The next billion: How to connect with the coming wave of Internet users

The next billion to go online will come from the developing world, offering an enormous opportunity for today's established companies to connect with them. So it's essential to understand just who they are.

Set amid the sprawling arid plain of eastern Kenya, the Dadaab refugee camp provides safety and shelter to 300,000 Somalis driven from their native land by drought and warfare. Many of them lack birth certificates or any form of identification, which exacerbates the difficulty camp officials face in providing basic services.

“It’s hard to build education or healthcare records without a birth certificate,” Brian Behlendorf, executive director of the Hyperledger Project, said at the Quartz’s Next Billion conference in San Francisco. To provide unique IDs to Dadaab residents, the United Nations Human Rights Committee is using Internet-enabled smartphones coupled with blockchain technology. “If that person shows up at a medical clinic or a bank, they can show a history, which lets them get treatment or take out a loan,” Behlendorf said. 

Similar stories are playing out all over the globe as digital information technology spreads beyond the developed world to provide innovative solutions for a huge new population of connected citizens. More are coming all the time. Right now, out of approximately seven billion people on Earth, only about 2.8 billion have Internet access. The next billion to go online will come from the developing world—places like India, Southeast Asia, Latin America, and Africa.

That’s an enormous opportunity for today’s established companies, but to connect with this new demographic, it's essential to understand just who they are. “If we don’t hear their voices, we’re not going to meet their needs," said Kimberly Bryant, founder of the nonprofit education startup Black Girls Code.

Here, then, are seven key characteristics of the next billion Internet users.

A supercomputer in their pockets

The first thing to understand is that the next billion users will be coming to the Internet via their mobile phones, speakers at the conference emphasized. Mobile phone penetration is going to rise globally, with many of the devices used in the developing world likely to be cheaper mobile phones with basic Internet capability. Today, there are 2.5 billion mobile users globally, and that number will eventually double, said Benedict Evans, a partner at venture capital firm Andreessen Horowitz. “Everyone is going to have an interconnected supercomputer in their pocket. And that creates a new kind of scale.”

Putting this amount of power in so many hands will mean that a vast swath of the globe will experience a technological leapfrogging effect, skipping landline telephony and desktop computers and going right into 24/7 personal connectivity. And those going online for the first time will be plugging into a global information space that's rapidly evolving with the emergence of deep learning and artificial intelligence. Mix all this fast-moving tech into a mosaic of local cultures and it’s anybody’s guess how all these changes will play out.

The next era of Internet connectivity won’t just be about offering consumers more options; it will also potentially change how society itself works. Take, for example, the Internet-enabled blockchain technology rolled out at Dadaab. What makes it revolutionary is that it’s distributed and universally verifiable, so there’s no way for a corrupt official to change documentation. In the Republic of Georgia, for example, a blockchain program lets residents know the title to their land can’t get taken away from them. “It’s a way of helping us reform the systems of the world to make them more accountable,” said Behlendorf. 

The lack of infrastructure in much of the developing world can make it difficult to do business. But it can also provide opportunities. When venture capitalist Hans Tung, managing partner at GGV Capital, arrived in China in 2005 looking for investments, even his own mother thought he’d lose his shirt. The country suffered from endemic corruption and had no tradition of customer service. Fewer than one in 10 consumers were connected to the Internet. The barriers to e-commerce were immense. Yet, paradoxically, the hostility of the environment turned out to be a boon for upstart e-retailers.

“When the offline retail experience is terrible, with poor service and small selection, you’ll be willing to try shopping online, even if it takes your merchandise four weeks to be delivered,” explained Tung. Fierce competition led to continuous improvements: “Service got better, selection got better.” Leading online retailer Alibaba saw its market capitalization climb from $100 million to over $200 billion today, making it one of the top 10 Internet companies in the world.

Location still important

Paradoxically, as the next billion people enter into the geography-less domain that is the Internet, the particularities of their culture and environment will be more important than ever. While it will be easier than ever to reach them from anywhere in the world, reaching them effectively will require the kind of savvy that can only come from physical presence. “If you’re selling technology to another technology company, you should be in Silicon Valley,” said Patrick Collison, co-founder and CEO of payment service Stripe. “But if you’re building a ride-sharing service in Mexico, you should be in business in Mexico.”

