Why would two of the world’s largest companies be in such a pitched battle to win some of the people with the least disposable income in the world as customers?In this article we unpick what the tech battle for Africa looks like and why there is so much investment there.
First off, it’s worth saying that Africa is a large and diverse collection of countries. Although there is undeniably much poverty, that's not the whole story. It's a beautiful and diverse continent, rich in natural resources, with both wealthy and poor countries and peoples.
The problem... or is it the opportunity?
Africa is a big continent containing 1.2 billion people. Of these only 21.8% have access to the internet. This means there is a massive opportunity for companies such as Facebook or Google to get into the market early and capture huge volumes of customers.
Facebook’s average revenue per user for Q4 2015. Photograph: Facebook
Image source: The Guardian
This might appear a little strange as, of course, consumers with less disposable income will not generate as much as those with more. However this is not about the short term opportunity, but more the opportunity cost.
It is similar to the way Microsoft are still recovering from the opportunity cost of not getting into mobile earlier. They didn’t see the immediate benefit and so lagged behind Google’s much savier approach with Android. Android is an important example as it shows how the introduction of one technology, a free operating system any phone manufacturer could use, being used for anti-competitive behaviour, pre-setting searches to Google and having their services pre-installed on phones.
So what is going on in Africa?
Facebook here might almost be outdoing even themselves, to the extent that they are actually making Google look like the good guys.
Facebook has a service called Free Basics which they have a contract to provide for a large number of African nations:
Source: The Guardian
This covers an impressive 635 million people. Or to put it another way, nearly twice as many people than there are in the USA.
Currently the broadband and data coverage in Africa is poor, especially outside of urban centres. Many areas in Sub Saharan Africa have very poor, or no, data coverage. The odd spot where you can get it is often marked in the landscape so people know where to stand and wave their phone in the air in the hopes of getting a data signal. As it stands only around 22% of people in these regions are connected (no matter how badly) to the internet.
Free Basics attempts to solve this problem firstly by using innovative solutions to create the structure, ie get the internet in, and then provide free access to the internet via their app. This app was originally called ‘internet.org’, which makes sense. If it was a way of accessing the open internet.
Except it wasn’t. It gave you access only to Facebook and a handful of other sites. It wasn’t the open internet at all. It was the walled garden in which Facebook could grow the next generation of users.
Everyone deserves to be connected…
In 2013 Mark Zuckerberg had an idea. One he expressed in a 10-page white paper, the theme of which was simply that the internet is a basic human right. Everyone should be able to access it. And some of the most disadvantaged people on the planet were being left further behind without it.
“Since the internet is so fundamental, we believe everyone should have access.”
Mark Zuckerberg, May 2013
In order to fulfil his vision he would need to solve the infrastructural problems that prevented the internet being accessed in remote areas. There have been a few attempts to solve this problem so far. The boldest of them from Facebook being to launch their own satellite back in 2016, it didn't exactly go well:
The thing is, this satellite was never destined to beam down the internet. It was intended for internet.org or ‘Free Basics’. That is, the sanitized, Facebook version of the internet. Meaning one company would have full control over what content people could see online.
So it wasn’t so much internet access as a basic human right, but Facebook access. And Facebook is still at it. Except this time they’re planning on using drones instead.
The thing is Africa wasn’t even the intended target for Free Basics. It had been meant to be rolled out in India first, as this was where the opportunity was:
“If you rank countries based on opportunity, India comes out on top, and comes out on top by a big margin”
Source: Facebook employee, via the Guardian
What Zuckerberg may have underestimated, or perhaps misunderstood, is that even if a country has a low GDP per capita, it does not mean it’s a free for-all-on net neutrality.
A combination of concerns over this issue and Facebook’s heavy handed approach badly damaged not only the project’s reputation but that of Facebook itself in india.
They swept in, told people what was good for them and just expected everyone to shut up and nod in agreement. It didn't happen.
Instead by February 2016 Free Basics was no more, effectively banned in India. Thus cutting off Facebook from the emerging market they had been banking on. And so the focus shifted.
Google and the race to the top
Google does not appear to be that keen on Facebook launching thier own version of the web. Without this its investment in Android won’t help it into the market, as people will be connecting directly thorugh the Facebook app and not thier services.
So Google decided to step up to the plate with its own solution - one that in my opinion actually makes them look pretty good. It started to heavily invest in Africa's internet infrastructure. So for example, it partnered with existing providers to launch projects such as CSquared, aimed at getting broadband into and across African cities.
It might be possible that Google realised all it needed to do to precipitate the failure of Facebook's scheme was to help get Africa online properly. That is, to enable access to the real internet for as many people as possible.
And so Google has committed to several projects to get the internet to Africa. Such as Google Go which tackles slow speeds by cutting data usage by as much as 40%, extending free public wifi and slightly more ‘out the box’ plans such as ‘internet by balloon’. Google has focused on solving the core issue of getting the people of Africa online.
The thing is, it might not actually make anyone any money.
People who have less disposable income buy less stuff. Buying less stuff means advertising to you is worth less money. Advertisers in Nigeria will pay less than 10% of the prices paid by those in the US. And advertising is precisely how both Google and Facebook earn revenue, so obviously this would make Africa a far less profitable market.
Clearly, Google and Facebook are it for the long run, but it does beg the question, what exactly is the opportunity they are costing against?