Facebook Targets Greater Reach in Emerging Markets with MediaTek Deal
Facebook’s mobile reach may extend beyond just smartphones and tablets. The 750+ million member-strong social network teamed up with MediaTek last week, [1] a leading software and chip designer for low-end phones based in Taiwan. Through this partnership, Facebook hopes to develop its social networking app for low-priced featured phones that will help it penetrate the emerging markets where many customers cannot afford a smartphone and don’t have a personal computer. We believe this move shows that Facebook is being proactive about attracting new users and that it recognizes the impact of tapping these users longer term. As the world’s largest online social network, Facebook competes with social networking segments of Google (NASDAQ:GOOG), Yahoo (NASDAQ:YHOO) and MySpace in addition to local competitors in international markets.
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Developing Markets Are Key to Facebook’s Future Growth
Currently, the U.S. has the largest Facebook user base at around 156 million members with Indonesia and India at positions 2 and 3 respectively. [2] However, developing countries like India have a population in excess of 1 billion and present an enormous opportunity. With a huge population base and continuously increasing Internet penetration, Indian Facebook users are expected to overtake both the U.S. and Indonesia in the near future. [3]
This is where MediaTek comes in. While still in the early stages, this partnership should pave the way for developing Facebook applications for subsidized, low-end phones, which might cost less than $50. This allows for Facebook to reach many low-income groups in countries like India, who cannot afford a laptop, smartphone or tablet.
MediaTek is a well known chipset manufacturer that earns around 70% of its revenue from mobile chips and has around 40% of the mobile phone chip market in India as of 2010. The company is currently developing a way to embed Facebook in MediaTek’s Runtime Environment (MRE) solution and expects around 50% of its Indian customers to adopt this solution. [4]
We believe this is an important, pro-active initiative from Facebook, which can provide further upside to its already large user base. You can see the potential impact on an increased user base on our current estimates in the chart above. Note that Facebook is still a private company and our analysis is based on public information that we were able to acquire.
We currently value Facebook at around $45 billion.
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