In the global economy of today, despite the remarkable reach of the Internet, only a minor portion of the world population have access to it. A whopping 87% of Google’s revenues come from advertising carried by its various web platforms. For example, the Adsense advertising program is one of the major streams of revenue for Google. Hence, it makes a lot of business sense to expand access to the Internet to as many potential consumers as possible. For example, “Connecting more people to the Web world-wide creates more potential users of its Web-search engine and other services such as YouTube and its Google Play media and app store. More than half of the world’s population doesn’t use the Web, particularly in developing nations, researchers say.” This is exactly what Google is trying to achieve as per the article in review. But there are quite a few challenges facing this vision. Firstly, the infrastructure in the developing world (where most untapped markets exist) is quite rudimentary and incompatible with the sophisticated tech products and services offered by Google. As a way of overcoming this problem Google is trying to create an independent network system that would function parallel with existing television and telephone broadcast systems. Already this proposition is being experimented with in South Africa, where a local school system is being supported via this new technology.
The challenges facing Google are not only in the realm of technology but also from powerful competing firms. Microsoft, one of the major rivals for Google, is trying out similar technological innovations with a view to installing them in developing nations. The advantages these new network infrastructure offers are two-fold. First, they reduce the burden on the conventional telecom airwaves, whose spectrum allocations are fully saturated. Second, they allow a more portable and localized network infrastructure to emerge, which offer firms like Google flexibility to target particular consumer groups. But as Amir Efrati notes, the path is not easy for Google, as incumbent cable and wireless network operators are fierce in holding onto their monopoly. The incumbents, especially in the US and Europe, “have clashed with Google, believing it is unfairly reaping profits on the back of their networks. Google has long feared such companies would make it harder for its Web services to work properly on the networks”.
Another major benefit for expanding access to the Internet is that it helps Google to enrich its consumer behavior databases. After all, this database is the backbone for catering targeted advertising centered on the individual consumer. This is already evident when we use Youtube or Gmail where placed advertisements are either ‘context’ specific or ‘user-interest’ specific. Since studies have shown that such targeted advertising works very well, Google has set its priorities in creating a robust, expansive and yet dynamic database to help this targeting. In this respect, it makes sense for Google to invest in this area, even if the potential returns in the near future are not very lucrative. The author of the article Amir Efrati mentions this key motivation behind market expansion in emerging economies. Otherwise, it would not have been obvious to the reader why such huge investments would be devoted to regions with modest revenue prospects.
Coming to the drawbacks of the article, it contains too many references to vague sources. For example almost every purported fact is attributed to “these sources said” “people familiar with Google’s plans said”, “researchers said”, “said people with direct knowledge of the matter”, etc. Nowhere are references to names or institutions from which information is being gathered for the article. Coming from a reputed journal as the Wall Street Journal, this practice undermines the credibility of what is written. It is as if the author is worried of libel suits from Google and Mircosoft – the projects of these two firms being speculated in the article.
In terms of its relevance though, the article is useful for students of Managerial Economics, for it presents a current and important development in the Information Technology industry. The student will learn that the world of business is very complex with multiple factors impinging on any managerial decision. And most of these factors do not show up in the annual reports, like, say, the political atmosphere prevailing in a particular market. Amir Efrati mentions how Google is lobbying hard to garner political support for installing its independent network infrastructure. The governments are faced with satisfying the safety requirements of the proposed high frequency devises. This is a legitimate precaution, for electromagnetic radiation from wireless antennas and receptors are feared to cause cancers in humans. This is one of the reasons that Google’s plans in trying out new technologies are being delayed. Secondly, politicians cannot antagonize their native contingency in terms of conventional network providers and related vested interests. Hence, there are numerous factors at play behind business operations – not all of them are straight forward. This insight is quite useful for the student of Managerial Economics.
Hence, overall, there are more positives than negatives associated with the article. Written in neat and easy prose, the article is largely devoid of technical jargon. Thus, it is accessible to students at all levels.
Efrati, Amir, (Updated May 24, 2013) ‘Google to Fund, Develop Wireless Networks in Emerging Markets’Retrieved from on 25th May, 2013