|Issue:||Latin America 2011|
|Topic:||Mobile Will Transform Commerce in Latin America|
|Author:||Mahi de Silva|
|Title:||Executive Vice President, Consumer Mobile|
Mahi de Silva is Executive Vice President, Consumer Mobile, in Opera Software. Mahi is responsible for commercial activities of Opera’s consumer mobile products and services. Before joining Opera, Mahi was co-founder and CEO of AdMarvel, Inc., the global leader in mobile advertising platforms, acquired by Opera in 2010. Prior to AdMarvel, Mahi co-founded Frengo Corporation, a mobile social media platform. Mahi also spent ten years at VeriSign, where he was part of the startup management team. From 2002 to 2006, he served as senior vice president and general manager of Wireless and Digital Content Services at VeriSign, where he built the world’s leading mobile messaging and mobile entertainment business with revenues exceeding $600M per year. Prior to VeriSign, he held various technology-leadership roles at Taligent, Apple and NCR Corporation.
Through usage of Opera Software’s mobile browser, the rapid growth in mobile internet activities in Latin America can be gauged. Mobile operators who offer attractive internet pricing packages are increasing their market share but the real opportunity is the disruptive new medium of mobile eCommerce. Mobile search and advertising revenues are set to double in Latin America, encouraging fast growth of mobile ecommerce, where many users are currently unbanked. The common language and homogeneous market of Latin America are particularly attractive for the Internet mobile eCommerce giants. Thus, mobile operators who enable their devices will benefit greatly from the mobile eCommerce evolution.
The population across the countries that make up Latin America is now approaching 600 million people, and with a mobile adoption rate close to 90 per cent, the region boasts more than 500 million mobile phone users. Coupled with important factors such as lower land-line phone and fixed line Internet penetration and less expensive tariffs for mobile data services – the primary device for digital communications and digital commerce will be the mobile phone.
Mobile Internet usage is booming
From our perspective through usage of the Opera Mini mobile browser, the following are highlights of what we saw in the last year across Latin America:
• The top ten countries using the browser in this region are Mexico, Brazil, Argentina, Venezuela, Colombia, Chile, Costa Rica, Peru, Ecuador and Dominican Republic.
• From May 2010 to May 2011, page views in the top ten countries of Latin America increased by 1556 per cent, unique users increased by 535 per cent and data transferred increased by 1041 per cent.
• Growth rates in Latin America: Other than Mexico, Brazil and Costa Rica lead the top ten countries of the region in terms of page-view growth (1181.9 per cent and 718.0 per cent, respectively). Other than Mexico, Brazil and Costa Rica also lead the top ten countries of the region in growth of unique users (485.1 per cent and 426.4 per cent, respectively). Other than Mexico, Brazil and Colombia lead the top ten countries of the region in growth of data transferred (920.9 per cent and 486.4 per cent, respectively). Other than Mexico, Costa Rica leads the top ten countries of the region in page views per user, with each user browsing 662 pages on average each month.
• Among the countries of Latin America, the most popular sites include Google, Facebook, YouTube, Live, and Wikipedia. Facebook is a popular social media destination, though Orkut is more popular in Brazil.
• We looked at the top ten handsets used in each of the top nine countries of Latin America. Out of the 90 total handsets listed, 51 of them were Nokia, 14 of them were Alcatel, 13 of them were Sony Ericsson, four of them were Apple, four of them were LG, two of them were BlackBerry, one was Motorola and one was Samsung.
Mobile data plans disruptive pricing
Mobile operators that recognize the consumer appetite for the Internet and associated services have started to offer new data plans and options to broaden the base of mobile data users. As illustrated below, TIM Brazil began to promote Opera Mini in August of 2010. Leveraging the browser’s compression technology to minimize network consumption, TIM also introduced attractive new pricing options for mobile data. Across a short period of six months, TIM was able to more than double their number of mobile Internet users and more importantly, dramatically improve their market share for mobile Internet users in Brazil.
Mobile search, marketing and advertising will become a multi-billion dollar opportunity.
