MIT Technology Review

Thursday, March 21, 2013

Facebook and Google Create Walled Gardens for Web Newcomers Overseas

In some countries, “the Internet” is confined to certain sites as part of a strategy to help wireless carriers offer starter packages.


With more than half the people in the world still not online, Facebook and Google are waging a battle to make sure that Internet newcomers get their first tastes of the Web from them.

Each company is persuading wireless carriers in poor countries to offer customers free or very cheap online access that is limited to stripped-down versions of the Web giants' sites. The idea is that once these new users get some experience in a walled garden of Facebook or Google, they will want more Internet access and pay for it, making the carriers' initial investment worthwhile.

The companies are not disclosing how well the campaign is working, though usage of Facebook and Google is growing sharply in the developing world. What's clear enough is that with more than four billion people still lacking Internet service, there is a large need for cheap mobile access (see this month's MIT Technology Review Business Report, Making Money in Mobile). "What's striking is that the majority of people who own smartphones in places like Indonesia don't have data service. They carry around a BlackBerry with no way to do anything other than SMS," says Nathan Eagle, founder of Jana, a Boston-based company that conducts surveys of people in developing countries via simple phones for a variety of clients. "These efforts are trying to expose people in a cost-effective way to what the Internet is." 

Facebook began this in 2010 with Facebook Zero, which lets Internet carriers offer a stripped-down version of the social network for free or very low cost and no long-term contract. The roughly 50 carriers in 45 countries that participate get revenue when users incur data fees by clicking on photos or other links beyond the News Feed items that Facebook Zero displays.

Then, last fall, Google followed suit with Free Zone, starting in the Philippines, Indonesia and later South Africa. Carriers that use Free Zone let their customers perform searches, check Google Plus, and use Gmail on their feature phones. Free Zone users can open any Web page from a search result without charge.  However, they will incur data charges if they click beyond that page, or if they open a photo or other attachment in Gmail.

Facebook says it is not paying the carriers to offer the cheap or free service; a Google spokesman said the company would not discuss business terms. "Many operators consider Facebook Zero a gateway experience to the Internet, so there is long-term value in Facebook Zero's ability to introduce and engage mobile-first Internet users on their network," says Facebook spokesman Derrick Mains. He did not disclose how many people are using Facebook Zero, but there is huge room to grow; Facebook has signed up less than 10 percent of the population in many countries in Asia and Africa.

One large wireless carrier in Indonesia, Telkomsel, offers an introductory package called "Facebook Paket" that gives customers access to just Facebook and chat services for about $3 a month, though customers can also pay 20 cents per day or $1 a week. By contrast, a Telkomsel plan with voice, text messaging, and two gigabits of data costs $8 a month—and requires a 12-month commitment.

Telkomsel did not reply to interview requests. But Victor Ferraro Esparza, a strategic product manager at Ericsson, maker of the network equipment that keeps customers of Telkomsel and other carriers within their walled gardens, says that the plan has led to an increase in wireless data subscriptions. "What we saw there is that when they were simply offering an undifferentiated mobile broadband subscription for a monthly payment, they had relatively little interest," he says. But once the carrier offered lower-priced special purpose plans—the first of which was Facebook Zero, plus a few chat sites— "they had a big increase in new subscribers, and were later able to convert some of those subscribers to a higher-priced unlimited mobile broadband package."

It's not yet clear if this tactic is aiding Facebook and Google. While Facebook has quickly added users in the developing world, that may simply be a reflection of broader trends such as rising levels of mobile phone ownership, says Carl Howe, a principal analyst at the Yankee Group. "Would that adoption have happened without Facebook Zero? We don't know. There is no blind study, and correlation does not imply causality," he says.

Eagle believes Facebook Zero is having a noticeable effect in some places. He says it helped Facebook more than double its usage in Africa in the 18 months after its launch. And Jan Rezab, CEO of Socialbakers, which tracks social media statistics, agrees, saying that "we believe Facebook Zero has affected growth in developing countries."