Knowledge Bridge

//Ran Ju /July 9 / 2012

Social media’s challenges in India: Monetizing its mobile users

Emerging markets have been the engine of growth for major social network players such as Facebook and Twitter in the past few years, with internet users in Brazil, Indonesia, India, Malaysia and the Philippines rushing to join the networks. In India, the skyrocketing use of mobile devices has helped Facebook to become the country’s most popular social network. Now India has 46 million Facebook users according to Socialbakers, a social media analytics firm in London, making India the third largest Facebook market behind the US and Brazil. India won’t be in third place for long. Based on the current growth rates, India is expected to be the largest Facebook market in terms of users by 2015, according to technology consultancy Gartner. That presents both opportunities and challenges for social networks, as well as lessons for news businesses.

The challenge for Facebook, for example, is two-fold. While India might be sprinting ahead of the rest of the world in terms of market size, Facebook captures much lower revenue per user outside of its US base. Before it floated on the market, Facebook revealed its revenue per user statistics: In the US and Canada, it earns $9.51, but in Europe, it earns only $4.86 per user. In Asia, that figure drops to $1.79 and even lower for the “rest of the world”, a mere $1.42. Some, but not all, of that difference in revenue per user is down to lower per capita incomes.

Another reason for the lower revenue is that Facebook users in rapidly developing economies access the site on mobile at much higher rates than in North America, and Facebook has been struggling to generate revenue on mobile at levels approaching what it makes from computer users. Nowhere is this a bigger challenge for Facebook than in India.

Targeting young people, Facebook has grown rapidly in India, at a pace of 22 percent every six months. Toward the end of 2014, India will equal, if not exceed, the US when both countries are expected to have 170 million to 175 million members.

India’s wired internet infrastructure is poor, so users have little choice but to turn to the mobile web. It is estimated that 30 percent of Facebook users there access it via mobile devices. And although there is a huge market for mobile ads in social media, Facebook itself is not sure whether its mobile business is working, even in developed countries such as US and UK. Currently, Facebook does not generate any meaningful revenue via mobile.

Like many other internet companies, not to mention news organisations, Facebook is looking for a way to monetise its huge and growing mobile audience. The social network has just started to introduce ads to its mobile version, including sponsored updates in users’ Facebook news feeds. Controversially, Facebook is also considering using ad targeting based on its users’ mobile app usage.

Facebook has to figure out how to turn its millions of comments, recommendations and likes into revenue. In addition to ads, it is exploring ways to allow people to buy clothing, furniture, music, a book, other content or goods when a friend has liked it. All you would need to do is click, and Facebook would direct you to where you can buy the item as part of an affiliate sales program. Facebook could become the ultimate social shopping engine, giving Amazon’s recommendation system and e-commerce juggernaut a run for its money.

As we’ve noted before, audiences are moving to mobile, but advertising revenues often lag behind the growth of digital platforms. News organisations need to make sure that they don’t cede this important digital space to search engines and social networks when it comes to developing new revenue. News organisations also need to explore the idea of moving beyond advertising to affiliate sales and other transactional business models to add to their digital revenue.

Article by Ran Ju