After the recent visits of few tech honchos, including Sheryl Sandberg from Facebook Inc. (NASDAQ:FB), Jeff Bezos from Amazon.com Inc. (NASDAQ:AMZN) and Satya Nadela from Microsoft Corporation (NASDAQ:MSFT), it’s time for Mark Zuckerberg to explore opportunities in India. The Founder and CEO of the online social networking giant is on an official visit to India to address the first Internet.org Summit and would also meet Indian Prime Minister Mr. Narendra Modi along with few other members of key ministries. Mark Zuckerberg is expected to have a discussion more on the lines of making the internet available to villages and rural areas of India with the help of other key partners of Internet.Org project, which includes Samsung, Nokia, MediaTek, Opera, Qualcomm, Ericsson and, of course, Facebook.
Zuckerberg’s Internet.Org initiative has got an aim to make the Internet more affordable for people who are completely disconnected from the evolution of technology. In the next five years, the project is aiming to bring 5 billion people across the globe on the Internet who don’t have internet connectivity. Definitely, the task is not going to be easy; therefore Mark Zuckerberg has brought the elite forces together to make the initiative more actionable and deliverable.
On the first day of his visit, Mark Zuckerberg took the stage talking how exactly the Internet could transform millions of life by providing the free access to knowledge. Here is the complete video of Mark Zuckerberg’s talk at Internet.org Summit:
1 Billion Facebook Users: India A Key Player
But that’s not all Mark Zuckerberg is targeting in his visit to India. Eventually, it’s much more than what is seems and published on media. Remember, how Sheryl Sandberg met Modi with a bag of suggestions of using Facebook for betterment of governance, effective interaction between government and people, and to attract more tourists to India. Barely, after two months, Mark Zuckerberg’s visit to India for Internet.Org Summit can’t be considered as a sole motive to promote the project. Mark Zuckerberg is on a mission to have 1 billion active monthly Facebook users from Asia region and India being the second largest country on Facebook with the biggest opportunity window, will play a key role in accomplishing his mission. The region is going to have a significant impact on the company’s performance in the future and investor are highly concerned about no-dollar-only-number growth in the region. Mark Zuckerberg is left with no other option but to be involved in number game in Asia to insure the speedy growth of Facebook in the future and India will play a key role in this. Let me explain you;
Asia is the fastest developing continent in the world. Two majors China and India, containing the one-third of the global population, primarily drive this growth. For any business major, which is indulged in the B2C business model, a sizable population of a growing economy is an opportunity to leverage and Mark Zuckerberg understands this very well. Both, China and India are the two largest countries by the number of Internet and mobile numbers. Though, India is trailing the US closely by the number of Internet users, but soon the country is expected to leapfrog the US, probably in the next few months. China has 632 million Internet users, with a penetration rate of 46.9%. Internet scenario in India slightly different from China, but the country holds an enormous growth opportunity in the future. The country has nearly 243 million internet users, resulting in 19% penetration. In 2018, the Internet user base in the country is projected to touch 500 million.
In mobile and smartphone section, China poses the biggest land of opportunity with nearly 1.2 billion mobile subscriptions. More than 700 million smartphone users in China have already upgraded their feature phone with Smartphone. In India, the penetration of smartphone is still just 9% though; total number of mobile subscriptions has already crossed 918 million by July 2014. The statistics clearly portrays a lucrative picture for company, likes of Facebook, deeply indulged in the business related to Internet or Mobile.
But that’s not all; both China and India are also one of the fastest growing economies in the world. China recently overtook US to become the largest economy in the world.
Facebook’s Failed Attempt To China
In 2010 and 2011 Mark Zuckerberg paid two visits to China to tap the market and open gates for Facebook. Unfortunately, China’s closed and confined ecosystem didn’t respond well to Mark and Facebook failed to present any challenge to the dominating homegrown social networking sites Renren, Kaixin001.com and 51.com. By the beginning of 2012 Mark Zuckerberg apparently understood, and accepted, the fact that breaking into the Chinese market may not pay off well to the investment and efforts. Instead, the open culture of neighboring India will welcome Facebook with both hands and would be a far better strategic move for Facebook to grab the largest pie of the growing economy. In the following three years, Facebook increased its employee base in India by multi-folds and the total user base crossed 100 million mark. Now, India is the second largest country for Facebook by the number of users and the only country after US, having user base more than 100 million.
India Driving The Growth For Facebook in Asia
But in the last two years, while Facebook recorded an unprecedented growth in India, Mark was busy in monitoring the revenue contribution from India and Asia region. The tally of the total number of users kept showing an impressive surge, but ARPU (Average Revenue Per User) failed to create much impact on the total balance sheet of Facebook. Between Q2, 2012 and Q2, 2014, Facebook nearly doubled the number of users in Asia region. The total number of Facebook users in Asia increased from 255 million to 410 million in just two years, and a large chunk of this growth came from India. The growth of 60% in just two years from Asia region eclipsed the performance of the US & Canada and Europe during the same period. While US & Canada region recorded mere 10% growth – from 186 million users to 204 million users – between 2012 and 2014, Europe performed better with 20% growth during the same period.
However, the scenario changed upside down when these figures were exchanged with the revenue contributed by each region. US & Canada region emerged as the top revenue puller for Facebook contributing nearly 45% of company’s total revenue in Q2, 2104. In the last 2 years, quarterly revenue from the region more than doubled. With nearly 28% contribution to the company’s total revenue in Q2,2104, Europe emerged as the second largest country. Interestingly, Asia region failed to present an impressive show despite of recording a three-fold increase in its quarterly revenue. The region contributed mere 15% of the company’s total revenue in Q2, 2014.
The main reason behind this disappointing performance of the Asia region – despite of having the maximum number of users – is due to the fact that users in Asia don’t spend much on online advertising. In Q2, 214 Facebook’s Average Revenue Per User (ARPU) from the region remained $1.08 against worldwide ARPU of $2.24 and $6.44 from the US & Canada region.
The market in the US & Canada and Europe is saturating now. Both the regions are failing to add a sizable number of users to the total tally of Facebook and most of the new users coming to Facebook belong to the Asia region. However, these new users are failing to bring sizable revenue to Facebook, which has become a cause of concern for the Mark Zuckerberg.
The growth of mobile phone, especially smartphone, in the Asia region has attracted mark Zuckerberg. India – the second largest country by the number of mobile phone subscriptions and the fastest growing smartphone market – would have a significant impact on overall Facebook revenue in the future. In Q2, 2014, 62% of Facebook’s total advertising revenue came from mobile and with each passing quarter the share of mobile ad revenue is surging up. The growing share of mobile in the company’s total quarter revenue has convinced Mark Zuckerberg to tab India now, especially after the focused strategy adopted by Google to penetrate the country with low-price smartphones. Google has planned to spend INR 100 Crs (US$16.5 million) on advertising to promote low-price Android One smartphones in India.
By now, it’s evident that Facebook will have to have focused approach on the Asia region. With no positive signs from China, India will be the best bet for Facebook to keep its growth intact in the future. However, lower penetration of the Internet and Smartphone, and low ARPU in Asia region is a big challenge. Therefore, by adding more people in India with Internet and Smartphone through Internet.org project, Mark Zuckerberg could quickly take the total tally of Facebook users in Asia region to 1 billion in just 3 to 4 years from now. This will not only help Facebook to bring in more revenue dollars from the region, but will also increase ARPU from the Asia region.