Our headquarters are located in Estonia, which is a country with 1.3 million people. This country is roughly the size of New Hampshire. Testing products in Estonia is mostly fruitless – the sample size is small enough to be statistically unreliable, even when building a consumer product. Regardless of the limitations, we have connected 80 countries through 300 mobile operators – the largest coverage in the mobile payments industry.
Our highlighting of these numbers is not meant as self-appraisal. Because we don’t have a comfortably large home market, expansion into other countries has been vital for us. It is also something that companies in large, developed countries do not have to worry about and has proven to be a wonderful competitive advantage.
Companies with a large enough user base in the home market are in danger of getting tunnel vision. If you are already at break-even, why would you take the chance of expanding into uncharted territories on other continents? If thinking about launching your product in Brazil or Poland seems risky, it’s because expansion has not been internalized in the company from the get-go. You are essentially giving up on targeting billions of potential customers.
In addition to avoiding risk, another reason for evading expansion is the false assumption that revenue is concentrated in North America and Western Europe. While it is true that the purchasing power in these regions is significantly higher, the other side of the coin is that user acquisition and competition is much tougher as well.
In the mobile payments industry, we can illustrate this disparity by comparing user acquisition costs on the iOS and Android platforms. Android is dominating the emerging markets and user acquisition is almost two times lower than on iOS. Mature consumer economies are flooded with products and services, which means it is much harder for a newcomer to stick out.
One of our most successful markets in terms of revenue is Brazil. This is a country where we have neither an office nor any local employees. There are several reasons why Brazil is huge for companies involved in mobile games:
- Brazilians has a population of 193 million people
- Brazil is the second largest market on Facebook after US
- 31 percent of all men in Brazil are gamers
- 23 percent of Brazilian Internet users play games regularly
Brazilians love gaming. So, why wouldn’t you try to enter this market as a game developer? The data above allows us to argue that there is revenue potential there and our own success in Brazil confirms it. However, if you think about your social circle – what percentage of entrepreneurs are planning of expanding into Brazil? It is likely to be very few, as emerging economies are not important for many companies.
If you do decide to differentiate yourself and aim at a market in Latin America, Eastern Europe, Africa or Asia, there key criteria to be considered not usually relevant for US-centric companies:
- Language – Forget English. In Latin America, you need Portuguese (the Brazilian version) and Spanish to guarantee that people can understand you. In Europe, there are 50 countries, most of which have their own language – and so on.
- Hardware & connectivity – Not everyone owns the latest MacBook or Galaxy S4 – if your product does not run on less powerful lower-end devices, traction might not be as good as you expected. And if your product needs heavy data usage to work, it would be smart to check what kind of high-speed Internet coverage your target market has.
- Design – Open up the homepage of China’s largest instant messaging service QQ and you will notice that it is completely different from what we consider “good” web design. Design is not culturally universal.
- Payment options – In Brazil, only one third of the population has credit cards. In order to collect revenue from users, you need to look at what payment methods work in each country – it might be worth considering mobile payments, pre-paid cash cards, etc.
- Pricing – The Big Mac Index has a good reason for existing – people in different countries have different purchasing power. Do not expect your product to sell if you are asking for the same prices as in the States.
Emerging markets might seem like a gargantuan challenge at first – foreign, fragmented, and distant. But that’s only because you have not been thinking about them in the past. With China reaching the first position in smartphone sales last year globally, now is the latest point at which you can afford to start reaching out.
Fortumo is a mobile payments company that powers in-app payments for game developers such as Rovio, Gameloft, Vostu and Zeptolab. The company covers 80 countries through 300 operators and lets users make payments on the web and in Android, Windows 8 and Windows Phone apps. For more information about Fortumo, visit http://fortumo.com. For insights into the mobile payments industry, read http://blog.fortumo.com.