Smartphones in the developing world: Why platform fragmentation is here to stay

I work in telecommunications, specifically telecommunications in developing world markets where most consumers don't have access to data capable mobile devices...much less smart phones. I am writing this as I return from a resort in Puerto Rico, site of the CARICAM 2010 wireless conference, which I attended as an exhibitor and speaker. The conference is a gathering of carriers and service providers in the Carribean area and Central America.

This is my company's first foray into Latin America after spending the past year and a half focusing almost exclusively on Africa. In Africa, we have approximately 12-15 licensees in various stages of development (with more popping up every month). Our biggest live instance is GloWorld in Nigeria, a network with around 24 million subscribers, and the product is Glo Messenger, a solution for bringing Internet communications to even low-end phones using universal protocols, such as SMS and USSD.

$10-$15 handsets are quite typical in African markets. I love to show friends a phone that a business partner picked up for me - new - in Rwanda for $10.00. It's made by a Chinese manufacturer I'd never heard of, and had an instruction manual only a fan of engrish.com could love. That silver spot on the back isn't the lens of a camera...it's paint designed to LOOK like you have a camera. The edges have some text burbling about the wonders of 3D sound (whatever the heck that is)...but there isn't a jack for headphones, and there clearly isn't a music player built into the device.

The device does make a pretty strong statement, however, about the aspirational quality of cell phones in Africa. The phone in question might not have a camera or audio playback capability, but people WANT that, and want others to think they have it.

Even that device, however, supports voice and text. This means that we can give that user the ability to send and receive email, IM messages, and interact with Facebook in a meaningful way.

Demand for Internet communications services isn't just this LA-based developer projecting my own needs and desires onto an alien environment. Rather, the demand for Internet messaging in Africa is huge, and growing rapidly, in spite of the low penetration of PCs.

The nature of that demand is changing rapidly. When we commissioned a study of relative market share of Instant messaging clients in Kenya, the number one IM client was Yahoo Messenger, followed by Google Talk, followed by Facebook IM (with MSN Messenger a distant fourth). The Facebook result was suprising to me, as at the time Facebook IM was little more than a javascript and HTML widget built into the sidebar of the Facebook web page (and that is still how most people use it, even though it now has an XMPP client capability). Today, however, Facebook IM is far and away the number one IM client in Kenya.

Facebook is challenging Google on a number of fronts in the US, but they are doing it just as strongly around the world. Here's an interesting statistic I learned at the CARICAM conference: there are 4 million people in Puerto Rico, and 1.7 million Facebook users there...meaning that most of the adult population has a Facebook account. A piece of local culture information which might explain that figure is that news shows usually start with what I can only describe as gossip (a fact related to me by a Puerto Rican conference attendee, and confirmed by watching the local news broadcast). That might explain why Facebook is so wildly successful in the territory, as who better than your Facebook friends to exchange such information.

Facebook is changing the face of the Internet like a Carribean hurricane sweeping across the tiny islands which dot the water in the run-up to Miami airport (I am now editing this in the plane). I can't imagine Google, who for well deserved reasons would consider itself the premier Internet services company, thought they would be facing an inflection point quite so early in their life as a company. The technology wheel spins oh so very fast...

Smartphones are an aspirational good in much of Africa, and though true smartphones constitute a very small share of the total market for phones, people will spend a significant amount of money relative to their incomes to acquire something higher up the cell phone feature continuum. In Kenya, estimates I saw six months ago claimed that about 20% of subscribers have 3G-capable mobile device. Only about 10% of that number, however, have a data plan.

In Latin America, Smartphone penetration rates are around 6%, on average, according to Informa. Even though it is growing fast, it is still expected that smartphone penetration rates isn't going to be more than 25% by 2015. That's good news for us, as demand for our services is necessarily strongest among those who don't have data plan alternatives.

We are finding, however, that even people with "smart" devices use our service. The reason is simplicity and immediacy. People will check their Facebook page from their iPhones, to be sure, but what if you want to respond, in real time, to a message posted to your wall, add a comment in response (by just responding to the incoming text), and start a real-time dialogue with the person who is likely sitting in front of their computer surfing the Facebook web site? You could open the Facebook app you installed, but that isn't a real-time interaction the way SMS communication is. We let you do that, as well as stay online with multiple IM clients and receive email. You wouldn't want to run all that simultaneously on an iPhone.

