This is a Short Note.
As we wait for major investments in African telecom sector from the likes of MTN, Glo, and Airtel, it is possible that Facebook and Google may turn out to be the drivers for broadband penetration in most rural communities. The reality is that for Google (yes, Alphabet) to continue to keep Wall Street happy, it must find ways to improve ad business pricing power. (Goggle revenue per click dropped 23% in Q2). Sure, revenue was still up (21%) in the search giant because it had more users.
As WhatsApp, Pinterest, Instagram, Twitter and Facebook compete for online ads with Google, the pressure will be massive to reduce price. Over supply affects equilibrium, pushing price lower in an elastic demand market.
Ten years ago, Google was largely unchallenged in digital ad. But that has since changed. Even transition to mobile has even decimated per click value. Google needs to find a solution. Google Africa can deliver that.
The developing world, including Africa, will be the future drivers of growth. Google understands that, and the very reason its CEO is visiting places like Nigeria and India to boost the business. It knows that to compensate for the lower per click fee, it has to have scale. Yes, more users (both publishers and consumers). Unfortunately, what it is doing today is not enough.
Google has to return to its Google Fiber project and provide broadband to communities in developing countries. It can also pipe TV through that fiber so that it can sell ads on TV. This should be Google Africa strategy.
Google Fiber is part of the Access division of Alphabet Inc. It provides fiber-to-the-premises service in the United States, providing broadband Internet and IPTV to a small and slowly increasing number of locations. In mid-2016, Google Fiber had 68,715 television subscribers and was estimated to have about 453,000 broadband customers.
According to Bloomberg, it has some records, laying 621 miles of fiber in Uganda. That is not enough. the reality is that Google needs to commit more funds into this project in excess of the paltry $100m it is investing with partners. Its future in ad will be determined by these projects across developing world.
Google Inc. is scaling up investment in Africa by laying fiber optic cable, easing access to cheaper Android phones and training a workforce in digital skills as the U.S. technology giant seeks to expand on the continent.
“We laid about 1,000 kilometers (621 miles) of fiber in Uganda and we are busy doing about 1,000 kilometers in Ghana,’’ Google’s South Africa head Luke McKend said in a phone interview. “We want to make sure that we cover all the bases. We want to train people and make sure that they have the devices and are able to connect to the internet.’’
Of course, Facebook through its Free Basics is working on a similar strategy. though it partners with telecom operators directly as in Nigeria. I expect these tech firms to have huge impacts in Africa’s telecom sector in coming years as they look for growth.