What does the acquisition of Viber & WhatsApp mean for technology in the developed world?
The acquisition this week of Viber by Rakuten for $900 million and WhatsApp $16 billion acquisition by Facebook signals that in the next 10 years, the population in developing countries will dictate the direction of technology in the developed economies.
Even though facebook’s footprint is now just over 1 billion people, it is still just a fraction of the world’s population. In addition developed countries are having a rapidly growing baby boomer population with lower rates of adoption of technology. In contrast, developing countries have a large growing youth population with faster rates of adoption of technology. The world’s population exceeded 7 billion on March 12th, 2012.
This growing young population is also fueled by a mobile first approach. Developing countries don’t have an established based of copper and other hard wire landline infrastructure to maintain. This means that operators don’t have a large debt load and some have bypassed the entire landline business model directly into mobile first. It means that any solution that is being created will have a focus on mobile and not so much on the web-facing model. USA’s smartphone penetration is 74%, Africa’s mobile phone penetration is 80%, Latin America’s mobile phone penetration is over 100%. While comparing smartphone penetration in America vs any type of phone in the rest of the world may seem like comparing apples and oranges, the fact that in America most apps only target smartphones means that there is a large subset of people being left out of this mobile revolution.
Real World Use Cases
It is becoming increasingly difficult for companies in Silicon Valley to think outside of the box when it comes to compelling use cases that doesn’t involve e-commerce, advertising and marketing. That works well for developed countries where a large part of the population does not lie in the bottom of Maslow’s hierarchy (food, clothing, shelter) and disposable income exists to varying extents. With China’s growing middle class, one-third of African countries having a GDP of over 6%, India’s GDP growth of 5.6% (part of the BRIC), the majority of the world’s population is focused on using mobile technology to solve everyday problems. M-PESA, developed in Kenya is the world’s leading mobile payment system. Increasingly developers are creating apps for the developing world such as Feykena but software investors are still shy, preferring to invest in pet-sitting apps than m-commerce using SMS for a much larger demographic.
A list of the Top 12 fastest growing economies does not include and developed country. The implication is that the potential for the largest return on investment lies in the developing world. Investments on the continent produced annualized returns of 11.2 percent for the 10-year period ending Sept. 30, 2012, according to a study by AVCA and Cambridge Associates. That return was better than U.S. venture capital investments and roughly in line with emerging markets private equity and venture capital indexes over the same period. According to PwC, the global financial crisis has hit the traditional G7 much harder than the E7 growth economies in the short term. Emerging economies – such as Nigeria, Vietnam, India, Indonesia, Malaysia, China, Saudi Arabia and South Africa – are set to grow much faster than the G7 (France, Germany, Italy, Japan, the UK, the US and Canada) over the next four decades.
Messaging as a Mobile Platform
China’s WeChat app currently has 270 million monthly active users compared to WhatsApp 300 million. WeChat is actively trying to penetrate the US market and is now rolling out payments services over the platform. Japan’s LINE currently has 300 million users (different from active users). Line has been making inroads not only in Japan, but also in Taiwan, Thailand, and Indonesia, and is fast picking up users in Europe and Latin America. South Korea’s Kakao Talk, which was launched in 2010, has 133 million registered users. Like many of its Asia rivals, Kakao Talk is free to download and has branched out into games, a mobile reader and e-commerce. It has struggled to grow beyond Korea’s home market. However these companies are showing that messaging is a viable mobile platform for the delivery of many other services and the lack of a smartphone population is not a valid business reason.
What apps do you think you will have in your pocket 5 years from now?