There are several obvious macro factors at play with regard to mobile opportunities in emerging markets:
- Mobile penetration has rapidly increased over the past decade and is now quite high
- Feature phone penetration still exceeds smart phone, though is declining
Despite increased smart phone penetration there is still a large segment of the market for which text vs. a mobile browser or app is the dominant interface to data. It’s fascinating therefore that Google decided to shut down SMS search this past March. With these factors in mind, it’s interesting to consider if there could be a gap in the market during which a feature phone search company could gain strong consumer mind share. If such an opportunity did exist, what information would it organize?
My answer: food pricing.
Agriculture is still the dominant source of income for individuals in developing countries, and information assymetries still hinder efficient markets. This is well known, and there is some strong academic literature supporting the positive benefits of ICT in enabling efficient markets. The basic economic ‘Law of one Price’ asserts that the price of a good should not differ by more than the cost of transport between any two markets. When there is information asymmetry though this law is often violated.
Robert Jensen wrote a seminal paper titled “The Digital Provide” that studied the impact of cell phone adoption on market prices and resource allocation in Kerala, India. Kerala was a fantastic region to conduct a micro-economic study on the impact of ICT on markets because cell phone adoption was rapid. On January 1st, 1997 the first mobile phone was available in Kerala, and by 2001 over 60% of fishing boats and traders had phones. Jensen’s study surveyed 300 fishing units in the region every Tuesday from September 3rd 1996 to May 29th, 2001.
Fishing is a critical industry in Kerala. The industry employed over 1 million people at the time, and served as a dietary staple for 70%+ of adults each day. Fisherman also have to decide on which port to land at and sell their day’s catch while at sea, and prior to mobile phones they had to rely at best on honed heuristics.
After the adoption of mobile phones in Kerala, the price variance of fish decreased dramatically, and variance outside of transport costs almost entirely disappeared.
Visualization of Food Prices in Three Regions in Kerala After the Introduction of Cell Phones
We find that price dispersion was dramatically reduced with the introduction of mobile phones; the mean coefficient of variation of price across markets (the standard deviation divided by the mean) declined from 60–70 to 15 percent or less. In addition, there were also almost no violations of the Law of One Price once mobile phones were in place, compared to 50–60 percent of market pairs before. Further, waste, averaging 5– 8 percent of daily catch before mobile phones, was completely eliminated … in addition, fishermen’s profits increased on average by 8 percent while the consumer price declined by 4 percent and consumer surplus in sardine consumption increased by 6 percent (though relative to average household expenditure, the latter effect is extremely small).
Kerala wasn’t unique either. Similar work has been done in Niger by Jenny Aker who found comparable results.
Back to search in emerging markets: what if you could index daily food prices in local markets? Premise is the only team I have seen with a chance of building out such a database. They appear to be crowd-sourcing prices in markets around the world, and are looking to sell the data to macro investors, policy makers, CPG manufacturers etc. I don’t know how one would effectively monetize consumer price search on feature phones, but there are at least a few potential opportunities worth exploring. Two ideas might be coupling search with a trading platform, and using search as lead-gen for high value financial services such as micro-insruance or lending.
There is obviously also a multitude of other mobile opportunities in emerging markets, and this idea is really only in response to thinking about the potential market gap with feature phone penetration still exceeding smart phones and Google having shut down various texting infrastructure. Food price indexing and search is also obviously not restrictive to feature phones, however, if one is thinking about a search product for feature phones I imagine one wants to focus on one category vs. trying to do everything. If I wanted to try and beat Google at search in emerging markets, this would certainly be an interesting strategy.
Sources & Additional Resources