beyondbrics

For anyone who needed a number to convince them of the growth potential in emerging markets telecom sector, consider this: Bric countries and Indonesia together will have 1.2bn internet users by the year 2015. And this figure is low, when one considers the internet penetration as a percentage of the population in these countries will still be less than 50 per cent.

As a study released today by Boston Consulting Group reveals, emerging markets are on the brink of a digital revolution, and it’s going to be bigger than anything the developed world has seen.

What the Brics and Indonesia have that the west doesn’t have is scale. According to BCG’s new report, The Internet’s New Billion, in 2009 China as a country spent 1bn hours online a day. Its digital market was valued at $420bn in 2008 and is said to be growing by 20 per cent each year.

The authors of the report argue that it is too late for international companies to establish major market presence in the Middle Kingdom. Some of the country’s biggest companies like Alibaba and Tencent are now competing beyond the Chinese border and beating outside competition at home. Just a few months ago the internet search engine Baidu’ s market share reached 70 per cent, just as Google’s slipped to 27 per cent.

But whereas only four of the top websites in China are foreign, in India three quarters of the country’s most popular sites are owned by foreign companies. Google’s social networking site Orkut is hugely popular, followed by Facebook, Twitter, LinkedIn and YouTube.

Mobile internet penetration in Bric countries and Indonesia is still low, but 60 per cent of current internet users in the Brics are under the age of 35 and are more likely to adopt new technology, especially when old technology is not easily available. Personal computer penetration in these countries is very low – in Brazil it is 32 per cent, China 20 per cent, Indonesia and India less than 5 per cent. (In the US and Japan this figure is 90 per cent.)

Equally, in Bric plus Indonesia mobile phone SIM subscriptions currently total 1.8bn, to rival a combined figure of 394m for the US and Japan. India has some of the highest costs for PCs and the lowest availability, but consumers are already beginning to leapfrog to mobile devices to access the internet. In Indonesia, 9m people access the internet through their mobiles, a 2.3m increase since 2007.

In Brazil, where the cost of broadband is high and 3G is not widely available, BCG forecasts that the current 63m hours Brazilians spend online a day will increase to 329m hours by 2015.

The numbers are staggering, the potential is huge. But the authors of this report warn that any company with a serious interest in capturing consumers in these markets have to establish a presence now, and they must tailor their strategies to the idiosyncrasies of each market. As BCG’s managing director in Beijing, David Michael, told FT’s Kathrin Hille, “Habits vary widely between users in China, India, Russia, Brazil and Indonesia.”

“One mistake is to assume that [users in these markets] are not online, that they’re behind, and another is to assume that if they’re online, you can just transfer your existing online marketing strategy to those countries.”

Microsoft seems to have taken this point to heart – today’s Wall Street Journal reports that  Microsoft plans to invest around $100m in Chinese companies in order to expand its reach in China’s search market.

Related reading:
Can Facebook become Brazil’s other social network?, beyondbrics
Facebook looks to emerging markets to boost users to 1bn, beyondbrics
Marketing in China: go online, beyondbrics
China Mobile search engine eyes market share, FT