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."
Time = Money, Right? (Score:5, Interesting)
But maybe the third world should be looked at more like consumers with a lot of time and little money? I know it's horribly ridiculous for me to think that I work more than a poor Chinese man working 15 hours a day because I don't. But if you want to think of it as a viable market, these people have time to offer a business. So the obstacle becomes not how we can get them to click on our Amazon.com link and buy overpriced shoes like we do with fatass Americans (calm down, I am one)? But instead how can we ask them to perform some very menial task on the computer with a reward of our services?
So maybe your company would like image or video corpora tagged with words in a different language and background of a different culture? Those are becoming more of an asset. Or perhaps you want to boost a wiki in a particular language? Or perhaps you could offer premiums on translations and bother to attempt teach them a second language through cheap software? Ontology building services? Or treating each small region as a zone by population and blocking IPs until someone or some team completes rent-a-coder like challenges? Then you could host their name(s) on sites where people now have access as a kind of local hero style recognition? I mean, there are a number of things you could do with simple peer review that would keep a steady income of services which equate to time from these people. Some are more realistic than others. Who knows, you could inadvertently better their lives by doing some of the above?
Re:Time = Money, Right? (Score:4, Interesting)
How about a new model based on transparency!
You could have a infographic on the top of the website called the "bandwidth cost bar". Every day it starts at the top and slowly works its way down based on the amount of bandwidth the provider is able to pay for based on the revenue to the site for that day. If one clicks on it there will be a detailed breakdown of who they are paying for bandwidth, how much they are using and how much it costs and a top level summary of revenue and expenses.
The bar slowly gets used up until its completely used up for the day and then there are no more videos and all pages redirect to the same page explaining that all the bandwidth for the day has been used up and customers did not buy enough stuff so they had to shut down for the day.
Re:Let the users pay the bandwidth bills (Score:4, Interesting)
The obvious answer is to distribute videos and other bandwidth-heavy content through a peer-to-peer mechanism such as Bittorrent. Then the users themselves take care of providing your extra server capacity. I guess it just needs a Bittorrent client written in Flash (ugh), or else built into the browser, with the site's main server acting as the first seed for each file.
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. Based on my experiences in a couple of 3rd world countries, I'm pretty sure that 99.9% of these users are at internet cafes - they spend the local equivalent of a couple of quarters for a couple hours and then the next user gets on. Few torrents of any significant size are going to complete in that short of a space of time.
Why don't they target the whole world with ads? (Score:3, Interesting)
So what's preventing advertising companies to have global or localized ads, depending where the user lives?
I know Google does it, but all the other ads I see in Czech republic on the US pages are very local to America (companies/services I don't know).
Here in South America... (Score:4, Interesting)
PS: By the way, I haven't found an English translation for this, but we are not "poor people" but "personas en situaciÃn de pobreza". Hope you do get the difference there
The Long View (Score:3, Interesting)
Going way off on a tangent here, into a "solution" which probably isn't really practical, but which would be cool if it worked.
'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.'
Is there a subset of content which could increase the ability to derive revenue from those countries? If we selected a subset, it would reduce the cost to deliver it. If it was content that increased the ability to derive revenue, it would pay for itself in the long run.
But what am I talking about? Content that increases the ability to derive revenue through advertising? Well, basically, I'm thinking of some TED Talks that have extraordinary ideas for increasing sustainable economic growth in third world countries. What if these companies, who know how to deliver content, focused on content like "how to convert cow dung into fuel pellets", "sustainable yield agriculture in equatorial climates", or "scrap metal Stirling engines". Even if the viewers (those who have access to computers) didn't use the knowledge for themselves, they might develop a hacker ethic to help bring up the rural areas of their country. Increased productivity at the edges lifts the whole country.
For the target countries, it gives them something to watch instead of just building resentment. For the content companies, it is a very long-term approach to developing new markets of the future.
Just spitballing. Any thoughts?
