Start-ups and digital majors aiming to penetrate emerging markets are increasingly doing so via mobile offerings, following the trends developed by local players. This phenomenon, called “mobile-first”, is creating specific opportunities in the mobile space for digital businesses, which have little choice but to tailor their products to mobile to succeed in the lucrative emerging markets. As a result, it is primarily mobile offerings that are seeing major financing from the West in developing economies, and it is these mobile firms that are likely to see major exits and IPOs in the near future.
The mobile-first revolution has been led primarily by access to budget smartphones, with Chinese and Indian vendors unveiling pioneering cheap devices that retail for under $100. As these devices become cheaper still, both smartphone and mobile broadband penetration will rise further, unlocking a great proportion of the world’s emerging markets to digital consumption.
Broadly speaking, the poorer the country the larger the gap between mobile and PC penetration. In low-income regions, last-mile fixed infrastructure is weak and few can afford fixed Internet tariffs. A pre-pay mobile connection is often the only affordable and available point of Internet access.
This divide is being further heightened by the collapse in demand for PCs, as smart TVs, powerful smartphones and wearable tech further displace the need for a desktop device. Emerging market homes, which have a much lower communications budget than those in advanced economies, can afford a much more limited number of digital goods and are bypassing PCs altogether. In 2015, the retail volume of desktop computers shifted globally is expected to fall annually by 7.0%.
The consequence is that digital brands in search of expansion are optimising their mobile offerings. The world’s leading social network Facebook launched a lightweight app in June 2015 specifically for emerging markets, with this streamlined version expected to function better on budget smartphones and low-speed broadband connections. The fact that in 2014 there were around 5.8 billion mobile subscriptions in developing countries, compared to only 1.2 billion in advanced economies, demonstrates the clear appeal of targeting the rapidly digitalised emerging world.
In particular, mobile-first consumers provide a ready market for financial and retail services. The low penetration of traditional banking means many in the developing world rely on their wireless handsets to transfer money and pay for goods. The mobile payments landscape is far more developed and diversified in markets such as China and Russia than in the West, with local players such as Alibaba and Yandex catering to demand for fast on-the-go mobile transactions.
Over the longer term, there is certainly sense in the provision of PC-enabled websites and services to emerging consumers, but for the majority of the mass market the PC will remain a distant second behind mobile. Digital consumption will simply mature and follow the model seen in advanced economies, where powerful smartphones continue to unlock a greater array of apps and digital offerings.
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