Tapping Into the Expanding Mobile Opportunities of Emerging Markets

Marketers wishing to profit from the gigantic new customer base of the developing world need to understand how these consumers use smartphones and apps.

By Pedro Ripper

Opinions expressed by Entrepreneur contributors are their own.

The face of the global smartphone market is changing. According to research by eMarketer, the number of worldwide smartphone users passed the 1 billion milestone in 2012. By the end of this year, that number will nearly double.

Yet the dynamics involved with this second billion are far different that those of the first. If app developers and marketers wish to profit from the next gigantic customer base, they need to understand how these consumers select, pay for and use apps.

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Differences in emerging markets. Affordability and usage patterns are not homogenous throughout the economic strata. What works among more affluent "early adopters" in developed nations does not translate to the experience of less wealthy -- yet still very enthusiastic -- consumers in less-developed countries.

While smartphone ownership is increasingly common in developing nations like the BRIC countries (Brazil, Russia, India and China), usage characteristics are far different than what's found in North America and Europe. Outside of certain Western nations, cellular contracts are virtually nonexistent. It's not unusual to find people carrying the latest Android devices but without voice or data service lasting more than a few days. That's because most consumers around the world prepay in cash for mobile services.

In much of the developing world and for the vast majority of its smartphone owners, credit-card penetration is very low. These mobile users are on prepaid plans, buying minutes just before using them, in a stark contrast to the plans popular in the developed world (whereby billing occurs after usage according to a contract). The typical prepaid scenario is for a user to stop by a drugstore or newsstand, give a cashier money and "top off" a wireless account with credit to pay in advance for calls in the next few days or week or two.

Other dynamics are at play in BRIC and other countries. In the modest Android devices that predominate by a wide margin over Apple iPhones, available onboard memory is very limited. Moreover, users download a lot of free apps but seldom pay for premium digital content or make in-app purchases.

App Annie Index statistics for this year's first quarter bear this out: The United States was the only country to outperform Brazil, Russia, South Korea and India in the number of apps downloaded on Google Play. Yet in terms of app revenue on Google Play for the same period, the top five countries are Japan, United States, South Korea, Germany and the United Kingdom. Brazil, Russia and India didn't even make the list.

So how does an app company penetrate this huge new market? App developers and marketers may be very successful but adaptations in monetization strategies are required. Here are six suggestions:

Related: 7 Myths of Developing Mobile Apps

1. Shrink the download size. In developing countries, connectivity is still expensive. Most users rely on free Wi-Fi or low-speed 2G and scarce 3G coverage. Consider creating smaller versions of titles or incremental downloads. Many game developers, for example, make their Levels 1 and 2 available first and offer the opportunity to download higher levels later.

2. Seek out app stores without data-usage fees. Some carriers preload onto phones app stores that provide downloads with no data- usage fees.

Since most emerging countries' smartphone users have limited access to 3G or 4G data packages due to the high costs and their limited available income, being able to distribute apps without users having an active data package improves the chance of an app being downloaded and therefore benefits a developer.

3. Localize. While the idea of translating text into a local language may seem obvious, additional steps can be taken. In China, a co-production model is not uncommon, whereby a local distribution partner will change the look and feel of an app so it has localized themes and music.

4. Offer subscription bundling. For marketers of premium apps, listing in a subscription-based store (such as what my company Bemobi offers) can increase the number of trials and overcome the initial cost barrier, since users perceive that they are receiving much greater value for their money.

Related: Are Mobile Ads Good for Your Business? (Infographic)

5. Think about granting a low-ticket price. Keep in mind the "pay-as-you-go" mind-set that most users in developing countries are comfortable with. A low subscription fee, based on shorter daily or weekly cycles (in contrast to a costly monthly fee), will work better in regions where end users are used to topping off their accounts.

6. Look at local carriers. Since the majority of these users have no access to electronic payment, carriers are increasingly finding it valuable to partner with specialized local app stores that want to leverage their distribution and prepaid billing capabilities. More than 75 percent of app revenue in China comes from carrier billing and carrier-branded app stores. Developers of premium apps can realize recurring revenue through a usage-based formula.

Related: How Social Franchising Is Bringing Jobs to the Developing World

Changing distribution models. While the Apple App Store and Google Play dominate app distribution in the States, it's different in other countries where the credit-card payment model simply doesn't work. China has in excess of 200 app stores, although a consolidation is under way. Qihoo 360, Wandoujia, 91 Mobile, UCWeb, Baidu and carrier China Mobile's app store are emerging as the leading players.

Wandoujia, with more than 300 million users, has attracted major Western app titles like Line, Flipboard, Evernote and Path. China Mobile, as well as China Telecom and China Unicom, account for the vast majority of carrier billing that benefits the Chinese app developer market, valued last year at $1.3 billion by app developer CocoaChina.

Brazilian smartphone users currently look to Google Play for app downloads. Nearly all these apps, however, are free. Developers wishing to adapt their revenue models to make money are embracing a prepaid model achieved through Brazil's mobile carriers. Initially focusing on Brazil (which has 250 million mobile subscribers), my company Bemobi is partnering with local mobile carriers such as Oi to offer apps from Electronic Arts and others.

Aside from mobile app developers, any business trying to reach users globally needs to understand the potential of the large swath of customers who will have soon have their first personal connected device. This new set of users may be using smartphones as their first personal device to connect to the Internet. And they will be connected through prepaid mobile services, most likely won't have credit cards and will have different expectations about prices. Therefore, variances in distribution, pricing and billing strategies will be key.

Related: Are Retailers Missing Out on Mobile?

Pedro Ripper
Pedro Ripper is the CEO of Rio de Janeiro-based Bemobi, which is focused on mobile-apps distribution. He is also a board member of Positivo Informatica, a PC, notebook and smartphone manufacturer in Brazil. Previously he held leadership positions at Oi, an integrated mobile telecom carrier in Brazil, and served as president of Cisco Systems' operations in that country. 

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