BIG TECH

Why Facebook´s Market Power Will Grow

While Facebook seems to lose users in North America and Europe, its “Free Basics” initiative is about to tap a massive reservoir of potential users in developing countries.

By Marco Schmidt

March 7, 2021

Abdul Latif

Loss of importance?

Facebook is undoubtedly the biggest social media platform in the world with around 2.7 billion active users per month as of the third quarter of 2020. Nonetheless, its rapid growth has not only come to a halt, in fact, the number of users in North America has decreased from the second to the third quarter of 2020 by one million. This is the first time ever that Facebook's user base in North America shrunk and one probable reason is the increasing popularity of platforms like Tik-Tok or Instagram (which, in all fairness, belongs to the Facebook group), especially among people aged 15-25. But does that mean that Facebook´s importance will diminish in the near future as North Americans and Europeans alike turn towards other social media platforms? Not at all, here is why:

Internet.org and Free Basics

Through its internet.org initiative, Facebook has committed to connecting the remaining half of humankind to the internet that, until today, still does not have access to it. A part of this initiative that was launched in 2013 is the “Free Basics” service. The idea is rather simple, as approximately 85% of the world population lives in areas with mobile coverage, many of those are still not able to pay for mobile data and are therefore excluded from using online services. Through cooperation with mobile operators, “Free Basics” offers access to certain apps and platforms free of charge. As Mark Zuckerberg, the founder of Facebook, proclaimed in the United Nations General Assembly internet access as a basic human right, this seems to be another step of Facebook in order to fulfill that goal.

This program has not been enrolled in most of the developed world due to the fact that the percentage of people that are already connected is a lot higher than in countries of the global south. Until now, the program focuses on countries like Guinea, Iraq, the Philippines, Honduras or Peru. The logic behind the project is clear; in places where people are not yet connected to the internet, the potential to acquire new users is enormous. Facebook does also have an inherent interest in getting people connected to the internet. Without the internet their very own platform cannot be used. Facebook claims to provide “Free Basics” users with news, health information, local jobs, education and communication tools. The latter obviously being Facebook.

The Success and its consequences on markets

The success of that approach is evident. Facebook, being the first player to penetrate the social media market in many places, enables people to access the internet, and not just that, Facebook is also the only choice among comparative offers as only selected platforms are accessible via “Free Basics”. It also stands out that the number of internet users in some Free Basics countries almost matches the number of Facebook subscribers, which is the case e.g., in Algeria, Guinea or Madagascar. The same goes for some Asian countries like the Philippines or Laos. On a global scale, while the number of Facebook users in developed countries might stagnate, the number of people that are enabled to get in touch with the internet through “Free Basics” are potential future Facebook users. There are already 2.7 billion Facebook users and approximately half of the world population, meaning another 4 billion people, are not even connected to the internet yet. Therefore, Facebook definitely has the chance to double its number of users in the future and remain the dominant force in the global social media market.

As the example of India has shown though, Facebook certainly cannot continue growing as smoothly as they might envision. In 2016 already, “Free Basics” was declared illegal by the Telecom Regulatory Authority of India for violating the rules of net neutrality. The concept of net neutrality establishes the prohibition of discriminatory behavior of an internet service provider to other apps, websites or platforms. As “Free Basics”, through a pre-selection done by Facebook, just allows the consumer to access certain content without paying for mobile data, many competing companies are denied access to the market. That, of course, is great for Facebook that is meanwhile establishing its dominant position in that very market.

The effects that “Free Basics” has on the functionality of the internet market in countries that are just starting to get their population connected are to be examined closely. A relatively high percentage of the population in India already has access to the internet (54,4%), so Facebook´s “Free Basics” will be a lot more influential in countries where this percentage is lower, mainly on the African continent. Facebook will continue to grow in these areas and almost naturally become the dominant social media platform. However, the consequences on the functionality of the growing and developing internet markets should be monitored and critically looked upon.

Marco Schmidt is about to finish his law degree at the University of Trier, Germany. He is particularly interested in matters of antitrust law and plans to pursue a LL.M. in Law and Economics at the University of Utrecht, the Netherlands. Being a German native, he is also fluent in English and Spanish.