Facebook understands what drives people to use data

Posted on July 22, 2013  /  0 Comments

Facebook is about to announce the results of a major initiative to make its services accessible to those at the bottom of the pyramid who do not yet use smartphones.

More than 100 million people, or roughly one out of eight of its mobile users worldwide, now regularly access the social network from more than 3,000 different models of feature phones, some costing as little as $20.

Many of those users, who rank among the world’s poorest people, pay little or nothing to download their Facebook news feeds and photos, with the data usage subsidized by phone carriers and manufacturers.

We saw this phenomenon back in 2011 when our researchers were in the field in Indonesia and heard them say they use Facebook, but not the Internet. I have also discussed the possible rationale for serving low-income users who may not be generating revenue at this time.

The immediate prospects of making money from feature phone users are modest. During the first quarter of this year, Facebook got only 24 percent of its $1.5 billion in revenue from outside of the United States, Canada and Europe. It is just beginning to ramp up its mobile advertising revenue, which was 30 percent of its overall global ad revenue in the first quarter. Those mobile ads are not as profitable as desktop ads, whose growth is flat.

The company will report its second-quarter earnings on Wednesday, but analysts expect that developed markets will be the biggest source of Facebook’s revenue and profit for a long time.

Still, there is a longer-term business opportunity, for both Facebook and its phone industry partners, as mobile usage grows in Asia, Latin America and Africa.

Facebook has struck promotional deals with phone makers like Nokia, which in May announced a $99 feature phone called the Asha 501 that includes free Facebook access for customers of certain carriers, including Bharti Airtel, which serves India and much of Africa.

The social network gets legions of new users from such deals, and the carriers and phone manufacturers hope that once customers get a taste of the Internet through Facebook, they will be willing to pay for more data access and better phones.

“It drives people to use data,” Mr. Makavy said.

Does this not highlight the short-sightedness of ETNO’s arguments?

The report.

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