Internet Users in Developing Countries Drag on Sites’ Profits

NYTimes.com

Web companies with big global audiences and renowned brands struggle to turn even a tiny profit. Call it the International Paradox. Web companies that rely on advertising are enjoying some of their most vibrant growth in developing countries. But those are also the same places where it can be the most expensive to operate, since Web companies often need more servers to make content available to parts of the world with limited bandwidth. And in those countries, online display advertising is least likely to translate into results.

 

Build huge global audiences with a free service, and let advertising pay the bills. But many of them ran smack into global economic reality. There may be 1.6 billion people in the world with Internet access, but fewer than half of them have incomes high enough to interest major advertisers.

  • Last year, Veoh, a video-sharing site operated from San Diego, decided to block its service from users in Africa, Asia, Latin America and Eastern Europe, citing the dim prospects of making money and the high cost of delivering video there.
  • MySpace — the News Corporation’s social network with 130 million members, about 45 percent of them overseas — is testing a feature for countries with slower Internet connections called Profile Lite.
  • YouTube, which a Credit Suisse analyst, Spencer Wang, recently estimated could lose $470 million in 2009, in part because of the high cost of delivering billions of videos each month. Google does not rule out restricting bandwidth in certain countries as a way to control costs — essentially making YouTube a slower, lower-quality viewing experience in the developing world.
  • Facebook faces the expensive prospect of storing 850 million photos and eight million videos uploaded to the site each month. It is struggling to finance its expensive global growth.

"Serving videos to the entire world is just not supportable at this time.”

 

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