People like to talk about the next billion Internet users – but “you don’t get there by navel-gazing in North America,” said Nathan Eagle, CEO and co-founder of Boston-based Jana.
Jana provides free connectivity in emerging markets where, according to a report from the International Telecommunications Union, the cost of data is often as much as 10% of a person’s income.
Consequently, consumers purposely throttle their usage to save money. At the same time, regional carriers are contending with growing subscriber bases and declining average revenue per user, while global brands are struggling to reach new consumers.
It’s a conundrum. The solution, Eagle said, is advertising.
Jana operates an Android app called mCent that integrates into the back-end billing systems of more than 300 mobile carriers across 90 countries and counting. It’s got 30 million users so far.
Brands and developers – Jana works with Amazon, Flipkart, WeChat, Google, Zynga, Twitter and others – make their apps available through mCent, and when users download and trial them they’re rewarded with free data to do with as they will. The app subsidizes the download and Jana gets a cut. The cost to the user is nil.
“They can use the data for literally anything,” Eagle said. “And yes, users have to engage with advertising – but there are a lot of people out there who are willing to engage with advertising for unrestricted Internet access.”
AdExchanger caught up with Eagle following Jana’s most recent round of funding in February, a $57 million Series C led by Verizon Ventures, with participation from Publicis Groupe and Spark Capital. AOL CEO Tim Armstrong also recently joined Jana’s advisory board. The company has raised more than $93 million since 2009.
AdExchanger: What was the genesis for the idea behind Jana?
NATHAN EAGLE: Jana came out of my work at MIT and the University of Nairobi and with carriers in emerging markets. Carriers were suddenly being inundated with data about their subscribers. They knew there was a benefit there, but they didn’t have the computational horsepower or human resources to deal with it. I would go in with my MIT hat on and build models around churn and product adoption. But the thing carriers were most concerned about was ARPU – the average revenue per user.
Phones are becoming increasingly ubiquitous and they’re becoming available further down the socioeconomic spectrum. ARPU is plummeting and yet carriers are seeing their subscriber base growing dramatically. Their subscribers can’t afford the service and carriers need to spend a tremendous amount of money to upgrade their network systems. That was a major problem that kept coming up and, frankly. I had no idea how to solve it.
How did you ultimately solve it?
I stumbled on the solution by accident. I was teaching mobile phone programming at the University of Nairobi and one of the things we built was an SMS blood bank system where nurses could text in blood-supply levels from rural hospitals and we could show what the blood supply was across rural Kenya in real time.
It was great at first, but two weeks after the launch about half of the nurses stopped texting and by the end of the first month virtually no one was using the platform. It turns out that sending these text messages represented a substantial fraction of a rural nurse’s wage, and asking them to send us data every day was like asking them to take a pay cut – and that was fundamentally unfair.
So we started crediting the nurses. The minister of health in Kenya offset the cost and virtually every one of the nurses started engaging with the platform again.
The business model resonated with the carriers because it was a new revenue stream, but the obvious question was: If we’re talking about footing the bill for billions of people, who’s going to pay for it?
That’s ultimately when we became an advertising company.
What is the mobile advertising opportunity in emerging markets?
Advertising in emerging markets is a more than $200 billion business this year and it will be a $300 billion business by 2020.
But mobile advertising in emerging markets is fundamentally broken because of something very similar to what was wrong with the SMS blood bank. Most people in the developing world are on prepaid or pay-as-you-go plans, and that means when someone sees an Amazon ad in their Facebook feed, for example, they know that ad just took money out of their pocket. And if they accidentally touch the Amazon icon, even more money flows out. It’s like Amazon is asking a user to take a pay cut in order to start engaging with their brand. Users are paying for every byte they consume.
That’s why the vast majority of advertising dollars are being spent on TV, outdoor and radio. Global brands know mobile is the right channel through which to reach the next billion, but they don’t use it because it’s not effective.
What is the benefit to advertisers of working with you?
We help them unlock this audience – and it’s not a negligible audience. These are the fastest-growing advertising markets in the world. There are 1.3 billion people in the developing world with an Android phone in their pocket today struggling to pay for data. By 2020, that number will be 3 billion. It’s a massive audience advertisers haven’t been able to access on mobile before.
Is there a data collection side to this?
We’re gleaning a lot of information about what our users want, specifically what kind of applications they’re interested in and what they do with their phones. We’ve mostly been using those insights on our blog to help educate. We’re not going to be in the business of selling our users’ data.
You’ve said in the past that you’re not planning an exit for now, but how will the new relationship with Verizon impact Jana?
Verizon is looking to become more of a media company, specifically through the AOL arm. And as a media company, they’re trying to get to an audience of about 2 billion – but no matter how much you win in North America, you will be far from hitting that goal if you don’t focus on emerging markets. These markets are the key to unlocking the audience that virtually every vertical needs in order to stay relevant.
By subsidizing data, you’re helping global brands get traction. But how important is it for them to remain sensitive to the cultural nuances in local markets?
We’re reducing the friction advertisers have in these markets to get their apps tried out by users. But we’re just driving trials. If their app doesn’t really resonate with people in a particular geo for whatever reason, then they just won’t use it.
What is the opportunity for you in China?
China has always been the elephant in the room for us. In terms of sheer numbers, China is the largest mobile advertising market in the world, developing or not – and by a lot. It’s the place where the most Android users live.
There are obstacles in China we haven’t necessarily encountered before in places like Brazil and India, so we’re going relatively slowly and trying to build a foundation. I’m really bullish on the opportunity there, but we have to figure out how to crack it.
What do you think of Facebook’s Free Basics service?
A scaled-down version of Facebook has some value for some people, but there are other users that also want to do Google searches, they want to visit websites, watch videos and try apps. We enable people to access the full Internet.
At the end of the day, Facebook’s plan to have drones shooting lasers into the developing world or Google launching balloons across Indonesia are fun and sexy stories, but providing the next billion with free Internet access won’t come from balloons or drones, it will come from the same infrastructure where the first billion got their access from.
The table is set: The infrastructure is there and Android is in place. Now we need to get the price per megabyte below a certain threshold. It’s as simple and as unsexy as that.
