, Yahoo (which is bulking up its Spanish-language service), and multinational competitors such as El Sitio and Loquesea.com. And it must also satisfy a very complicated market: 31 million U.S. Hispanics, a bilingual population with as many ethnicities as there are countries in Central and South America.

First, Terra will try to get Hispanics on the Net. Only 16.6% were online in 1998 (though that figure, no doubt, has increased), according to U.S. government data. That compares with 37.7% for non-Hispanic whites. To encourage Internet use--and earn revenue--Terra has allied itself with New Jersey-based telecom IDT, which has a Latino clientele that uses its call-back services. Together, they plan to begin providing Internet access soon.

Terra aims to stand out by marketing itself--with more than $65 million in print and TV ads--as the company that understands the linguistic and cultural affinities of its audience. One ad features a woman clad in red vinyl with a waterfall of blonde hair. Superimposed are the words guera, rubia, mona, and loira--the different words for blonde in Mexican Spanish, Castellano, Colombian Spanish, and Portuguese, respectively. "We know what you're talking about," the ad claims. Terra's U.S. site reflects that orientation, with its easy hub-and-spoke links to Terra portals in Latin America. If you visit Terra's U.S. sports page, for example, you might get a Tiger Woods headline. But click on its Peruvian link and you'll get news on Peru's La "U" soccer team. Go to StarMedia's Peruvian sports page, by contrast, and you get the same Tiger Woods headline you'd get in the U.S. StarMedia's nationalized offerings are fewer and harder to find.

Handling diversity is the most difficult part of the U.S. Hispanic equation, say analysts. Some Latinos prefer to surf the Web in Spanish, while others are equally comfortable at English-language sites. "Everyone pays lip service to different content and different languages for each country," says Lucas Graves, a Jupiter Communications analyst. "But the question is how effectively you can create local partners with familiar media properties."

Terra is trying to meet the challenge by offering local content, as well as e-commerce sites and services in Spanish and English. The company has agreements with the Miami Herald and MTV Latino and hopes soon to sign agreements with Hispanic newspapers and TV and radio stations in California, Miami, and New York--the areas with the largest Latino populations.

In the meantime, Terra is producing original content. For example, an immigration site with a link to the INS allows Terra users to chat with others who have made their way to the U.S. and to read up on immigration law.

Terra has a three-pronged business plan. It hopes to derive revenue from its ISP, selling advertising on the site, and e-commerce sales. For now, Wall Street seems impressed: As of Feb. 15, Terra's ADR shares were up 850% (to 127 3/4) since its November IPO--despite a management shakeup. In early February, in what the Spanish press portrayed as a power grab, Telefonica Chairman Juan Villalonga ousted Terra's dynamic CEO Juan Perea and took the reins. Villalonga, says Merrill Lynch analyst Peter Bradshaw, is "a man on a mission" to dominate the Spanish-speaking Internet world. But whether that world is ready to be dominated remains to be seen.