Developing World Is a Profit Sink For Web Companies 203
The NYTimes is running a piece on the dilemma faced by Web entrepreneurs, particularly in social media companies: the developing world is spiking traffic but not contributing much to revenues. The basic disconnect when Web 2.0 business models meet Africa, Latin America, and the Middle East is that countries there are not good prospects for the advertisers who pay the bills. "Call it the International Paradox. Web companies that rely on advertising are enjoying some of their most vibrant growth in developing countries. But those are also the same places where it can be the most expensive to operate, since Web companies often need more servers to make content available to parts of the world with limited bandwidth. And in those countries, online display advertising is least likely to translate into results. ... Last year, Veoh, a video-sharing site operated from San Diego, decided to block its service from users in Africa, Asia, Latin America, and Eastern Europe, citing the dim prospects of making money and the high cost of delivering video there. 'I believe in free, open communications,' Dmitry Shapiro, the company's chief executive, said. 'But these people are so hungry for this content. They sit and they watch and watch and watch. The problem is they are eating up bandwidth, and it's very difficult to derive revenue from it.' ... Perhaps no company is more in the grip of the international paradox than YouTube, which [an analyst] recently estimated could lose $470 million in 2009, in part because of the high cost of delivering billions of videos each month."
Re:BBC Videos (Score:3, Informative)
Re:Part of the online video problem . . . (Score:5, Informative)
The reason that Hulu is only available in the US is that international TV licensing is a nightmarish legal morass from which no man emerges fully sane.
Re:BBC Videos (Score:1, Informative)
As others have mentioned from a US perspective, this is due to licencing. The BBC licences programs for distribution in the UK only (even from other parts of the BBC).
Re:Part of the online video problem . . . (Score:5, Informative)
"US only" or "Canada Only" and "EU or some subset only" are almost certainly products of wrangling over distribution rights and/or various wrinkles in different countries' compulsory licensing schemes. While those are likely to slowly come down in the long term, they don't have much to do with how profitable various regions are.
The second factor, discussed in TFA, would lead more to "US/Canada/EU/etc. only" or "no third world" and is pretty much exclusively economic in motivation. Clearing the rights isn't an issue with the mass of amateur youtube uploads and the like; but costs of delivery are (at best) constant across the world(at worst, they are likely to be rather higher in poorer areas) and expected revenue certainly isn't constant.
I'll be interested to see if Youtube and the various other *tubes and knockoffs start to offer schemes whereby outfits who want their stuff available outside of the usual geographic areas (ie. propaganda groups for various banned NGOs, governments in exile, and the like) can pay to have them made available. I suspect that that might be attractive; but it might also become useless pretty quickly. If a video service, say, is extremely popular among good upstanding citizens of the regime, who use it to exchange funny cat videos and blooper reels, banning it will be unpopular. If a video service is virtually inaccessible, save for a bunch of videos sponsored by banned/unpopular groups, great firewalling it is a political no-brainer.
high bandwidth (Score:5, Informative)
i run several large sites, all are very popular in south america, south east asia and middle east
but the bandwidth bills are huge as is in gigabits/s
what we started doing is capping speeds during peak hours to these places simply because not enough money is being made from sales and advertising to pay for it
i know net neutrality people say thats wrong but were not a charity and have to pay alot to carriers :(
Re:high bandwidth (Score:5, Informative)
This isn't a violation of net neutrality because as a site owner you could serve traffic to these locations but *choose* not to. If a provider prevented you from serving content to certain locations, etc, that would be a violation of network neutrality.
Re:BBC Videos (Score:2, Informative)
Re:Bad business model, perhaps? (Score:2, Informative)
Re:Here in South America... (Score:4, Informative)
There is NO way for them to pay (Score:5, Informative)
Having lived for more than 2 decades in third world countries, there is more going on than you may think.
It is true that may people in developing countries do not have the funds to pay, which is why the advertisers are getting upset. However, in my opinion the biggest problem is that even when you have the funds to pay, you can't find anyone who will accept your money.
For example, how many online stores only accept Credit/Debit Cards, from their own country? PayPal is supposed to provide a solution for this, but only if you live in a western country. If you live in South America, Asia or Africa forget it, you can't use the service.
Even in the poorest developing countries there are still many individuals who have disposable income, but they are limited to spending it within their own markets, because of artificially imposed trade barriers, often set-up by the very companies that complain that they can't penetrate said market.
If you sell widgets online, and only allow payment via a Credit/Debit card with a US billing address, guess what, you will generally only make sales to people in the US. Everybody else relies on grey imports, and often the middle men\importers & smugglers will make more money than you on your own product.
I don't have a complete solution, as the topic is very complicated, but I am trying in my own tiny little way.
Re:Here in South America... (Score:2, Informative)
Re:high bandwidth (Score:3, Informative)
true we have no restrictions offpeak 12 hours a day when we have agreements with carriers not to charge anything for bandwidth as they have plenty capacity then, so we just pass on the savings to users
the problem is peak hours, even at 4.5-5$ a mbit @ 95th percentile the costs spiral very quickly :( and some places like iran where we get huge traffic from at times makes us nothing in income unfortunately
the bandwidth prices are falling rapidly but the amount of users from developing countries is growing exponentially, sometimes I envy google for their deep pockets and being able to afford services like youtube running
Re:IT IS THE CREDIT CARDS STUPID!!!! (Score:3, Informative)
You're probably right. It probably IS the credit cards. But as an e-commerce seller in the US, I'm going to tell you straight up: I do not and will not accept credit cards from outside of the US. Why? Rampant fraud. Until other countries deal with their fraud issues, there is no way that online merchants of any kind are going to accept credit cards from outside of the US. The risk is waaaay too high.
