The Next Billion: Discussion Points

I was recently part of a fascinating discussion about what has been termed 'the next billion' describing the next wave of people to come online (predominantly from emerging markets) and the opportunities/challenges this presents. Sharing the main points below: 

There are several issues we discussed including connectivity, access, devices, usage of devices and data, monetization strategies for apps, ROIs for different players in the space, etc.

+ Connectivity: Balloons, mesh network of buses (avoids real estate issues), satellites, etc. What return can be expected from these investments and will they be successful? Internet is a utility, and charging for infrastructure may be difficult. Therefore, is the set of solution providers limited to large companies (e.g. Google, Facebook) with the capital resources to fund connectivity at a loss in exchange for some hope/ability to monetize subsequently in the form of apps?

+ Devices: Costs matter in this market, hence the race to deliver lowest cost devices. Will Apple be sidelined? Can they avoid brand dilution while foraying into these markets? Is open source more likely to win than closed systems?

+ Usage of devices and data: Usage is very different in the developing world for a couple of reasons. First, there is less income to spend on data and in-app purchases, affecting engagement and product design. Should all apps be lite versions of their developed world counterparts? Can we utilize cheaper ways of downloading or sharing data?

Second, because of the lack of financial infrastructure (e.g. credit cards), the carriers hold the keys. Identification and payment occurs at the carrier (e.g. when phone is issued, when minutes are topped up), thus app stores are carrier controlled. Implications for Google and Apple? Implications for apps’ ability to monetize (opportunity costs are not just financial, but also the hassles associated with running out of minutes). Financial infrastructure is very much an important driver here. mPesa is an example of carrier (Vodafone) power in Kenya.

+ Monetization: A few ways to pay for apps: money, usage (e.g. data), attention (e.g. ads). Ability to charge for apps / in-app upgrades / use significant data is limited due to limited disposable income. Attention is premised on subsequent ability to monetize. Advertisers effectively subsidize data costs on behalf of the consumer (the same thing happens here) in exchange for leads and purchases. But the returns have to be realized at some point. When? Will users with limited disposable income respond to heavy advertising in the same way?

+ Correlation between GDP / GDP forecasts and the value of a user. “A user is a user” is not true. Developed world users are very different than developing world users. Even within a country this is not true depending on how wealth accumulates and is distributed. Per user metrics (related to valuation and otherwise) should adjust for this.

+ At first, many companies are likely to focus on logistics/infrastructure (e.g. the Uber / Instacart type companies) in emerging markets than heavy advertising models.