On the smartphone front, Informa predicted that iPhone's market share would be squeezed over the coming years, particularly by Android, whose share of the total is ballooning in any predictive market share graph (and did quite noticably in Informa's diagram). Don't get me wrong - the size of the total market is inflating quite rapidly and every provider of cell phone devices with a credible ownership of some part of the market rubber ball will grow with it. In other words, even though their share might shrink somewhat from a mindshare percentage standpoint, shipments will still go up every year because the total size of the market continues to grow quite fast.

I don't think, however, that the trend will continue ad infinitum, as I explained in a bullet point in my presentation. Android will never be to cell phones what Microsoft and Windows are to PCs, because phones aren't like PCs. PCs and Laptops are essentially tools, and people don't make personal statements about themselves with tools (though Apple works hard to bend that rule, at least in laptops, which ARE carried on your person).

Devices you carry on your person are different, as they express more about you as a person (this is something Apple understands intuitively). In that context, phones - particularly the expensive smart variety - share certain demand characteristics with cars, clothes and handbags. That militates against one phone platform ruling over all. Android helps to broaden its appeal by letting manufacturers create a diverse mix of devices (Blackberry does the same), but I still don't see any of those platforms achieving over 90% market share Microsoft acquired for Windows (which many in this forum would likely argue is a good thing).

So, sorry, everyone, platform fragmentation in smartphones is here to stay...at least, in my opinion.

Of separate note: conventional wisdom in the US (and ZDNet) seems to be that Blackberry is doomed, run over by the twin juggernauts of iPhone and Android. One thing many US pundits don't realize, however, is just how effective Research in Motion (maker of the Blackberry phone) has been at penetrating third world markets. Blackberry is everywhere in Africa, and though it is far from a majority of total cell phones used on a network, it has a very strong showing among those who spring for a data plan. In parts of Latin America, such as Venezuela, Colombia and Panama, Blackberry is far and away the number one smartphone platform.

In that context, Blackberry Messenger - the blackberry-to-blackberry chat service that combines some of the benefits of SMS (the instantaneous notification quality, the built-in aspect) with the metadata of instant messaging (presence information, profile icons, etc), is quite brilliant. When I first saw it awhile back, I wondered what use people would have for a Blackberry - exclusive chat network. However, Blackberry Messenger is proving in many markets to be an important attractor, both for new users who want to chat with their Blackberry-owning friends (which in many countries, may be your entire peer group), and as a "sticky" service that makes it hard to wander to a new home on another rplatform.

In Venezuela, people ask what your BBM ID is. According to someone I met at the conference, kids buy Blackberries because of Blackberry Messenger, and all of her peers have Blackberries. Admittedly, she works in telecommunications and is likely paid a decent salary, but Blackberry has nowhere near the same mindshare in the US or the UK, as examples.

Blackberry's success with Blackberry messenger is interesting, but I don't know that a closed network model would work on a platform like the iPhone. There's a lot more variety in the Blackberry product family, both from a screen size and a pricing standpoint. This puts a Blackberry within the reach of a wider swath of mobile subscribers. iPhone, in contrast, has one device, and it is consistently expensive around the world...particularly in countries that don't subsidize cell phones (subsidization is not as common throughout Africa, usually because most people are pre-pay). Facetime might become interesting for iPhone to iPhone users, but iPhone will always be a very profitable but minority segment of the market (and, on current trends, is likely to be an exclusively developed-world phenomenon, which if you are shooting for the top of the luxury good heap - as I think Apple is - is no bad thing). This will constrain the utility of an iPhone-only chat service.

Anyway, those are just some thoughts based on recent events in a market area from which I earn a living. I'll try to provide more such nuggets of life on the edges of the technology sphere as they occur to me (it's certainly easier to bang out blogs on this, as it relates to things I spend every waking hour thinking about).

Of course, it is hard to me to stay silent on issues that raise the hackles of technology geeks back home. Platform battles are fun, and I've been chatting with ZDNet users about them for over ten years.

I'll just not do it today.