Re:Let the users pay the bandwidth bills (Score:3, Informative)
That's unlikely to work, at least in anything like bittorrent's current form, because these users don't own their own computers and network connections.
It is true that there are a lot more net cafés over here (here = Uruguay, South America) than in the US on average, but at least over here, 1/3rd of the population owns a computer (that includes children and elderly), though a lot of those are OLPCs.
"Broadband" (if it can be called that) would collapse, though, we're already quite strained as it is.
Whatever happened to the multicast idea?
BTW I saw a mention of SopCast somewhere in this thread, I second the idea...
Re:Let the users pay the bandwidth bills (Score:3, Informative)
Re:IT IS THE CREDIT CARDS STUPID!!!! (Score:2, Informative)
What about plans to deal with credit card fraud risk from inside the US?
You do the best you can. But from my experience, the fraud rate from inside the US is several orders of magnitudes better than outside of the country.
Re:Why don't they target the whole world with ads? (Score:3, Informative)
Its technically feasible. But as an advertiser, are you going to pay for 18 localized versions of ads to locales that have very little money to buy your wares? And all the corporate infrastructure needed for that?
Little money? It depends on which so-called developing countries you're talking about.
Now if you're expecting for a guy in Brazil to click in a banner written in English, advertising some generic random gadget, and after that, he would bother to make an international order (to pay a lot for transportation, local taxes, the long wait and any other hassle possible).... Well, think again.
Why should someone bother? Would you?
E-commerce in Brazil is quite popular, and you see lots of banners advertising products domestically buyable. The local companies are not complaining.
If there's some profitability problems with Youtube with certain countries, ones populated with people with broadband connections at home (not exactly starving, aren't they?), there's something wrong going on.
Re:Business or Charity? (Score:1, Informative)
Yes, Africa may not have been the best example, but I was trying to show the contrast against the most diverse group quoted to my comfort zone. South America for example does have a class of individuals with disposable income, yet US centric media does not seem to attract purchasing from them. The company I work for has both and independent Asian and South American marketing division. Both of these markets where flat until we specifically focused on targeting them, now they are our fastest growing segments.
Re:Let the users pay the bandwidth bills (Score:2, Informative)
Federico, a guy from Colombia (LA) with a standard 3Mb connection who doesn't work in a sweatshop making Nike shoes.
Re:Part of the online video problem . . . Is YOU (Score:3, Informative)
NOTE: This post may appear to be a trifle bitter in tone. That's because it is.
Let me speak from my personal experience of living these last 5+ years in a developing country: It's the developed world's own goddamn fault that we don't pay for things online.
The cost of delivering the content is constant for the provider. The cost for the receiver, on the other hand, is insanely high. I'm sharing a 128Kbps ADSL line with 2 others right now, at a total price of about US $55 per month. A 256Kbps line costs US $150. A 512Kbps line is about US $350 (recently reduced from $440). The only reason for this pricing is a monopoly on Internet services jointly controlled by France Telecom and Cable & Wireless.
For reference, the monthly minimum wage (for the minority who actually have work) is about US $250.
But even if we could download things, we couldn't pay for them online, because credit cards are virtually impossible to get from local banks. And by local banks, I mean of course franchises of Australian giants ANZ and Westpac.
We can't get credit cards because we have bad credit ratings. We have bad credit ratings because the average interest rate for a first-time borrower is 23%.
But most of us can't even get a first loan because the one collateral we have, customary land holdings, is not accepted unless it's been leased to someone or commercialised in some way. Most people are not willing to sell their birthright - and their children's only wealth - just for a good credit rating.
But even if we could get a local credit card, the majority of sites online won't accept them because of the risk, coming as it does from a country with (surprise!) poor credit history.
Debit services like Paypal don't even know we exist. Suddenly, the fact that our banks are franchises of regional giants has no bearing on anything.
To sum up: So you don't want to let me access your content? How terribly surprisingly. Fuck you very much and have a nice fucking day.
Re:1947-08-15 (Score:2, Informative)
In the end I agree with the service providers because theres a lot of demand for video and remember one thing, bandwidht CAPS are almost non existent in developing world. But the FAIL is in the service providers for not trying to sell real targeted ADs, or subscriptions. I'd be more than happy to pay 10 USD monthly to see what I want when I want it at decent resolution. It's cheaper than local cable offering with 130 channels of translated dumb fox-warner-sony- crap. Or let me buy channels to see.. let me buy episodes for 50C each FUCK! the money is here you just don't give a heck. When you think you have to put your data centers in the middle of a jungle, with IT personal killed by malaria everyday.. you know and I know it can be helped, you're a moron
This is good news for local entrepreneurs, If only I had enough money to start up a local hulu clone.. sigh.