NexThought Monday – Creators, Not Just Consumers: Facebook and other global players are bringing transformative digital technology to the BoP – but will local economies benefit?
Digital technology impacts people throughout the world in countless ways, but there are two ways in which it makes a particular impact on emerging markets:
Service delivery: By improving reach and reducing cost to bring essential services denied to many, particularly in rural areas.
Economic development: By creating the conditions for truly advanced digital economies, innovative businesses can not only deliver services but create jobs and economic value, which has the potential to help pull countries out of poverty.
On the ground, the majority of digitally based initiatives supported by philanthropic capital have been concentrated on the former. We’ve seen great projects that have focused on service and content delivery, such as MAMA, Frontline SMS and the Praekelt Foundation’s work delivering Wikipedia over USSD. But content – or information catered to the needs and wants of global consumers – is expensive to localize and deliver, with a challenging business proposition that may only be addressed by nonprofit donor financing. And it’s hard to build a viable digital economy on nonprofit services alone.
That’s why the second way in which digital technology impacts emerging markets is interesting to us at Caribou Digital. It’s fascinating to contemplate how a budding tech industry, and its spillover into adjacent industries, can create a genuinely 21st century digital economy in many emerging markets. Here we can see the potential to create real value from the bottom up, by supporting companies and entrepreneurs who understand their market, understand their industries, and innovate with digital technology in new and exciting ways that are not just carbon copies of Silicon Valley ideas. Here we can measure the impact digital has across industries, as McKinsey has attempted to do with its iGDP rankings (which measure the Internet’s contribution to overall GDP in different countries).
Recent high-profile efforts to increase Internet access in emerging economies often concentrate more on service delivery than building digital economies. Take the Facebook-led “Internet.org” initiative, which is billed as “a global partnership dedicated to making affordable Internet access available to the two-thirds of the world not yet connected.” The initiative recently released a data access app that works for free on Android phones that subscribe to Airtel in Zambia – and announced plans to roll it out later in other parts of the world. The potential benefits of the app are clear. It scores excellently on the service delivery level of impact, as it provides free access to a wide range of fantastic content from many partners which can have a massive impact on people’s lives, particularly for women. (Although, as an Android app, it may be more likely to be used initially by urban and peri-urban smartphone users, and not the rural poor where it would really have a major impact.)
However, on the business development side of impact, it scores less well. Evgeny Morozov has criticized the walled-garden structure of the app and the way in which it ties users into the Facebook ecosystem to receive free content. Others rightly point out that while zero-rated apps (for which the data used does not count against a user’s monthly data cap on their mobile plan) are a good thing for consumers, they start to build unscalable barriers for those app developers who aren’t able to negotiate zero-rating. So, if you’re already in possession of a few hundred million (or billion) global users, and a brand deemed attractive enough to a mobile network operator’s user base for them to use it as a customer acquisition tool, you’ll be OK. However, if you’re one of the many small start-ups trying to get your app discovered, you’re less likely to find that zero-rating helps you.
Morozov also touches on the important issue of personal identity, and the concern that a zero-rated walled garden will lock users into an ecosystem where their personal data is not portable, not their own and not open. We are increasingly seeing that the winds of regulation and taxation influence the trade routes of international personal data, and the cloud tends to reside where value can most cost-effectively be created. So Google has a billion-dollar UK business, but the likes of Dublin and Lichtenstein are where most revenue is generated for tax reasons. For Google, Facebook and other large global technology companies, value is extracted from personal data and created where it is expedient. As customer analytics becomes commonplace in emerging markets, a question arises – especially for people who may have digital identities and personal data for the first time: How much of this value will remain in those countries? For instance, how much of McKinsey’s iGDP will be realized to the benefit of the economies that originate the data, and how much of it will evaporate into the cloud? Will digital service industries build jobs and economies in the markets they hungrily seek new customers in, or will they act more like digital extractive industries, mining personal data and using it to create value somewhere else?
“Internet” is a loaded term. Those of us who were around before the World Wide Web was developed will be pedants and point out that it pre-dates Web technology by decades. The Internet refers to a set of many open protocols, a set of many tools, and the free opportunity to build the services that fit the needs of you and your community upon its networks. The suffix “dot org” is even more loaded, and comes freighted with expectation that the owner’s activities are solely for the common good. Clearly, Internet.org has the potential to have a tremendous impact in emerging markets. But we would certainly like to see more evidence from Facebook’s consortium that they’re living up to the spirit of the memorable URL they use. Likewise, we’d like to see more signs from other global technology players that they respect the open access that has always been the Internet’s greatest strength.
We believe we are on the cusp of phenomenal change in emerging market digital economies, where countries which previously have suffered from poor or nonexistent infrastructure may now begin to see transformative changes in areas such as health, education, finance and energy access through transformative and sustainable 21st century technology. If we are to truly see a revolution in the way that digital economies change the face of these countries, there needs to be a level playing field that can support local businesses that create jobs, and regulation to ensure that economic value remains in the country, supporting the local economy and pulling people out of poverty. We need to build services that treat people as creators and enablers, not just as consumers.