The social network cashing in on emerging markets

Facebook has been a roaring success in developed countries, but a new social media platform is about to take developing countries by storm.

When I discover what I think is a new means of communication that might affect future corporate strategies I prick up my ears. I have just discovered one that at first glance seems off the planet but it just might sweep significant parts of the world.

So let’s start with Facebook, which is a communication tool where the vast majority of the users describe themselves and their actions as they are. Some people invent a virtual character but it is certainly not the norm.

And Facebook is about to become an amazing marketing tool because the messages people exchange will be used to target advertisements at them. We have never seen a marketing tool like this before but this is a development that has been widely discussed.

But what stops Facebook from being a mass product in emerging countries is usually the unavailability of low-cost smartphones and the fact that those on low incomes close to the poverty line may not want to talk about their lives. In addition it can be against their culture and beliefs.

In China the Tencent operation has created virtual products so people can create their own character and buy virtual gifts. That’s been successful but its creation is very Chinese and Tencent will not necessarily sweep through South East Asia and India.

The looming boom in social media in South East Asia and India firstly emerges as a result of the actions of Taiwan-based Hon Hai Precision, trading as Foxconn Technology, which is the world's largest electronics contract manufacturer. Foxconn makes devices such as Blackberry, iPad, iPhone and Kindle. It is the largest private employer in China.

Hon Hai is now marketing a $45 smartphone in Indonesia and other parts of South East Asia. Now for the first time poorer people have mobile phone access to the Internet -- they are starting to communicate with each other. Accordingly, as part of the Taiwan low-cost mobile thrust, Hon Hai has taken a 20 per cent a stake in MigMe, a Perth-based Australian listed company that operates out of Singapore. The entrepreneur behind MigMe, Steven Goh, will be remembered as one of the pioneers of online stockbroking in Australia. He and his co-founder have assembled a group of people around him that has clearly caught Hon Hai’s attention.

Now, MigMe is a minnow: At last count it had just under $10 million in the bank and in the September quarter burned $1.6m – it’s not the sort of company that normally attracts a giant such as Hon Hai. Yet MigMe will be featured on the $45 Hon Hai phone front screen in Indonesia.

Here is my description of the of the MigMe/ Hon Hai plan: Migme is setting up a ‘Facebook’ for Indonesia but instead of people communicating as themselves they will create a virtual person -- the person they really want to be. And they will communicate with other virtual people on the clear understanding that this is all virtual. Naturally you will want to buy gifts for your virtual friends but you will pay real money for those gifts. Most of the gifts will be low cost but some will be expensive. The proceeds from the gifts go to MigMe.

Goh has established access to an extensive part of the Indonesian music market. You can listen to a large number of artists for free. But the better-known performers will only have excerpts free and you will pay to listen to the full track. For those performers who are free, virtual characters may want to send them messages and receive replies. That will cost money, and the artist gets a share of the proceeds.

What catches my attention is that this takes the virtual reality of games a step further -- if MigMe and Hon Hai are right, poorer people are seeking a virtual experience rather than a real one but will make real money payments in small amounts to enhance that virtual experience, just as they do in games. And the technique may be applied to many businesses, but imagination and technology is needed.

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