Why did everyone abandon the feature phone market?

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On February 19 2014, Facebook announced they had acquired WhatsApp for $19 billion. WhatsApp is one of the most popular chat apps out there, with nearly half a billion people. WhatsApp is one of the few chat apps that has created chat apps for Symbian, Nokia Series 40 and the Nokia Asha platform – all platforms that most software companies left years ago. Why did that happen?

Jan Koum and Brian Acton, the founders of WhatsApp, are still carrying old Nokia phones in their pockets (along with iPhones and Android phones).  WhatsApp was first released on iPhone, then later on released apps for Android, then BlackBerry and feature phones.
Nokia Asha with WhatsApp
Nokia Asha 210 with a WhatsApp-button was released in June 2013

Growth in Emerging Markets

As Mark Zuckerberg has discovered, most of the growth the next decade will happen in emerging markets. Take a look at the following graph showing the expected number of mobile subscribers in 2020:
Growth in number of mobile subscribers – report from GSMA

As you can see, there is very little growth in Europe and North America. The growth will mostly be in Asia, Africa and South America. And that’s the reason Facebook put $19 billion on the table for WhatsApp. WhatsApp is one of the few really successful and growing apps in these markets.

In these markets, feature phones are still very important. Only recently (in Q2 2013, according to Gartner) did smart phones surpass feature phones in terms of sales. It will take another 5 to 10 years for feature phone users to slowly transition into smart phones users.

Why are people in emerging markets using feature phones?

Cost is an important reason why feature phones stay in the market. When people buy a new phone, there will always be someone who is willing to buy your old phone. While a brand new smart phone in Indonesia might cost as little as 40 USD, there will be someone who only wants to spend or can only afford 5-10 USD on an old Nokia phone produced in 2006. Because of that, the phones will circulate in the market for many years.

But cost is not the only important factor.  While doing user research in Nepal and Indonesia, I spoke with people who own both a feature phone and a smart phone.  Many actually have high end Samsung Galaxy Android phones, or iPhones. But most of the time, they use their feature phones. Why? Because when you live in a country with limited and unstable data connections, unstable power sources and costly data traffic, you end up preferring the performance of feature phones.

Benefits of using feature phones over smart phones:

  • The battery will last longer than most smart phones.
  • The software on the feature phones is designed and optimized to work on limited/slow phones, and with limited data traffic.

Winning in emerging markets isn’t just about the money (for now)

I believe one of the reasons app developers abandoned the feature phone market is the lack of revenues. A lot of people in Brazil, Indonesia and India do not have credit cards, and it’s thus challenging to collect payment from the users. But a few, like mxit and mig33 have been successful in monetization.

On Android, iPhone, BlackBerry and Windows Phone, there are already built-in systems for payment through the app stores. This makes it much easier to collect payments. And after all, smart phones are the future, and the feature phone market is dying (albeit very slowly).

Winning the feature phone market cannot be defined only by one’s ability to drive revenues in the present.  In reality, it’s about winning the future smart phone market, as billions of people get online for the first time or migrate over from feature phones to smart phones. That’s why Facebook is trying to “be the internet” in emerging markets, and is putting efforts into products like Facebook Zero, Facebook for text-only phones (basic phones) and Facebook For Every Phone (for feature phones). Plus, they are now also approaching the emerging markets with WhatsApp.  The focus of these products isn’t so much on monetization, but rather about creating a social conglomerate for the future.

Chat apps in emerging markets

Chat apps for feature phones

There are a few developers besides Facebook working on creating chat apps for the feature phone market. ICQ, Mozat Deja, mxit, mig33, mini Fring, RockeTalk, qeep, Hike, Chaatz and Saya. It will be exciting to see which ones survive, and which ones win the market. There is a huge potential, and there will be a massive growth of users – even users on feature phones.

There is no reason to abandon the feature phone market, quite yet!

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