Re:Let the users pay the bandwidth bills (Score:3, Interesting)
I live in a 3rd world country, and I'll tell you that internet cafes here mostly do not have the bandwidth for such. Most people do it from work. Most of us here are still on dial up or equivalent. Even at most companies/universities, you have to get in at off-peak ours to be able to watch youtube.
Even so, it is not uncommon for people in the towns to own (obsolete) computers (P3 era and up).
That being said, I'm not sure how typical the basket case of Africa is [wikipedia.org].
IT IS THE CREDIT CARDS STUPID!!!! (Score:5, Interesting)
I am sorry, but this is total BS. I have been developing web sites in Latin America (Mexico, Guatemala, Chile) for going on 10 years now. This might (MIGHT) apply to populations in Africa and some parts of Asia.Even there are people with money. If they have a computer, and sufficiently fast connection to watch things like U-tube, they have money.
This is the idiots fault for not doing their market research. There are trillions of dollars to be made in developing country because of demand for things that are not easy to find or limited selection. It is the advertisers fault for not being able to create mechanisms to deliver the goods and accept payment.
The problem is that what they are selling often requires a U.S. only credit card. Even people with credit cards, often have trouble buying things in the United States or Europe because they do not accept foreign cards.
Solve the payment problem, and the revenue is unlimited. There are often plenty of domestic web sites in developing countries making plenty of money.
As for advertising revenue, I have run many sites and know for a fact I can make many times the money for any given space on a popular site over what Google will pay me for it by selling to a domestic advertiser in a developing country.
The ignorance of that article is impressive.
leave them alone.. (Score:2, Interesting)
let it happen naturally. history shows forcing progress on people always results in some flavor of evil.
Re:BBC Videos (Score:2, Interesting)
Re:There is NO way for them to pay (Score:2, Interesting)
Why is the US like that? I notice that many web sites won't sell to Canada.
Re:Let the users pay the bandwidth bills (Score:2, Interesting)
I live in a 3rd world country, and I'll tell you that internet cafes here mostly do not have the bandwidth for such. Most people do it from work. Most of us here are still on dial up or equivalent. Even at most companies/universities, you have to get in at off-peak ours to be able to watch youtube.
Even so, it is not uncommon for people in the towns to own (obsolete) computers (P3 era and up).
I won't comment about the technology issues of delivering high bandwidth services on third world countires. Like it or not, such issues are slowly but steadily being overcome.
However, one of the main points in the summary (yeah, I did not read the article, so sue me[or flame me]) is the *profitability* issue that comes with advertising.
The problem is that as a high school mexican student, usually the ads you see when navigating through porn sites, facebook, hi5 or whatever page is "de moda", you usually see ads aimed at USA teens or at best aimed at a very general Mexican market.
What they (web advertising companies, like google) need is some kind of tiered ads marketing mechanism which allows people from specific cities or states (like say Tijuana, La Paz [BCS] or say Santiago [Chile]) to buy ad time in the internet.
This however should be done person to person, and as such, the ad company (like google) would need to have offices which receive the payments (and setup the ads) on each of the different cities close to the market.
It will also be possible to implement a more automated system to achieve this (using something akin to prepaid cards) in which the product owner buys some "ads-time card" at Elektra and then sets up his advertisement using the card.
I would be interested in performing such type of project (at least for Mexico, when the flu outbreak is over =oP) for a company like google, microsoft or others... If only they were listening
Re:Business or Charity? (Score:3, Interesting)
I think there is certainly some mileage in what you are saying but I think you missed one vital point regarding consumers in poorer nations at least: they don't have spare cash. For the most part almost all their money goes on buying essential goods, they don't have spare cash to buy the next gadget. From the advertisers point of view there is little point in directing adverts at them even if they were localized.
Of course this is a rather broad brush argument because there are rich people even in the poorest countries but I think the marketing people probably feel there aren't enough of them.
Re:IT IS THE CREDIT CARDS STUPID!!!! (Score:2, Interesting)
Out of curiosity, will you do business with Canada or the UK?
What (if any) problems have you had with credit cards from these two countries?