Living in the Silicon Valley it is easy to focus on mobile products that target folks who are relatively price insensitive (well, when compared to the rest of the world). However, for every mobile phone sold in the developed world, four are sold in developing countries. Of the more than six billion mobile phones in the world, more than five billion are in developing countries, mostly in Asia and sub-Saharan Africa. Within the next decade, virtually every phone sold will be connected to the Internet and run third party apps, which means companies that understand the differences in the global mobile ecosystem are going to create & capture massive value.
There are stark differences between the ecosystems in developed and developing markets to discuss. To be successful, app developers need to understand those differences if they want to be successful in developing markets. In both markets, the mobile ecosystem layers can be simplified & represented like this:
|Apps (client & cloud)|
Some players vertically integrate multiple layers (notably Apple & Amazon) or are trying to integrate multiple layers (Samsung & Google). But for the most part companies tend to be specialists in one of the layers of the ecosystem.
Once Apple popularized the mobile app store, app developers gained a lot of leverage, as they could now directly acquire users without intermediaries. So in developed countries, the mobile ecosystem revolves around the OS providers and app developers. However, because the carriers in developed countries provide device subsidies and essentially extend 30 days credit to the end user, they have outsized influence which has kept the OS providers relatively in check and sets up app developers to capture the largest share of value over time.
In the developing world, for the foreseeable future, the ecosystem revolves around price-conscious users who buy an unsubsidized phone directly from an OEM retail partner and hop between the cheapest pre-paid plans, with no loyalty to carriers (or even their mobile numbers). So the carriers have largely been forced to compete on price and the OS providers became subservient to the OEMs in order to get to market given they are key channel. Thus the OEMs, who compete via differentiated hardware features & physical availability, have outsized influence and power. I think this is one of the reasons Nokia was able to dominate for so long.
App developers hoping to expand into the developing world have no choice but to adapt to these different dynamics. Apps developed for high performance smartphones and always-on high-speed Internet connections will struggle at best. And while strategies like Facebook for Every Phone are important for large incumbents I think building great experiences for low end Android devices the critical priority for fast growing startups that are resource constrained. Here are some of the ways apps have to be different to succeed in the developing world:
- Distribution & engagement: Preloading, even with a tax of exclusivity or device specific features, is a much more valuable tactic. Similarly, SMS becomes more important than email or social network based channels. Finally, think about how to handle users that only have phone numbers.
- Low-bandwidth & poor networks: Strip your first-world app of extra features and frequent data updates. Make it resilient to lost connections and long latencies. Think about server to client compression and efficient file formats. Work on ways to gracefully degrade your application & enable offline use for key scenarios.
- Battery usage: Likewise, start to think about your battery budget as apps that drain battery power are also going to be unpopular. How much processing and how often you spin up any radios matters. We take 24-hour electrical service for granted in the U.S. and Western Europe but many people don’t have full time power, and plugging in isn’t always possible for the user.
Don’t get me wrong: Developed countries still constitute a very large market for apps. Developers can continue to work on innovative and feature-rich apps that leverage the smartphone ecosystem in those countries. But mobile players hoping to break out in a global market absolutely must take into account these stark differences between the developed and developing world, or they will be frustrated and disappointed by the unsatisfactory response to their products.
Well said bubba; keeping dropping the knowledge.
Good post, shared this on Twitter earlier, but though I leave a comment too. I think battery problem isn’t going away any time soon as we are faster at inventing new ways to consume battery than ways to preserve it. The problem should be attacked from all the angles:
1. making batteries that last longer. This is hard and limited by laws of physics.
2. making software and hardware that consumes less battery. This is also non-trivial, but a lot of opportunities here.
3. making it easier for people to charge – and remember to charge – the battery.
I think number 3 has a lot of potential and there has been surprisingly little innovation in that area from OS manufacturers.
This is a great post and am pleased to see that this is getting some thought in the US. I’ve spent my career working in emerging markets, over 12 countries in the last 12 years, you’ve covered a lot of important issues and I think we should give some thought to others as well.
Battery is a big issue for sure, but maybe we should find a way to avoid battery all together and use solar/wind power, some people have to walk miles to get a phone charged with the motor of a car… in the sun.
Also, the OEM is not really the king, it’s the retailer since that’s the one who can influence the purchase at the point of sale. And since we’re talking about OEM’s, please remember that the large OEMs have big overhead costs to cover and as such, their phones cannot be so cheap. So consider new comers, especially in China and Korea, who are developing Android-based mobiles with scrapped-down versions that can come sub-100 USD.
As you pointed out, the operator has little options to prevent churn. In fact, it’s normal for people to carry several SIM cards for multiple operators and then switch between them depending on which one offers the best rate at the moment. Furthermore, since more than 80% of the consumer base tends to be pre-paid, they can stop using their SIM anytime. So when you’re going to roll-out your app, make sure it’s supported by all the operators in that country, not just one.
Another thought to consider is: the rest of the world is not a single entity. Just as you would get offended if somebody called you Canadian or Mexican, so Nigerians are if you call them Kenyans or a Thai if you call him/her Phillippino. As such, study the country you’re aiming at, empathize with the consumer’s way of life and needs, understand them as well as you can because believe me, they are not you. They are human beings, yes, and they do have the same needs you do (e.g.: food, roof, security, health, communication, education, entertainment, etc.) but the way to fulfill them is radically different than the way you fulfill yours. Imagine you need to call emergency services but you cannot afford to make a call, how do you get help? How do you use a phone/ app if you can’t even read? In short, make sure the app you’re creating is relevant for THEM.
The final point is the money. In some places like Brazil, Russia or Mexico, you’ll have no trouble finding some clients who can pay 10-20 USD for your apps, but they won’t be so many and you’ll struggle finding them in Southeast/ Central Asia and Africa. So if you want to get scale, think of alternative business models, other than just pay for download, how about pay for use? Some operators in Sub-Saharan Africa provide 3G charging per MB or per time with really low tariffs to make it affordable.
The venture capital model should also be revised for these markets, the time for return should be longer since the value will be in the mass use.
I’ve to say it was refreshing to see this post. I spent years in Middle East/ Africa/ Central Asia, Eastern Europe and Latin America listening to industry giants (OEM’s, OS’s, operators, etc.) complaining that 3G/ 4G is taking too long to take off because there are no apps for them to use… why don’t you take a chance? Anyway, just some thoughts for whoever is interested in this topic ☺