I’d Like to Buy the World a Coke

Yesterday’s note about US and Chinese technology companies growth initiatives in Southeast Asia got us thinking about global Internet usage in developing/emerging economies. Some more work on the topic here:

#1. Most of the world’s top online markets are in the developing world. A few, like China and India, you know. But here are others on the Top 20 list of global online populations:

  • #4: Brazil. 149.1 million users, 71% of the population
  • #5: Indonesia. 143.3 million users, 54% of the population
  • #8: Nigeria. 98.4 million users, 50% of the population
  • #10: Bangladesh. 80.5 million users, 48% of the population
  • #12: Philippines. 67.0 million users, 63% of the population
  • #13: Vietnam. 64.0 million users, 66% of the population
  • #16: Thailand. 57.0 million users, 82% of the population
  • #17. Iran. 56.7 million users, 69% of the population
  • #18. Turkey. 56 million users, 68% of the population
  • #20. Egypt. 48.2 million users, 48% of the population
  • Source: https://www.internetworldstats.com/top20.htm

#2. Users in emerging economies are increasingly using smartphones to access the Internet. Pew Research Center surveys done in 2013/2014 and again in 2017/2018 show smartphone ownership in emerging/developing countries rising from 24% to 42% penetration over the period. Advanced economies showed no growth across the same time frame, at 72%.

Smartphone ownership is already over 40% in the following countries from the above list: Philippines (44%), Vietnam (53%), Brazil (54%), and Turkey (69%).

#3. The most reliable predictors of individuals’ Internet usage around the world are age and educational achievement, and this is even more the case in emerging/developing economies.

In Brazil (#4 market globally), for example, 90% of people aged 18-36 are online, but only 57% of those over 37 years of age. In Indonesia (#5 market globally) 62% of “more educated” users are online versus just 14% of those “less educated”.

Source for Pew data: http://www.pewglobal.org/2018/06/19/3-social-network-adoption-varies-widely-by-country/

#4. When it comes to social media, many emerging/developing economies have far higher usage rates. In the US, consumers report using social media for 2 hours/day. Compare that to the stats for some of the countries we mentioned at the top of this note:

  • Philippines: 3 hours, 57 minutes/day
  • Brazil: 3 hours, 37 minutes/day
  • Indonesia: 3 hours, 23 minutes/day
  • Thailand: 3 hours, 10 minute/day
  • Egypt: 3 hours, 9 minutes/day
  • Nigeria: 3 hours, 2 minutes/day
  • Turkey: 2 hours, 48 minutes/day
  • Vietnam: 2 hours, 37 minutes/day
  • Source: https://wearesocial.com/us/blog/2018/01/global-digital-report-2018

#5. Pulling this all together, it seems clear that emerging/developing economies hold so many of the top positions in global Internet usage for three reasons. The first two are straightforward: they have large populations and smartphone handsets/Internet access are becoming more affordable as global economies of scale increase.

The third is not as obvious: most of these countries have much younger populations than the developed world. In Brazil (#4 market), the median age is 32 years old. For Indonesia (#5), it is 30. In Nigeria, it is only 18. For comparison, median age is 38 in the US and 46 in Germany.

As for investment implications, two themes to consider:

  • Google and Facebook don’t just dominate US online advertising; they are consistently in the top 5 most visited websites across every single emerging/developing economy we listed earlier.

    No, there’s not likely much in the way of profits here just yet relative to developed countries. But GOOG/FB have the real estate to grow alongside these economies for as long as they retain global dominance in search and social. See “most popular websites by country” here: https://www.alexa.com/topsites/countries

  • These companies, plus Apple in handsets, are important portals for any other business that wants to grow in emerging/developing economies. If you want to advertise online in Brazil or Thailand, or get your app on the smartphones of users in Bangladesh, you have to pass through the same companies as if you were just interested in the US market.

Bottom line: we cannot recall a time in history when a handful of companies so completely dominated not just developed economies but almost every emerging one as well. Coca-Cola used to dream of a world where everyone had a Coke daily. Google and Facebook have essentially accomplished this in every market where they have access.