Building a successful digital business has a clear formula: build up a user base, create a product they are willing to pay for and retain those users for as long as possible.
Some companies do it better than others. Facebook has 2 billion active users, VK has 90 million. Netflix has 93 million paying users, Hulu has 12 million. Spotify has 50 million paying users, Pandora is at 5 million. Why?
Beside executing well on user acquisition, monetization and retention, a critical component of success is adapting when to market changes. Many companies no longer exist who failed to make the change from desktop to mobile and from web to apps. What’s the next big shift and how not to go defunct because of it?
Facebook, Netflix and Spotify have in part outgrown their competitors thanks to understanding that their user base has changed and adapting to this. Consider this:
- 8 out of 10 smartphone owners live in an emerging market
- Smartphone sales in North America declined by 1% in 2016 but grew by 9% in APAC
- Mobile data usage is growing 2x faster in MENA than North America
2.3 billion people around the world are today accessing online content on their smartphones, while only 20% of them are located in the United States and Europe. Not tapping into that user base means cutting off your growth.
There is one problem with the global markets, namely existing user growth, monetization and retention strategies do not work:
- User acquisition is complex and costly, as a local approach is needed (there are over 1,500 languages spoken in Asia) and market regulations are vastly different
- People do not have the capability to pay with traditional payment methods; credit card ownership in virtually all emerging markets is in the single digits
- User income is lower which means less users are willing to pay for services; the biggest APAC markets have roughly 5-fold lower income than the United States
This means the average smartphone user today is completely different from a few years ago:
- Not located in the US or Europe, but in Latin America, MENA and Asia
- Doesn’t have 3 credit cards, highly likely to not have a bank account
- Doesn’t have a good data connection, relies on 2G connections
- Does not understand English
How do you tackle this? By taking a localized approach to user acquisition, a localized approach to revenue and applying retention tactics that are tailored for emerging markets. Sounds like a big challenge, but this does not have to be done alone:
- “Spotify strikes its 25th telco deal”
- “Netflix partners with Vodafone in India”
- “Facebook partners with 18 operators for low-cost data”
Leading digital companies leverage mobile operator partnerships for user growth. It allows the companies to expand by piggybacking on the telcos existing presence:
- Brand awareness: With every person owning a mobile phone, carriers are usually the largest consumer-facing companies in their country and for digital merchants, partnering with locally known brands creates consumer trust
- Online reach: Mobile operators can directly reach consumers through SMS messaging, social media, online advertising, their homepage, customer self-service portals and call centres
- Offline reach: Outdoor advertising and retail locations means consumers see and engage with carriers everywhere they go (Telenor, India’s 8th largest mobile operator, has over 2000 retail locations while one the country’s leading retailers Big Bazaar operates some 200 hypermarkets)
Quickly scaling up presence to a similar level that mobile operators already have is impossible for most digital companies. At the same time, carriers have the local presence to bring new users on board, they provide payment solutions that consumers use on a daily basis and they know how to generate revenue from their own services from low-income users.
When in Western markets users are brought in with AdWords and monetized with Visa, the path to user growth in emerging markets lies with mobile operators. If you are not yet thinking about how to leverage mobile operators for the growth of your company, now is the final moment you should get going.