Mike Abundo plurked a very interesting article from the New York Times website. The gist of the article is that global web companies are thinking of restricting access or lowering service standards for people who access their websites in developing countries. The problem is that the cost of operating and delivering the services is not at par with the advertising that they get for these particular regions (low income bracket doesn’t interest major advertisers). In short – they’re not profitable and they need to cut down costs to increase their profit margins. Is there really a chance for Facebook to have low quality pictures and videos in the Philippines? Or for Youtube to have slower loading time? Is there a chance that they might even restrict access?
Only Time will Tell
At the end of the day, the decision is with the people in the boardroom. If the costs are really too much to handle, then they will really take measures to make sure that they deliver their numbers. In fact, some of the companies have already started making changes. Here are some examples and quotes from the NYT article.
Veoh blocks access from several countries:
Last year, Veoh, a video-sharing site operated from San Diego, decided to block its service from users in Africa, Asia, Latin America and Eastern Europe, citing the dim prospects of making money and the high cost of delivering video there.
“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.”
MySpace has already started with Profile Lite:
MySpace — the News Corporation’s social network with 130 million members, about 45 percent of them overseas — is testing a feature for countries with slower Internet connections called Profile Lite. It is a stripped-down version of the site that is less expensive to display because it requires less bandwidth.
MySpace says it may make Profile Lite the primary version for its members in India, where it has 760,000 users, although people there could click on a link to switch to the richer version of the site.
Youtube to give slower loading time and lower-quality videos:
But Mr. Pickett also says that YouTube has slowed the creation of new international hubs and shifted its focus to making money. He says that does not rule out restricting bandwidth in certain countries as a way to control costs — essentially making YouTube a slower, lower-quality viewing experience in the developing world.
Facebook might do quality control with their services and web features:
“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.
Potential Solution: Do a Friendster?
The global marketing and sales trend is to go niche. Try to satisfy individual groups instead of trying to offer something to everyone. Friendster decided to do this when they finally set up office here in the Philippines. Seeing as 50% of their traffic comes from here, they localized and partnered with local agencies. The result? The companies based in the Philippines have been scrambling to come up with online campaigns with Friendster.
A possible solution for this dilemma is to identify possible growth areas and to set-up a local team that will be in charge of growing the business in that particular region. If they can’t expand, then they can also explore the possibility of partnering with a local agency to be their reseller.
Hi Carlo,
Not sure if you’re on multiply but they do already have this option of upgrading for I think P99 a month. The upgrade has to do with the storage of high-res pictures since they only retain the low-res versions after a few weeks.
Hi Marissa,
Yup, I saw that already!
Multiply has no shortage of ad revenues here in the Philippines. They have ABS-CBN as their partner re-seller. All ABS has to do is to bundle the online ad spaces with their TV spots, lol. That, combined with the premium service might give Multiply decent cash flow.
Personally though I don’t find the premium service too attractive. o_O; They should include more features in it.
Heya Carlo, this is already being done, with so many services being blocked locally either because of licensing issues or because we’re just not that important. No Hulu or Pandora for the Philippines (or even outside the USA for that matter). Even Xbox Live access is limited — the Philippines wasn’t even a country field in their registration process when I signed up.
I disagree though that the solution is to do a Friendster. It strikes me that Friendster’s only move was to embrace Southeast Asia, having long since been edged out by MySpace and Facebook (and others) in the USA as the dominant social network. They had their window in the US and that passed a long time ago so it’s now time to look elsewhere.
To a lesser extent, Multiply is in the same situation — I’m sure it was not their founders’ intention to make the Philippines their priority market when they put it up in the US in the early 2000s.
For many groups, like Facebook, or the bandwidth-intensive media sharing communties, or even new Silicon Valley tech startups, the size of their emerging market user base is still very small, and they still have the chance to focus their services on the markets that matter. And the Philippines right now is simply not a priority market for these groups.
Which brings us to the bigger question: Why aren’t we a priority market, and who or what can do something about it?
Hi Mikoid!
Love the insights bro. However, I still believe that what Friendster and Multiply is doing is a good strategy. I have no insider information, but if I were in their position, I would play my cards like this:
1. Build up where I’m strong. Monetize communities where I’m already present.
2. Use the cash generated from the smaller markets to try to launch new campaigns in other parts of the world. If Friendster is no longer relevant, then consider making and selling new products
If they go after markets without capitalizing first on their strongholds, they’ll just dry up (unless they come up with a new killer app).
As for the Philippines not being a priority market, that’s economy in play. Unless the climate here improves and the spending capacity of the population increases, then we won’t be considered high priority for global major advertisers (thus the localized sales force to reach companies who are willing to spend).