Are Facebook and YouTube Giving Africans a Raw Deal?

I’ve spent some time dwelling on the implications of a recent article in the NYT on the fate which may await Facebook, MySpace and YouTube users in Africa. Thanks to Bill Zimmerman for bringing it to my attention. At issue is the extent to which leading US social media companies plan to serve inferior quality content to users in developing countries in an effort to reduce their bandwidth costs. Or worse still, how many of them plan to cut off content to Africa completely?

“Whenever you have a lot of user-generated material, your bandwidth gets utilized (in countries where) bandwidth is expensive and ad rates are ridiculously low. If Web companies really want to make money, they would shut off all those countries. -  Michelangelo Volpi, CEO of Joost.com

A little over a quarter of the world’s population (1.6 billion people) has some form of Internet access, but according to the NYT article half of those fall below the income threshold expected by online advertisers (no source is given to support this claim!). So, what plans do high traffic operations have to cut their bandwidth bills?

“We may choose to set a limit to how much we are willing to pay in bandwidth cost. In some countries there may be particular peak times where instead of high definition, we might decrease the resolution.”  - Tom Pickett, Director of Online Sales and Operations at YouTube

“We can decide, either on a country by country or user by user basis, to engineer the quality of the service for that cohort of users.” - Jonathan Heiliger, Computing Infrastructure Executive, Facebook

MySpace is “testing a feature for countries with slower Internet connections called Profile Lite. It is a stripped-down version of the site that is less expensive to display because it requires less bandwidth”.

The global growth of Facebook and YouTube is being spurred by growth in emerging markets and pre-emerging markets. 3.8 % of Facebook’s traffic comes from Indonesia (now the 4th biggest traffic source outside the US). That’s more traffic than than Facebook gets from Germany and Belgium combined. Nigeria gives Facebook the same amount of traffic that it gets from Norway or Denmark. In Africa as a whole, Facebook traffic grew at a rate of 86.9 % last quarter!

The question asked ad nauseam about sites like Facebook and YouTube is how are they going to make money. In order to answer that question, Facebook needs to find out how it is going to make money in Africa, Latin America and India? Facebook can’t continue to grow without attracting new users from emerging markets. However, in Africa and parts of Asia bandwidth cost per user is much higher, but ad revenue per user is significantly lower. This is the “International Paradox”.

How much ad revenue per annum is each unique user of YouTube, Facebook or MySpace worth? It’s tough to get reliable stats for YouTube, but Bill Gurley of Benchmark Capital reckons each Facebook user is worth $ 2.47 per year, and for MySpace his guesstimate is $ 6.50. I spent a lot of time trying to get my hands on a country by country breakdown of the eARPU (Estimated Annual Revenue per User) that various major social media brands place on users from emerging markets, but I’ve given up for now. If anyone reading this post has such data I’d love to see it.

What factors need to come into play before the cost of serving African Facebook and YouTube users comes down but advertising ARPU for Africa goes up?

1. Bandwidth: Metro fibre networks are expanding rapidly in East Africa and in two months the final kilometers of the SEACOM cable will be ready. More bandwidth and cheaper contracts should make it more cost efficient to serve rich media content to countries like Kenya, where 10 % of the 40 million population have Internet access.

2. Larger online ad budget allocations to target African audiences A corollary of the point above. Greater Internet penetration in Africa (currently at 6 % by the way), more bandwidth, etc. will lead to companies earmarking a greater portion of their ad budgets to target online consumers.

3. More African ad networks More truly African online ad networks will have to emerge to feed this market. Pamoja Media, which recently partnered with Yahoo, is the pioneer in this sector, but there should be plenty of room for new players.

But hang on a minute, maybe those of us interested in the future of the web in Africa should be asking ourselves a different set of questions. Instead of bemoaning the fact that African users could end up becoming second class consumers of Facebook, etc. shouldn’t we instead be asking why there isn’t enough unique African content available on uniquely African platforms? Alexa stats show that the 20 most visited web sites in Kenya and Nigeria are pretty much identical to the top 20s of Canada and the USA. The same goes for the UK and Australia.

Even though this seems to show that the global English speaking world has homogeneous browsing habits, it’s good to see examples of local content standing out (few though they are) amongst the Yahoos, E-bays and MSNs. Sites like Y-FM (Ghana), Sahara Reporters (Nigeria) and the Nation Media Group (Kenya) are climbing up the rankings in their respective countries. Important regional platforms such as Afrigator and Maneno are also increasing their traffic share.

It looks like the next 2 years are going to see an explosion in great web content coming out of Sub-Saharan Africa, with no shortage of users to create it, view it, share it and click on the ads next to it. As Aly-Khan Satchu said in a comment to the NYT article.

“Looking in the rear view mirror means you entirely miss the opportunity. I feel that in SSA [especially but it applies to Emerging Markets as a genre] we are set to embark on a one off super charged convergence with the rest of the World. It is the last convergence trade left, practically.”

So, Facebook and YouTube, stop looking at ways to give Africa a raw deal and start looking at how you can be a part of the revolution. Maybe you should take a page out of Google’s book.