This post consists of my “value-added” thoughts on David Kirkpatrick’s article on Fortune here.
Since I love all things technology and passionately believe that it wields the power to change the world, these numbers are just plain interesting to me. I’ve overlayed on the data some general technology trends on Web 2.0 startups, venture capital, microfinance and poverty, all cleverly slapped into one big fat blog post. Why? Because they’re all inter-connected, and I haven’t written anything all this week (been so darn busy lately!) Off we go.
Indonesia:
- 1 in 100 owns a PC
- 1 in 1,000 has broadband Internet
- 63 million cell phone subscribers, representing 27% of the population (of 234 million)
- Annual cell phone subscription growth rate: 36%
India:
- 166 million cell phone users
- Last year’s cell phone subscription growth rate was 84.5%
Switzerland:
- The Swiss have 85.1 PCs per 100 persons, beating the United States at 80.3 PCs per 100 persons
Global PC penetration is 12.9 for every 100 people. Room for growth? You bet. Many of PC owners are obviously in well developed countries, and not poor countries with lots of people. OLPC’s efforts to reach the billions at the BoP will move the needle here, if they succeed. Not forgetting the “middle” market, more of those who are neither rich nor poor will also buy computers and get on the internet. (Better start loading up on some PC stocks!) But wait, am I sure that the middle-class is not going to get poorer and not buy computers? Well the stats from Hans Rosling’s TED talk show that the overall trend here is that the world is slowly digging itself out of poverty, and I take comfort in that. Actually, read on below as I describe another trend that supports that.
Now, for some cell phone stats:
United States:
- 77.4 subscribers per 100 people
- Everywhere in Europe (except Turkey) exceeds penetration in US. Italy is at a whopping 135.1 cellphone subscribers per 100 persons.
- Hong Kong beats the US in penetration too, at 135.3
The global average is 41.6 per 100 people.
Cellphone usage growth in fast growing markets last year*:
- Peru: 57%
- Vietnam: 114%
- Pakistan: 170%
- Ukraine: 185%
*numbers might be fuzzy, but they show a general trend
What’s also important to note about this upward trend in adoption is that mobile phones were the crucial piece that first enabled the poor in Bangladesh to get out of poverty (see section on Village Phone). Women built business models around it and turned it into a source of income. These days, mobile phones are also playing another role in microfinance: enabling the transfer of money and information over, well, mobile phones! In poor countries, a brick-and-mortar bank branches with ATMs are hard to come by (ditto for computers and broadband), so mobile phones are serving this unmet need, facilitating microfinance and thus helping reduce poverty.
Other interesting stats:
- 1.3 billion of global population connected to the Internet, compound annual growth of 20.3% for past 8 years.
- Internet ad spending of $40 billion is only 6.6% of global total of $605 billion and is growing at 33%. (Ha, I should double down on this little company while I can!)
Data from 2008 Global Internet Snapshot compiled by Imran Khan, senior analyst at JP Morgan. (hmm, can anyone get me access to that full report?)
That’s why medium and big tech companies can weather the unfavorable US economy trend by going abroad. Fruit trees in your backyard not yielding? Then go after the greener pastures outside of your backyard too. It’s called diversifying. That’s the other thing I love about software is that it’s not a physical object–a computer scientist can create value with merely a laptop (and some coffee!) The cost of making that first software copy is the most expensive, then every other subsequent copy ad infinitum is basically free. This is just the nature of information economics, and has obviously served Microsoft very well. Actually, tiny tech startups can do this too — by leveraging the distribution power of this thing they call the internets.
And that’s why Web 2.0 is really leveling the playing field between tiny tech startups vs. the big traditional conglomerates, and having the slow-moving incumbents throw a hissy-fit like a spoiled rich kid, resorting to cheap tactics to get even. We truly see the power of the Internet as an equalizer here–in terms that clearly translate to cold hard cash (I mean, come on, Hasbro wouldn’t be bothered by Scrabulous if there was no money involved–I’m sure they have better things to do like, say, eating more pies)
Web 2.0 startups should still be focused on creating value and getting down to the basics of actually building a sustainable business that makes money. Trite, I know, but obvious and still missed by many. VentureWire wrote on March 18, 2008 that while venture funding continues to flood into these startups, investors caution that the frenzy may have reached its peak. VCs poured $1.34 billion into these startups that mostly make money from well, advertising (who doesn’t know someone who just hopes to throw up a website and sprinkle some Google Ads on it?) Year-over-year growth in the number of deals slowed down to 25% (slowdown in growth, but still growing–growth from 2002-2006 almost doubled every year).
The general sentiment gathered by VentureWire from VCs is that there are still many quality Web startups, but they are getting cautious and pulling back a little, citing concerns over an oversaturated market, lofty valuations, and the general economic downturn in the US–which will affect online ad-spending, which most of these startups derive revenue from. I mean, srs ly, we don’t need another bubble, k thx! (referring to the actual tech bubble and that over-hyped video that now really annoys me when someone sends me that)
Speaking of changing the world, Web 2.0 startups and making bags of cash for investors–I really wonder to myself if we will see a trend of Web 2.0 startups focused on the Bottom Of the Pyramid. C. K. Prahalad, a renowned econ professor and global business consultant posits that, well actually, he proves by citing examples in his book that for-profit companies can actually make a lucrative profit by catering to the needs of the poor, contrary to popular misconception.
Writing this blog post has then really got me wondering. When will we start seeing Web 2.0 startups that cater to the BoP, and what are their challenges? Kiva is definitely a Web 2.0 startup that caters to the BoP, but I don’t know if it meets all the criterias of Prahalad’s a socially-responsible and money-making venture as described in his book — namely, they are not exactly making a million dollars for investors. But that’s because they are non-profit and they’re not a public company that must bow to the pressure of Wall Street every 3 months.
My question then is, when will we see a Web 2.0 for-profit that can make wads of cash while changing the world, improving the quality of life as their primary business model. I mean that the way they change the world and make money is through the same instrument and not two distinct ones–I believe this is the key point in Prahalad’s BoP. To contrast, Google makes their bank from search advertising. Then Google.org, their philanthropic arm gets a fraction of that profit and uses those to change the world and make it a better place. The way they make money is NOT the same as they way they change the world. There’s plenty of other examples like this, where you make money from one way, and then do good another way. Is it possible to combine the two?
I think David Kirkpatrick concludes well when he says, “We are entering a world of common communication and awareness. Undeniable benefits will continue to accrue to the technology suppliers. But even beyond that, there will almost certainly be a significant positive macroeconomic impact from bringing so many new people into the global economic system.”
Now that, is music to any technology entrepreneur’s ears — change the world (and get rich) or die tryin!
Tags: web 2.0