Internet in Some Developing Countries Not Profitable

http://www.nytimes.com/2009/04/27/technology/start-ups/27global.html?_r=1&th&emc=th

Certain internet companies, particularly ones that require large amounts of data transfer and thus bandwidth, including many of the most popular online sites such as Youtube, Facebook, and Myspace, are having trouble finding a balance between profit and idealism. Ideally, most of them agree they would like to have their websites be accessed by all the people around the world, but in reality, developing countries eat up a lot of bandwith and generate very little revenue (I assume because they aren't clicking on ads, which I never do, for that matter, do you?). Some companies, such as Veoh, a video sharing site, have gone so far as to restrict access to their sites in Latin America, Africa, and the Eastern Europe, while others offer 'lite' versions such as Profile Lite (for Myspace) in India.

'This intractable contradiction has become a serious drag on the bottom lines of photo-sharing sites, social networks and video distributors like YouTube. It is also threatening the fervent idealism of Internet entrepreneurs, who hoped to unite the world in a single online village but are increasingly finding that the economics of that vision just do not work.

“I believe in free, open communications,” Dmitry Shapiro, [Veoh]’s chief executive, said. “But these people are so hungry for this content. They sit and they watch and watch and watch. The problem is they are eating up bandwidth, and it’s very difficult to derive revenue from it.”

Internet start-ups that came of age during the Web 2.0 era, roughly from 2004 to the beginning of the recession at the end of 2007, generally subscribed to a widely accepted blueprint: build huge global audiences with a free service, and let advertising pay the bills.

But many of them ran smack into global economic reality. There may be 1.6 billion people in the world with Internet access, but fewer than half of them have incomes high enough to interest major advertisers.

If Web companies “really want to make money, they would shut off all those countries [Latin America, Africa, and parts of the Middle East and Asia]," said Michelangelo Volpi, chief executive of Joost.

“The part of me that wants to change the world says, ‘This is unfair, it shouldn’t be like this,’ ” Mr. Shapiro [of Veoh] said. “On the other hand, from the business side of things, serving videos to the entire world is just not supportable at this time.” '

- an internet cafe(?) in India. photo courtesy of NYT.