It’s not surprising
that we have turned our attention to emerging markets and their
potential opportunities in terms of communications. Brazil, Russia,
India and China (the top four emerging markets, also known as BRICs)
combined are home to over 40 percent of the world's population. They
are also the epicenter of an emerging global middle class that will
reach over 1 billion people by 2015. More than 1.7 billion mobile phone
subscribers will live in these four countries by 2012, and at least 680
million will have access to the mobile Internet. The rate of mobile
Internet use in these markets is similar to or exceeds the rates seen
in the U.S. and Western Europe.
If the future of the Internet is
the mobile Internet, then the future of social networking is on mobile.
Brazil (not the U.S.) already has the highest percentage of Internet
users participating in social networks worldwide. Recent data from
comScore's World Metrix audience measurement service indicated that
Russia and Brazil had by far the most engaged social networking
audiences in the world, followed by Canada and Puerto Rico (the UK and
the U.S. reached seventh and ninth place, respectively).
Some
skeptics may claim that we are still talking about countries with lower
ARPU and extremely high levels of prepaid mobile service (generally,
over 75 percent of the entire mobile subscriber base). If prepaid
phones and SIM cards have been a key reason mobile subscriber levels
have been increasing so fast in emerging economies, the next barrier to
global mobile access will depend on the cost of a handset. But we are
already there. Prices of basic handsets fell from around $250 in 1997
to around $20 today (Source: The Economist).
Prepaid Anything, Anytime, Anywhere,
Prepaid mobile subscription plans have been fueling the growth of the
mobile services segment in emerging markets, but for some reason,
prepaid is associated with less maturity. And the assumption is that
this perception will go away once these markets become more mature. I
have a different view. I think we are moving towards a more prepaid
scenario, even in more mature communications markets and even after the
current economic scenario ceases.
We
usually tend to think that as they continue to grow, communications in
emerging markets should follow the same (or very similar) type of path
experienced in more mature markets. But what if the opposite happens?
According
to IDC, during the first part of 2009, the top 10 carriers in the
United States added just under 3.5 million retail net subscribers. Out
of these, 75 percent were prepaid users.
Prepaid subscribers make up 19.2 percent of the subscribers for the top
10 carriers in the U.S. Yes, we are going through tough economic times
and this may explain the increase in prepaid, but this trend is here to
stay and here’s why.
The customer is king, and the new
generation of customers has a more “prepaid mindset” – less committed,
pay-per-use, leave whenever I want to go after the next big thing.
Things started to change with Generation X (people born between 1965
and 1976), a group of consumers that likes to try new products, views
high-tech products as accessories and responds to customized marketing
and advertising efforts. Generation Y (people born between 1977 and
1994) have lived in a media-saturated world. After Generations X and Y
comes Generation Z (as Bill Gates would call them, Generation I),
which refers to children born after 1994 and the first generation to
grow up with the Internet. They are highly connected, digital natives
and the most globally exposed generation.
The age group born between 1994 and 2000 represents nearly 18 percent
of the world’s total population. For this generation, computers and the
Internet are commonplace. They are used to instant action,
gratification and results. Their social networking is mainly through
online communities, and they can build huge communities using the
Internet without knowing anyone personally.
Whether
you’re from Generation X, Y or Z, one thing that’s for sure is we are
all being affected by the “connected economy” that is shaping up.
Inevitably we’ll all be increasingly connected, which will affect our
consumption patterns. That is why I think that a predominant “prepaid”
scenario is more likely than ever and not just in emerging markets.
Despite what we’ve seen in the past, more prepaid may be more
challenging for communications service providers (they may not be able
to keep two-year contracts with customers and churning from one
provider to another will be easier).
On the contrary, “prepaid”
doesn’t mean less opportunity. For example, it opens up the doors to
more options to sponsor mobile products and services, which means an
explosion of additional revenue for communications service providers
that are not necessarily coming from a customer’s monthly bill.
Clearly,
in this scenario, there’s a greater need for more operational
flexibility, efficiency and adaptability than ever before. We are in
great need for a new business model that can support such substantial
transformation. Communications service providers from the U.S., Western
Europe and some developed countries in Asia may have a lot to learn
about surviving in a prepaid/low ARPU type of scenario. Furthermore,
their new competition may well come from emerging markets and not
necessarily from a co-national communications service provider (it’s
already happening anyway). But with every challenge, comes an
opportunity.