US tech woos developing world
But WhatsApp and Google face challenges in growing globally
● The van pulled up in a dusty lane in Jaipur, India, and five men wearing green WhatsApp T-shirts jumped out. Before a gathering crowd, they launched into a short play designed to teach people how to recognise and reject fake news — one of many such skits performed across the country.
It was a testament to how anxious WhatsApp and its parent company, Facebook, are to defend their business in India after a series of lynchings inspired by false rumours spread using their app. But it was also a sign of how intensely Silicon Valley is now pinning its hopes on the developing world.
Take Mark Zuckerberg’s declaration last week that he wants to shift Facebook towards private messaging — by far the dominant form of social media in poorer nations.
In a conference call with investors, he said most future growth would come from “developing countries”, and emphasised his investments in Messenger, WhatsApp and their mobile payments systems.
At Snapchat, too, CEO Evan Spiegel tried to reassure analysts that he could reverse his app’s shrinking numbers by expanding into the global South where populations “skew young”. Amazon has built four distribution centres in Mexico and spent more than £5bn (R92bn) to expand into India.
Tim Cook, Apple’s CEO, has gone to great lengths to protect its privileged position in China, agreeing to store the keys which unlock Chinese users’ iCloud accounts on Chinese servers.
Google has provoked fury by secretly designing a Chinese search engine that would share data with authorities, eight years after quitting the country for ethical reasons. Meanwhile, it is vying with Facebook to bring internet access to rural Africa.
What lies behind this scramble? While different tech giants have different reasons, they are all subject to one basic fact of corporate life. Their valuations are based on their ability to keep growing.
According to Matti Littunen of Enders Analysis, these companies are trapped in a vice between their users and their real customers — advertisers.
It’s no secret that Facebook’s audience has reached saturation in North America and is declining in Europe.
But Facebook has also reached the limit of how many adverts it can show its customers without alienating them completely.
Escaping this trap will be no walk in the
They just are not serious enough about getting to know these markets Matti Littunen Enders Analysis
park. Users in the developing world are much harder to monetise because they simply don’t have enough money.
Then there is the problem of access. Even where infrastructure exists, the relative cost of data is often prohibitively high.
Relative to income, some Africans pay the equivalent of £200 (R3,680)for a single gigabyte of data. That gives low-bandwidth apps a big structural advantage over others.
Some tech firms have aimed to fix this through cutting deals with local phone companies to exempt their apps from data limits. Facebook’s Free Basics programme gives users free access to a narrow selection of apps in around 60 countries. But that has faced opposition from activists who accuse it of a kind of “digital colonialism”.
Elsewhere, tech giants are the target of protectionist curbs. “There are some countries that still treat the sector as a luxury, like tobacco,” says Boutheina Guermazi, director of digital development at the World Bank.
“There is taxation on incoming traffic, taxation on handsets, taxation on data.”
China, happy for Apple to create domestic manufacturing jobs, has no reason to let Facebook and Google compete with homegrown titans such as Alibaba, Tencent and Baidu.
This, Littunen argues, points to Silicon Valley’s greatest hurdle. “The fundamental problem is they just are not serious enough about getting to know these markets,” he says.
The services they sell are completely formed by living in America. Google’s mobile payments system, for instance, requires a bank account, something 2-billion people do not have.
It is a long, hard road ahead for California’s would-be colonists. Perhaps their biggest challenge is to come to terms with, and adapt to, a “rest of world” that doesn’t always need what they’re selling.
Sunday Telegraph, London