Financial Forecast Series - Part III

Sep 21, 2017

Youth in Emerging Economies are Using the Internet to Close the Development Gap.

When identifying relevant factors for the enormous growth in emerging markets, technology adoption, usage and diffusion of the internet and adjusting to an ever more “interconnected” world are commonly discussed as the most critical metrics for analyzing development. Although these factors are commonly discussed as the most crucial metrics, how important are they really?

In contrast to public transport or public health, comparing the adoption of technology and internet diffusion across countries requires just a study of just a few years to understand the impact of technology adoption.

A Pew Research Center report surveyed the internet usage of more than 45,000 individuals in forty countries around the globe, in developed and emerging economies. Take a look at the results!

⅔ of people surf the internet worldwide!

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Analyzing the Pew Institute survey results: in 2013, an average of 45% of interviewed individuals in 21 emerging countries responded that they surf the internet regularly and own a smartphone. The numbers change radically if we look at the data in 2015, where the percentage increases to 54. A large percentage of these respondents come from Malaysia, Brazil and China. The number of opportunities for tech startups operating in developing countries is growing due to the uptick in internet usage. As more and more people around the world turn to the internet to help them live their lives, it is up to young entrepreneurs in these countries to take full advantage of these opportunities for economic growth.

To better understand this overall increase in internet users, it is best to compare the data from emerging economies to the statistics in developed countries. In developed countries (Europe, North America, Canada, Israel, Japan, Australia, South Korea) the percentage of individuals who regularly surf the internet increases to 87%!  The gap between the percentage of regular internet users in developing and developed economies continues to exist, but the number of internet users across the board is increasing.

Studies show that in the coming years there will be an overall increase in the “digital literacy rate” (ability to understand and use technology) of individuals in within emerging economies. The gap is predicted to decrease even more during the next 2-5 years. The median of the distribution gap is 67%, meaning two thirds of the global population currently use internet. This number will only increase in the future.

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The increase in web access in emerging countries is due in part to the web contagious effect. The web contagious effect states that three fourths of internet users are voracious; using the internet every day and in most of the cases several times per day. This holds true in the Pew Survey whereby 76% of survey respondents, stated they use social networks on a regular basis including Facebook, Twitter, Instagram, and Snapchat.

One of the biggest surprises within these survey results is that the most aggressive networkers are in regions where internet coverage is low. Three fourths of internet users in Middle East (86%), Latin America (82%) and in Africa (76%) say that they use social networks regularly and can be categorized as voracious users, as opposed to 71% of North Americans and 65% of Europeans.

Is it an education issue?

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We cannot overlook the importance of education to the broader question of access to and knowledge of how to use the internet. The more people in emerging economies accumulate wealth and continue studying on through to higher education, the more their technology use will grow.

What does this mean for entrepreneurs? Opportunities where entrepreneurs can bring education and technology together are ripe for the taking! Opting to focus operations in developing countries may prove to be a better market with a higher potential growth rate than developed economies where startup markets in many industries are saturated. Investing in schooling tools or products (for example startups that invest in schooling infrastructure, general apps for smartphones, apps for learning new languages, didactical social games, puzzling games, etc.) can prove to be a highly profitable sector as demand for these products continues to grow in emerging economies.


Is the gap really so big?

At the moment, the gap remains consistent between emerging and developed economies, but it is probable that as education, access, and internet penetration continue to grow, that over the next ten years this gap will continue to shrink. Entrepreneurs in developing countries continue to grow their skills and close the gap, taking advantage of the increase in internet access and usage by bringing the benefits of tech to these emerging economies. Millennial entrepreneurs in emerging economies continue to enhance their digital literacy and test the boundaries of tech. Watch out for the young entrepreneurs of the future to use the internet to close the development gap.

Francesco Mazzola is a regular Contributor to the Ye! Community.


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