Click here to subscribe to The Economist on YouTube: https://econ.st/2xvTKdy
L.O. Two simple letters that marked one of the biggest changes in human history. In 1969 programmers were trying to type “login”.
50 years later and half the world is now online. But that half is primarily from the rich world. How will the second half of humanity coming online change the internet and how will the internet change them?
India’s internet penetration was pretty low until very recently with the launch of a new mobile network called Reliance Jio, with incredibly cheap phones and incredibly cheap data prices. Reliance Jio launched aggressively in 2016 offering subsidised handsets and free data to hook people in. India went from being a relatively expensive place to consume data to being the cheapest in the world. Prices crashed by 94%
Newer users in the developing world are browsing the internet in much the same way as people in the developed world.
When people get online the first thing they do is they chat with their friends, they watch sports, they watch movies, they watch music videos. They watch an extremely large amount of pornography.
But this is where the similarities end. The internet was built on the assumptions that many users speak English are literate and are media-savvy. None of those things remain true for the second half of the internet. You have a whole bunch of languages that don’t enjoy very good support in terms of web browsers or input. And you have a whole bunch of people who can’t actually read or write.
There’s practically no usage of desktop computers, laptop computers. It’s almost entirely on mobile phones and these mobile phones tend not to be the expensive, very powerful ones. They have limited amounts of storage.
This is prompting big tech companies to change the way their products work
They’re having to understand these new behaviours. They’re having to fundamentally rethink how they supply their services. For much of the world that is now coming online, text is not the natural way to interact. It’s smaller apps that can do more and that can be used with voice or video rather than text.
Many tech giants have already begun to establish themselves in emerging markets. Facebook has over 1.5bn users in developing countries and the YouTube channel with the most subscribers is a Bollywood studio and record label.
Creating large user bases is one thing making money from them is another.
The prevailing assumption around making money on the internet until this point has been a largely American assumption of advertising. 99% of Facebook’s revenue comes from advertising as does 85% of Google’s. But many people in the developing world are poor. So users don’t have the same value to advertisers.
Take Facebook’s last quarter of 2018. They make 12 times as much money per user in North America than they do in Asia. And overall annual revenue from the developing world is much lower too. Google for instance, about 46% of their revenues comes from the US alone and only about 15% from Asia. That 15% includes rich countries like Australia and Japan.
Take those away and the revenue from Asia would be even lower.
If the traditional advertising model isn’t going to work tech companies will have to think outside the box.
What people will pay for is the opportunity to express themselves? Until the advent of smartphones really, a big money-spinner for Indian mobile networks was something called a caller-ringback tone. I would pick a song that I like very much and if you were calling me you would hear it, and I pay a monthly fee for that to happen. Now think about exactly what this is. I am paying money for a song I will never listen to, only so that my friends who are calling me can hear it because I want to express myself.
So it’ll be lots of novel ideas like that for very, very small amounts of money but we’re talking about lots and lots of people doing these things.
One thing is for sure the internet’s second revolution will change people’s lives for the better.
The ability of people around the world to have a good time is becoming a little bit more equal. And that, while hard to pin down in economic data is a net benefit to just the general well-being of humankind, which can be very easy to understate or to ignore, especially if you’re used to those things but has a really meaningful impact.