In 2010, total digital advertising spend in Latin America topped US$2 billion and will more than double to US$4.2 billion by 2014 according to eMarketer. As more consumers access the Internet from mobile devices, there will be a disproportionate shift of these advertising dollars to mobile formats. Enhanced targeting capabilities such as location and operator data, will compound the attractiveness of mobile traffic. Ad agencies are starting to tout the benefits of the Latin American market over similarly sized markets like the European Union because of the commonality of language (Spanish and Portuguese compared with 23 languages in the European Union) and the presence of major consumer brands that have strong pan Latin American relevance.
Digital commerce continues to expand globally and in Latin America
In the desktop Internet space, the US$60 billion global search, marketing and advertising businesses all need to create sales leads and subsequently convert them to sales. Revenue accrues to service providers that can reliably convert a lead into a commercial transaction. Global e-commerce will generate more than US$680 billion of revenues in 2011, according to J.P Morgan. J.P Morgan also named the top beneficiaries of e-commerce in 2011 to be Amazon, Priceline and MercadoLivre, the e-commerce giants in Latin America. For the first quarter of 2011, MercadoLivre announced that it had a total of 55.6 million users that engaged in US$954 million of e-commerce, of which US$254 million were paid through the Mercado Pogo payments platform.
Consumers in Latin America are underserved by traditional banking services and a majority of mobile phone users are “unbanked”. Given that Latin America is a cash-oriented economy and that a majority of mobile phone plans are pre-paid accounts, consumers have become highly familiar with the practice of “banking” a portion of their disposable income into a digital account managed by their mobile carrier, which is drawn down based on usage. The adoptions of mobile voice services have spread rapidly into rural areas of the region, prompting mobile carriers (or their pre-paid agents) to invest in expanding their presence. During the same period, traditional banking institutions, for a variety of reasons, have not expanded their presence to serve these consumers. This has created an opportunity to create a new disruptive paradigm for commerce powered by a mobile phone. The following examples illustrate the size of this opportunity and the power of mobile operators (and their partners) to drive innovation in disparate regions of the developing world.
M-PESA – Originally deployed by Safaricom (a Vodafone affiliate) in Kenya as a microfinance service, it has grown to a branchless banking service supporting deposit and withdrawal of money, transfer of money to users and non-users of the system, paying bills, m-ticketing and of course, purchasing airtime. In Kenya, M-PESA transactions now accounts for more than $3 billion – 11 per cent of Kenya’s GDP annually. The deployment has grown from Kenya to Tanzania and Afghanistan and has more than 13.5 million customers globally.
GCASH & SMART Money – Competing, yet similar systems launched by Philippine mobile operators Globe (GCASH) and SMART (SMART Money), answering the needs of a vastly underserved banking market coupled with a high incidence of wage earners that needed domestic and international cash remittance services. The system leveraged the ubiquity of SMS (text messaging) and the familiarity of the cash-in load network, and introduced the new powerful concept of a cash-out network, where consumers (and eventually enterprises) could take money out of their mobile phone account. SMART estimates that more than US$600 million has flowed through the SMART Money system in 2010. With more than ten years of deployment, these payments systems have pervaded the physical and virtual commerce in the Philippines and have inspired many new payments systems around the world.
In summary – key ingredients for mCommerce in Latin America
In Latin America is progressing rapidly towards mobile internet age with mCommerce. The following are the key points considered here:
– Mobile voice adoption is approaching 90 per cent and mobile Internet adoption is also growing rapidly
– Mobile operators are pricing mobile Internet plans to attract consumer adoption
– Digital search, marketing and advertising is a multi-billion dollar market, and is shifting to where the consumers are – mobile phones!
– Digital commerce continues to expand with regional giants like MercadoLivre
– Large parts of Latin American consumers engage in a cash oriented economy and are “unbanked”
– Mobile operators already deliver rudimentary “banking” services to mobile consumers
– Mobile operators (and their partners) can extend their services to become a key component of the commerce value-chain.