Abhay Nihalani

Social Capital Markets 09: Making Money on Mobile in the Developing World

We all use cell phones, and the majority of us acknowledge the immense potential for the mobile platform as a tool for development and empowerment. But do we really understand all of the complex infrastructure and mechanisms for getting that call or SMS to and from the palm of our hands?

The “Making Money on Mobile in the Developing World” panel at SoCap 09 made it clear that in order to build a sustainable and scalable mobile phone solution for development, there needs to first be in place a thorough understanding of mobile ecosystem, including the industry value chain, the characteristics of the major players, government regulation, and the potential future of the industry.

Esteemed panelists ranged from long-time mobile industry insider and venture capitalist Arun Gore of Gray Ghost Ventures, to entrepreneurs Gavin White of Resdida and Ashifi Gogo of Sproxil. The panel was also expertly moderated by Alison Bloch, an mHealth strategist for the GSM Association’s Development Fund.

The panel was both high-level and technical, and yielded some key insights for social entrepreneurs interested in using the mobile phone as a tool in their ventures. The first was that mobile ventures must not be seen specifically as “social” ventures. Often times large industry players, like telecom carriers and partners like pharmaceutical companies, won’t take a non-profit seriously, and rarely begin to pay attention unless they see a profitable value proposition embedded in the solution for them. The lines between financial and social impact need to be purposefully blurred in the mobile industry.

The reason for this is that there are many levels of bureaucracy and complex infrastructure to traverse in order to make changes to enable certain solutions. Many large mobile corporations are inherently bound by inertia and status quo, and in the end, despite social impact and potential lives saved, they are the controllers of the network and any scalable solution will have to go through them.

For this reason, Ashifi urged solution developers to engage their target mobile carriers very early on the process, and to try to demonstrate their value to the carriers well before they are ready to roll out their solution. If not done well in advance, this could lead to frustrating lags and roadblocks when launching the venture.

But who are the decision-makers to whom you must demonstrate value? Most people typically target the CTO or CMO of a carrier, who may agree to a concept in theory, but Arun asserted that in order to get things done you need to sell your concept to the individuals who manage the carrier’s data center and get their buy in, since these are the folks that will be most impacted by the connectivity and churn issues that result from changes to the system.

Another insight was to be explicitly aware of the environment you are working in, particularly the habits and patterns of your end user, and the mistakes made in the past in the ICT industry. Indeed, a common thread throughout the entire SoCap 09 conference was that innovative solutions can often be sourced directly from those who are struggling with the problem, and this is no different in the mobile space. According to Ashifi, the best way to help commercialize a solution is to speak to and observe the mobile phone utilization patterns of the communities you are looking to impact as much as possible. Don’t disregard the farmer with the battered old Nokia phone from 1998 – this farmer uses that phone for everything; it is his social network, news source, business tool, and information engine.

Gavin echoed the sentiment that solutions need to be personalized and empathetic to the end user. He brought up an example of the time e-mail was first introduced, and how companies were interested in a mass-blast approach that didn’t take into account specific group’s needs and interests. He warned that solution developers must avoid this mass, impersonal approach that is starting to rear its head again as mobile becomes more ubiquitous. Solutions will only stick if there is value being provided to the end user where and when they want it.

The panel concluded with a discussion of where this industry is moving in the future, and what are the changes and innovations that will arise that will impact the sustainability of ICTD ventures. These are some of the trends that will influence the industry:

  • Cost of SMS will continue to decrease: In the Philippines, innovative carriers have gotten the price of an SMS down to approx 1 cent, and are still making a profit due to increased volumes as a result of reduced cost. This trend will likely be followed in other countries, and this will make ICTD solutions more cost effective. (Conversely in the U.S., SMS costs 4-5x more than most developing countries, not to mention the double fee incurred by both sender and receiver.)
  • Maturation of the industry will lead to more diverse and specific core competencies: Like other industries, as the mobile industry continues to mature and carriers grow larger, more businesses will emerge with niche roles and specific core competencies, such as tower operators, spectrum owners, application aggregators, etc. This will create many more opportunities for social ventures to integrate at various levels of the value chain.
  • More durable hardware: As phone manufacturers and carriers continue to compete on market share, particularly on the “last-mile” customers in more rural and inaccessible areas, they will focus on developing more durable, appropriate and affordable hardware solutions (see: solar powered mobile phone) for these customers.

Things that the panel hoped to see in the industry as it evolves that would create a better environment for mobile solutions for development include:

  • Governments easing fees and regulations that place a heavy financial burden on the mobile industry, such as landing rights. These fees prevent more affordable pricing due to needing to recoup these initial investments.
  • The rise of consumer advocacy groups to protect consumer rights and give them a voice in how the industry evolves to suit their needs. Currently, despite the volumes of end users, there is not enough cohesion among them.
  • Heightened compatibility between hardware, software and carriers in the mobile industry to allow interoperability and potential to scale for mobile solutions. For example, the cloud-computing concept could transfer to cloud-telephony.

In the end, Alison brought the discussion back to what mobile ventures are all about: information. How do we identify, pool and disseminate the information that is most valuable to all the distinct stakeholders? And who will own the information that is generated from the huge volumes of mobile transactions as new applications emerge? To make money from mobile solutions for development, value will be inevitably be derived from creative ways to address these questions.