Increase online content to let digital ecosystems flourish

10 September 2015

Increasing the availability of local Internet content and services is a key factor in the development of a rich online ecosystem, as local content incentivises the uptake of Internet users, research by Strategy& shows. To explore how Internet content develops, the consulting firm surveyed 75 countries on their digital ecosystem maturity, finding that countries go through four distinct phases. To be sustainable in the development through the various phases, government as well as businesses are needed to incubate and foster transitions.

Internet infrastructure is an important factor in the uptake of Internet in a country. However, local and relevant content in an online ecosystem also factors as a key incentive for people to use the Internet. In a recent article, titled ‘Understanding Digital Content and Services Ecosystems’, Strategy& considers the evolution of the reciprocal relationship between users and content that grows towards a rich digital ecosystem. The consulting firm notes that “ensuring a sustainable supply of local, relevant digital content creates incentives and reasons for subscribers to get online.”

The greater the depth of available relevant content, and the more diverse the types of available content, the higher the maturity* ranking of the ecosystem. As part of its study of different environments and the development of digital diversity, Strategy& compares the maturity scores of 75 countries with their rates of Internet penetration. This allows the consultancy to identify trends that relate generally to four different phases in the development of their respective ecosystems.

Digital content and services

Four phases
The first phase, in which developing countries such as Ethiopia and Cameroon find themselves, is called ‘Content Foundation’. In this phase the initial online content is developed which creates an incentive for early adopters to start consuming the material online. This includes information and entertainment, but the secondary motivators include utilities, such as e-government services. According to Strategy&, this stage, which takes around four years, sees the average Internet penetration increase from 5% to 13% and the ecosystem maturity index from 14 to 27.

The ‘Network Effect’ is the second stage of development. India and Ghana are on the cusp of this phase, while Thailand is on its way to toward maturing out of this phase. In this phase, the growing number of users increases the value of the services, which feeds back into pulling more users in and thus building positive momentum for Internet uptake. This stage follows an S-curve which, once a critical mass is reached at around 25%, takes only two years for Internet uptake to reach 35%. Internet use increases from 13% to 43% and the ecosystem maturity index increases from 27 to 40.

Ecosystem maturity vs Internet penetration

In the proceeding phase, ‘Monetisation’ occurs. Countries like China and Brazil find themselves in this phase, while Malaysia has recently passed through. This stage sees content providers develop ways to monetise their offerings, which creates further incentives to develop more content. During this period, Internet uptake increases on average from 43% to 62% and the ecosystem maturity index from 40 to 50.

The final phase is called ‘Content Diversification’. This transition is about intensified content diversification through business services, which are now able to operate their business models. This occurs either as a way of enhancing the scale and productivity of existing business models or as a way of creating new Internet business models. In this phase, Internet penetration increases on average from 62% to 85%, and the ecosystem maturity index increases from 50 to 61. This is the state in which developed economies find themselves, such as the UK, US, Germany and South Korea.

Economic sustainability models

Another factor highlighted is that different countries require different models to sustain the development of a digital ecosystem that enables and incentivises Internet users to log in and use services. The level of income is related to how far advertising and e-commerce can drive the development of an environment, with lower incomes lacking the disposable income to keep an ecosystem sustainable.

Particularly for developing countries, in which household income is low, governments are important in making nascent Internet ecosystems sustainable, this goes for countries like India, Nigeria and Kenya. Thailand and Malaysia are examples of countries whose online ecosystem is sustained by advertising, and the United Arab Emirates is an example of a country that uses a subscription model for its online ecosystem. Most highly developed economies function on a mixed advertising/e-commerce model.

* Strategy& defines ‘Ecosystem Maturity’ as a function of both the depth and the diversity of the different content categories within a certain country.


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