As an example, Collison cited Stripe’s experience working with small web startups in Japan. The company learned that due to banking regulations, it was very difficult for online retailers to accept payment in a variety of different currencies. So Stripe tasked its engineers to come up with a solution. The result was an easy-to-use service that allowed Japanese startups to do business with customers around the world. “That turned out to be a pretty big deal,” Collison said. “It's the kind of thing you can only learn by going to a place and getting in at the grassroots level.”

Another essential characteristic of the next billion is that they will be relatively poor. That certainly has its disadvantages from a business opportunity perspective. “These users aren’t going to monetize right away,” acknowledged Saad Munir, senior sales manager for web startup Jana.com. But on the flip side, Munir said, the marketplace is wide open.

“In the developed world, the ecosystem is very saturated,” he pointed out. “As more and more users come online in emerging markets, the potential is going to be enormous.” Jana.com aims to leverage this opportunity by offering customers free bandwidth to download apps. The cost is subsidized by developers keen to stake out market share while it’s still up for grabs. As those customers achieve middle-class incomes, companies that have earned their loyalty “are going to rake in money,” Munir predicted.

Many people in developing countries aren’t familiar with traditional ways of doing business in the West. That can be a hindrance, to be sure, but it also means that they may be open to ideas that might seem uncomfortably novel here. When Airbnb began operating in 2008, recalled co-founder Nathan Blecharczyk, “we wondered, ‘Is this idea only going to work in New York City?’” Needless to say, it caught on all over the place, but Blecharczyk said he was surprised that the idea did particularly well in an environment very far from its starting point.

“China is our fastest growing country,” he said, with listings leaping from zero to 10,000 in just 15 months. It turned out that the Chinese had been sharing their homes informally for years, and so the market was primed to understand the concept. And because relatively few Chinese have traveled abroad, “they don’t have any preconceived notion of what travel should be like,” he said. To them, the “sharing economy” and a traditional Western hotel chain are equally novel.

An enormous pool of potential customers

In the past 10 years, China has gone from fewer than 100 million Internet users, most of them dial-up customers, to some 700 million desktop and 600 million mobile users. In the years ahead, a similar explosion will take place in India, where only 35 percent of the country’s 1.3 billion people now go online, and in Africa, where 29 percent of the continent’s 1.1 billion people are connected. 

The pool of potential customers is enormously diverse. Based on his experience in China, GGV Capital’s Tung said the most productive approach to tapping a developing market like that is to partner with savvy, hard-working locals who know the written and unwritten complexities of the business environment.

“It’s not easy,” he said. “There are language issues [and] government regulation. There are no one-size-fits-all answers.” But if you combine Western business expertise with the relentless hard work and ambition of local entrepreneurs, “the potential is mind-boggling,” said Tung. “You can take on a giant and win.”

Stripe’s Collison is a believer. He said his company is continuing to expand into new markets around the world. For all the worldwide growth that the Internet has experienced thus far, we’re still only in early days, he said: “We haven’t seen the full potential of the Internet or even close to it. Globally, spending on the Internet is only two or three percent of the total.” That compares to eight percent of retail spending in the United States and 17 percent in China, and that figure is growing fast everywhere.

As relentlessly as the changes brought by digital transformation seem to be, they aren’t happening by themselves. Businesses have to identify opportunities, adapt their strategies to changing circumstances, and innovate to meet the needs of users. According to Bryan of Black Girls Code: “You need to create the future that you’re hoping to build.”

The next billion: Lessons for leaders

  • The next billion Internet users will go online using mobile devices, leapfrogging from no tech to high-tech in a single bound.
  • Lack of infrastructure in developing regions will both hinder Internet entrepreneurs and provide opportunities for innovation.
  • Understanding cultural, linguistic, and economic realities will become more important than ever as hungry local competitors enter the marketplace.
  • The next billion Internet users will be poor—but many will have significantly more income in the near future, motivating competition for their market share today.
  • They will not be familiar with established Western business practices, leaving them more open to new ideas.
  • While entrepreneurs in the developing world may not share the technical sophistication of their Western counterparts, they are hungry, hard-working, and savvy. This makes them essential partners in local markets.