April 28, 2009
In Developing Countries, Web Grows Without Profit
To serve emerging markets, companies like YouTube need to invest in expensive servers, but ad revenue for those countries doesn’t cover those additional costs. The New York Times reports.
Web companies that rely on advertising are enjoying some of their most vibrant growth in developing countries. But those are also the same places where it can be the most expensive to operate, since Web companies often need more servers to make content available to parts of the world with limited bandwidth. And in those countries, online display advertising is least likely to translate into results.
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.
“It’s a problem every Internet company has,” said Michelangelo Volpi, chief executive of Joost, a video site with half its audience outside the United States.
“Whenever you have a lot of user-generated material, your bandwidth gets utilized in Asia, the Middle East, Latin America, where bandwidth is expensive and ad rates are ridiculously low,” Mr. Volpi said. If Web companies “really want to make money, they would shut off all those countries.
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