Are Mature Markets Poisoning Emerging Markets’ Tech Experience?

The other day, I was reading this fascinating and scary story of a woman in Kenya who thought she was carrying the HIV virus because an app told her so. The app was a hoax but she could not have known it as she had downloaded the app over Bluetooth from a friend and never got to read the reviews that warned about the scam. The BBC story was centered on a report funded and commissioned by the Bill & Melinda Foundation and developed by the Mozilla Foundation in close collaboration with Digital Divide Data.

The report offers a very interesting snapshot of what technology and smartphones mean in a country like Kenya. The good is how smartphones can help Kenyans, especially low-income earners, not to feel left out of society. The bad is online gambling becoming a larger issue. The ugly is what consumers in emerging market discover, especially when new to smartphones, is their experience is shaped by trends set by larger international organizations that control the ecosystem.

This last point made me think about how different the smartphone market is compared to the feature phone market and not just because the hardware is different.

Feature phones were More Customized than Smartphones

Going back to 2009/2010, emerging markets were the future of mobile as the overall mobile phone market was made up by dumb phones and manufacturers had a more focused portfolio for emerging markets. The race to control emerging markets was very much open, as Nokia fiercely defended its position in markets such as Africa, Latin America, and Asia.

What was unique about Nokia was that, even back then, their focus was on services as well as hardware. While lowering the price of feature phones, Nokia focused on lowering the requirements for data consumption, making some of their services such as music and maps available offline. Nokia also implemented a financing service for small businesses as well as a service focused on allowing users to send money called Nokia Pay.

These were the years when most of the hardware was not yet touch-based and was customized with keyboards that reflected the different languages. Applications were also pre-loaded to reflect local cultural preferences. Aside from possibly Latin America, which endured for years the hand-me-downs from the US, consumers in emerging markets were given devices that mostly reflected their needs.

These were also the years before local manufacturers, empowered by Android, started to make a dent in the market share of tier-one players and fragment the market in such a way that replicating what Nokia had became impossible due to the lack of economies of scale.

With the shift to smartphones and the pressure on margins, many vendors are prioritizing high growth markets such as China and India while trying to serve the rest of the emerging markets by leveraging what they have in the portfolio rather than customizing to the country’s needs.

Software: One Size Fits All

With the advent of smartphones, touch, and the shift to software, customization was no longer needed to be able to sell in a specific country. One phone model was shipping across more markets than ever before as most settings were delivered via software. Apps were no longer pre-installed but could be accessed through app stores that offered more international content than they did local. While software might overcome language barriers, it has less success overcoming cultural differences. Apps suitable in America or Europe might not be so in the Middle East or Africa where much of the female population is highly dependent on the men in their lives to grant them access to technology, for instance.

While the size of the emerging market population is still very appealing to hardware vendors, it is not always so compelling to developers and service providers. Tier-one developers and service providers might lack the cultural knowledge to customize and they might see the connectivity challenges and low-income barrier as issues that will always dampen their opportunity, making the investment less than worthwhile.

Many emerging markets are also mobile-only rather than mobile-first markets, making the relationship consumers have with technology quite unique. Many emerging market smartphone users have no measure of comparison for what the digital world can deliver, which makes them vulnerable to exploits. The case reported by the BBC is a very good example. Esther did not know her phone could not possibly diagnose whether she had HIV through the reading of her fingerprint on the screen. For all she knew, technology is that good.

Are Emerging Markets a Duty or an Opportunity?

Tech giants cannot ignore emerging markets in their path to world domination. Google tried through the Android One program to lower the price of smartphones in emerging markets so Android could continue to grow. However, the strength of local, combined with the little differentiation the program was giving to the devices, lead to a weak value proposition both for partners and customers alike. Plus, focusing on an online channel in markets that mainly sell via small mom and pop shops did not really help. Google also focused on improving connectivity by flying internet balloons — an endeavor that is taking much longer than first anticipated to become a reality.

Facebook started a couple of years ago with tweaking its user experience for emerging markets so the content the user was looking at was prioritized and loaded first over side stories which would not be loaded. It also launched an accelerator program to come up with ideas that make advertising rewards relevant to local users.

Finally, Facebook also focused on connectivity first with Free Basics. Users do not pay for using Facebook and other apps but some governments, like India, found it too limited. More recently, Facebook launched Express Wi-Fi in India, as a renewed attempt to offer connectivity at minimum cost by the deployment of public Wi-Fi.

The hurdles both companies have faced, however, underline the challenges of looking at emerging markets from the comfort of Silicon Valley. International telcos with interests in emerging markets such as Telenor, Megafon, and Vimpelcom (now Veon) are also trying to get a slice of the pie and they might just have the advantage of having a ton of data on the very consumers they want to serve.

The Win-Win when Tech Improves Life in Emerging Markets

Rather than focusing on lowering costs or lowering services requirements so consumers in emerging markets can afford to buy devices and subscribe to services, tech companies should focus on improving life in emerging markets. Technology should be used to improve education, eradicate diseases, improve housing and transportation and ultimately create more wealth and empower people to become a potential customer for Amazon, Google or Facebook. While the final goal might be the same and generate market growth, I would very much argue the means to an end would be much more rewarding for emerging markets.

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Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

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