The New York Times has published a fascinating piece today http://www.nytimes.com/2009/04/27/technology/start-ups/27global.html?_r=1&hp that examines the questionable economics of the global march of digital properties into markets that are unlikely to generate sufficient revenues to cover the consequent cost of infratructure and bandwidth.
The article points out that Facebook, YouTube, MySpace and others are faced with the possibility of either wihdrawing service or offering a ‘service lite’ proposition to tens of millions of users in countries where their content is desired but where that desire does not translate to dollars.
In this case the issues are made more complex by the challenges all of the parties have in even the highest potential advertising markets. Other than Google (and then with little help from YouTube) none of the companies mentioned are actually significantly profitable and continue to operate their business on the back of shareholder funds that are required to supplement advertising revenues. The moment more cash is requered it’s likely that few developing markets, unless they are the sources of those funds, will continue to receive the service to which they have become accustomed.
There is somethong eerily familiar about this. One of the few things Empires have in common is that they tend to begin the process of implosion when the logistics and economics of the supply chain start to go awry. This happened in 1812 and 1942 in a very particular way and in slower motion to the British Empire over a period of 50 or so years. In the end implosion abroard leads inevitably to trouble at home but it’s a brave leader who can make the decisive call and withdraw with dignity before it’s too late.
For some, local entreprenuers and owners of indiginous media properties, this maybe the playing field levelling good news that they need to survive. It’s always tough to compete against someone who does not need to make a profit.