More Globalization Thoughts
So I was thinking about the stats that I posted yesterday about global internet users. North America makes up about 20% of all Internet users. But the Internet revenues in North America are certainly greater than 50% of all Internet revenues, although I say that without the benefit of any numbers.
I would like a chart of revenue/user in each major geography. I suspect that North America would be the highest, followed closely by Europe. After that, I suspect Latin America. Then Asia and Middle East/Africa.
Maybe there’s a proxy out there we can use. Maybe it’s Amazon. Maybe it’s eBay and the other major online auction sites (Mercado Libre and a number of asian services).
As investors like us start thinking about how to allocate capital to a global internet, it would be very useful to focus on revenue/user instead of just global audience.
Of course, that’s already happening because North America is only 20% of the global internet audience but it attracts well over 80% of the investment capital. And that will change. It already is.
I think it probably correlates with GDP or PPP or some measure like that. Simply said: As long as Asian/Latin American citizens do not have the same amount of $$ as an American citizen and do not spend as much on tech, it will be difficult to get to the same level with revenue/user. There may be some niches which can already be successful by leveraging the differences in the market or address the rich elite class, but I suspect it may take a little longer for the investment capital to be distributed more equally along the continents.
It might be interesting to chart GDP and PPP divided by internet users for each region and see what that saysAre there any econ students out there looking for a summer project?
Not an econ student (any more), but took a quick look at this. I combined the TechCrunch data on internet users and ad spend per country, then combined that with per capita GDP. There was not a lot of correlation. For instance, Brazil’s 2007 per capita GDP is lower than Mexico’s, yet ad spend per internet user was twice as high in Brazil than in Mexico. Now, per capita GDP has total population in the denominator, not internet population, so that could be skewing results, but I wouldn’t bet there are significant differences in internet penetration between France and England — certainly not as significant as the difference in interactive ad spend per user.When I have a little more time this afternoon, I’ll throw my data up on a Google spreadsheet for everyone to look at & critique.
Wouldn’t online advertising spend by country serve as a fairly decent proxy?
Not really because there are some very large commerce businesses in a numberof countries that don’t have large media businesses
FYI Korea’s Naver (top search portal) did about US$ 128mm operating profit in Q2 2008, while Google did presumably about $ 800mm in the US (given their 2Q 2008 profit in total was $1.58bn and their US business took up about 48%, or about half, of their total business.) So the ratio was about 6.25 there. Meanwhile, the US-S Korea ratio in terms of population is about 5.8, and the GDP ratio is about 14.5. So this might suggest that in countries where the internet infrastructure is advanced, like in Korea, the internet revenue per user can be as high as that of the US or Europe. Today China is a different story, as the Chinese don’t spend as much online now – but according to some of the Chinese bloggers that’s changing fast now. Now some even say China is about to observe the hockeystick curve in the e-commerce arena.
Korea is on par with the US for sureAs is JapanOr close to itBut the rest of asia is notI really would love to see the data
Fred,I thought PwC and TC did some work around this. Is this approx what you were looking for?http://www.techcrunch.com/2…http://www.pwc.com/images/o…More thoughts on the same vein here:http://andrewchen.typepad.c…http://andrewchen.typepad.c…
I just went digging for this as well. See the TechCrunch article first.
I’ll check out the linksThanks for posting them for me and everyone else to see Nik
I’d think the average effective CPM in search advertising would be the best proxy for revenue per user.
Agree. Average cost per click on AdWords is probably the simplest proxy. By that metric I believe many parts of the EU (especially the UK) are ahead of the US.
Ed – certainly in some markets. We know wine, and due to a whole slew of complex interstate laws Europe is way ahead with online wine sales. The US began deregulating interstate shipping in 2005, so its interesting to see how fast it catches back up.Glad to see people looking at data deeper than top level subscriber details.
very helpful numbers – thanks.makes me a little more confident in canada
I have used Google Adwords Spend to extrapolate market size. Adwords has three drivers, the numbers of companies that advertise, the average CPC and the total revenue line. We own several websites in LATAM and use these as guide lines. We have obtained them from different conferences we have attended.
Dollars can throw off your calculations. In China $50 K seems like a very significant Series A investment. In Silicon Valley, it’s lunch money. I would also wager there are US-based companies with over half its users out of the country. Your own Twitter, I’ll wager, has close to the same number of users in Asia that it has in the US.
I’d like to see the numbers for Asia broken out by country. A while back, I remember reading that South Korea is the most connected nation on the planet. I would expect more Internet innovation to be coming out of there as a result.
Hi Fred. Hope you are enjoying travel.Your points/issues raised are not really affected, but here’s some world internet/broadband usage data that is amalgamated from multiple sources, so is a little different from comscorehttp://www.internetworldsta…
Yahoo says that it gets most of its revenue from outside the US.
Do they give a percent breakdown?
I posted something on the BNET technology blog that you mgiht find interesting – some points I got from recently talking to IDC about their regular Internet demographic studies.
I guess that the URL would be helpful:http://industry.bnet.com/te…
Couple of things to look at other then revenue/user:*disposable income — this provides a glimpse of where their will be meaningful ad growth which is the core revenue driver of the Internet. As long as people have money to burn advertisers will want to get in front of them.*two markets within one: within some of these markets there are really two markets — take Israel or India where there is an upper middle class forming whose Internet habits are very similiar to those we see in the LA, London, or Seoul, but in an nearby city or even adjacent neighborhood the market is more similiar to a 3rd world country.
For Europe, IAB Europe has some (admittedly rough) figures about online advertising revenue per capita, from €133.2 in Norway to €36.9 in Italy (2007) (some of the data here:http://bit.ly/37UKSS). That is not the total revenue pool, but a pretty good proxy – more developed commerce, gaming, subscriptions etc. markets tend to be more developed advertising markets as well.
I found interesting reports by country under http://www.buyusa.gov/home/ 🙂
fred, agree that revenue/user is a more important metric to look at when evaluating global internet opportunities, a lot of money has been and will be lost in India and China as people try to invest in geography arbitrage (read Indian and Chinese companies copying US businesses) because the revenue is not there to support those businesses scaling, there are few strong global consumer Internet plays in India, on the other hand there are quite a few US companies that can expand overseas but in those cases they need to conquer the US before moving to other areas because the US is the lower hanging fruit for those companies