Why 5 billion people will never use your app

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)
Operating System

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:

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.