Is “Free Basics” The Right Strategy For Facebook?
Egypt became the second country after India to shut down the controversial Facebook (NASDAQ:FB) sponsored free limited internet access service, after a government permit was not renewed. [1]. The Indian telecom regulator disabled the service pending investigations of whether it poses a threat to net neutrality. [2]. “Free Basics” launched under Facebook’s Internet.org brand, allows subscribers on supported phone carriers to visit certain websites without paying for data. In India under this plan, users can access 30 websites including Facebook. Since this limits internet access and provides an advantage to the sites which can be accessed for free, activists in India have been opposing this service stating that it is a threat to net neutrality. Apart from India, Facebook has partnered with telecom carriers to offer “Free Basics” in several African countries and some countries in the Middle East, Latin America and Asia Pacific. The social media company believes that the internet will see an additional one billion users in the next five years and a significant number of these users will come from emerging markets. [3]. “Free Basics” appears to be a strategy to attract these users, although controversies over how this impacts net neutrality have impacted Facebook’s reputation in these regions.
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Can Expand User Base But At The Cost Of Brand Reputation
Facebook claims that 3 million people in Egypt signed up for the “Free Basics” service which started in the region two months ago, of which 1 million received internet access for the first time. [1].Apart from Africa, Asia Pacific presents a huge growth opportunity for the company. It believes that India will represent 1/3 rd of the next one billion internet users. [3]. and given that only 30% of internet users in Asia Pacific are also on Facebook, compared to the 60% number in North America, the growth potential is tremendous. [4]. Through “Free Basics”, if Facebook is able to bring these users on to the internet and subsequently on its platform, it can see a tremendous growth in its user base. We expect Facebook’s average international users to grow from 1.3 billion in 2015 to nearly 2 billion by the end of our forecast period.
However, critics in India are accusing Facebook of using “Free Basics” as a disguise to capture users in India ahead of the competition. Since this initiative provides access to a limited number of websites, which currently does not include Google, critics believe that it violates the equal access premise of net neutrality and gives the social networking company a dosproportionate influence over the internet. [5]. Facebook believes that by allowing free access for a limited number of websites, it will prompt users to sign up for paid data packages as they will see the value of internet. As a result of this initiative, it will bring a lot more users to the internet, where they can access all content. However, this argument has not gone down well with net neutrality activists who are viewing Facebook as a threat to equal access to the internet. While this issue is being debated and discussed in India, regulators are expected to take a final decision by early January. It is possible that the outcome in India might affect the future of this initiative in other countries.
If successful, “Free Basics” should bring a large number of users from emerging nations on to Facebook, however if it is found to violating the net neutrality norms, it can negatively impact the company’s reputation.
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Notes:- Free Facebook –Backed Internet For Millions Of Egyptians Shut Down, NBC News, December 30, 2015 [↩] [↩]
- India temporarily bans Facebook’s controversial free internet services, The Verge, December 23, 2015 [↩]
- Facebook growth taps emerging markets, Bangkokpost.com, November 2015 [↩] [↩]
- Facebook pushes into Emerging Markets with Slideshow, A different light weight video pitch, Ibtimes.com, October 2015 [↩]
- Why India’s Net Neutrality Activists Hate Facebook, Bloomberg, December 30, 2015 [↩]