Facebook, Inc. FB unveiled its plans to open an ad sales office in Johannesburg, South Africa. This is expected to help the social networking company monetize the vast market of Africa with a population of over 1 billion, out of which only 120 million use Facebook at present.
According to Bloomberg, Facebook has appointed Nunu Ntshingila, the chairman of WPP plc’s WPPGY Ogilvy & Mather agency as the head of Africa operations.
However, the company will have to overcome quite a few hurdles before it can get a significant foothold in the region. The country is still struggling with little to no Internet connectivity. As a result, the majority of people are not aware of social media platforms like Facebook.
Nonetheless, the lack of physical infrastructure has propelled the extensive use of mobile Internet in the region, which is a positive for Facebook. According to a Jun 2015 report in The Guardian, researchers predict that mobile Internet in Africa is likely to increase 20 times in the next five years, which is double the rate of global growth. However, expensive data and unavailability of smartphones can dampen the company’s prospects in the near term.
Facebook is collaborating with telecom companies in the region to make its Internet.org available for users over there. Through the Internet.org app, one can avail free access to Facebook, Google GOOGL, Wikipedia, local information websites such as government services and weather updates. The project primarily aims to offer Internet access to those who cannot afford it.
This apart, the company is also planning to roll out a trimmed down version of its Facebook app that requires significantly less data but operates faster. The new app, called ‘Facebook Lite’, hit Asian markets this June and Facebook intends to launch the service in Latin America and Europe soon.
Such expansion initiatives have become a necessity for Facebook to maintain its growth pace, given the maturing U.S. market. Expansion in Africa will also allow Facebook to leverage the opportunities in the local advertising market (its primary revenue source). In fact, Ntshingila’s expertise lies in advertising. She will be overseeing the business so that Facebook can collaborate with local businesses and advertising agencies.
Africa can prove to be a difficult market for Facebook, but with the kind of potential that it holds, the risk might be one worth taking.
Facebook has a Zacks Rank #3 (Hold). One of the better-ranked stocks in the technology space is Akamai Technologies, Inc. AKAM with a Zacks Rank #2 (Buy).
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