Web 2.0 Services Shutting Out Developing Countries

In a particularly infuriating Article, the NewYorkTimes sites developing countries as the toughest places to monetize web traffic for web services like YouTube, Facebook and MySpace. The article makes the argument that countries in South America, parts of Asia and Africa, are particularly hard to monetize due to the increased costs of serving rich media (like video and flash advertisements) to low bandwidth regions of the world. There’s also the factor of Advertising to low-income (by comparison) foreign markets who, even if they were interested in the products being pushed to them, probably couldn’t by them due to lack of expendable income.

“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.”

Internet start-ups that came of age during the Web 2.0 era, roughly from 2004 to the beginning of the recession at the end of 2007, generally subscribed to a widely accepted blueprint: build huge global audiences with a free service, and let advertising pay the bills.

But many of them ran smack into global economic reality. There may be 1.6 billion people in the world with Internet access, but fewer than half of them have incomes high enough to interest major advertisers.

…

“We can decide, either on a country by country or user by user basis, to engineer the quality of the service for that cohort of users,” said Jonathan Heiliger, the executive who oversees Facebook’s computing infrastructure.

The article never goes on to make the very valid, and totally logical observation that these companies simply don’t know how to monetize these markets because they don’t understand the complexities involved. Bandwidth is probably the least of hurdles to overcome, the bigger issue is to understand who the major companies of the market are, how they reach consumers and to determine if they can reach their consumers through the web. If not then, yes, they probably aren’t right for the market and if they exit then it creates a huge opportunity for local entrepreneurs to innovate. Especially when services like MySpace are considering offering scaled back or ‘light’ offerings for developing countries. For instance, the absence of Hulu in Africa offers a huge opportunity to broker deals to offer content via the web here in it’s stead, if that were your motive (you’ll have to ask Jason Elk how that’s working out for him =).

Ben White of ict4entrepreneurship.com writes in his article “YouTube ‘burden’ creates opportunity in Africa“…

Why are people in less developed countries expected to use ‘watered down’ versions of what is used elsewhere? This is like Microsoft thinking they can give simplified versions of their programs to developers here and then expect them not to find their own solution. This is backward thinking and it opens up a whole new field of opportunity. Services like YouTube and Facebook are distracted by there primary markets. They don’t have the time, the resources, the know how or the local context needed to figure out what works in a country like Uganda. This creates new opportunities for local entrepreneurs with bright ideas. People who can appreciate local circumstances and innovate the business models that make the difference.

This is good for two reasons. Why should the Twitter’s and Facebook’s of the world dominate the whole planet? At the end of the day, their American companies that innovate for similar markets. Meanwhile services like MXit and Zoopy are innovating for countries that fall under the radar of most web services. They’ve found a way to succeed where their first world counterparts either can’t or don’t care to. This isn’t a disadvantage, it’s a huge ADVANTAGE if you look at the opportunity to tap a completely untapped market and monetize people who are often marked as a blue variable on someones spreadsheet.

Read the full NYT Article here.