100 Million Reasons Why Facebook, Inc. Is Succeeding in Africa

Source: Facebook.

Africa may not be the most attractive growth geography for social networks like Facebook (META 2.50%), but there are still an awful lot of people to connect. To that end, Facebook just announced that it has now crossed 100 million monthly active users within the continent. That figure represents half of Africa's Internet-connected population.

What kind of an opportunity does this milestone represent for the world's largest social network?

The good news and the bad news
For Facebook, Africa has some important opportunities as well as challenges as it attempts to grow its presence in emerging markets. The company notes that 80% of its African MAU base is accessing the service on mobile devices, which is precisely where Facebook is firing on all cylinders.

In a way, that means that Africa sits right between one of Facebook's strengths and one of its weaknesses. The company has been absolutely crushing it in mobile, generating $5.1 billion in total mobile ad revenue over the past year. But Africa is grouped within its Rest of World operating segment, which is easily the weakest in terms of monetization. Other regions within Facebook's Rest of World segment include Latin America and the Middle East.

Source: Facebook. ARPU = average revenue per user. MRQ = most recent quarter.

It's highly unlikely that payments revenue within Facebook's Rest of World segment will increase much, since digital micro-transactions aren't particularly popular in those parts of the world. Besides, even on a global basis the payments business is hitting a ceiling. The advertising business is really where the opportunity lies.

There's a WhatsApp for that
It's also worth pointing out that Facebook acquisition target WhatsApp utterly dominates Africa, particularly in countries like South Africa. Nearly four at of every five South Africans use the popular messaging app in any given month, easily beating usage of Facebook's own Messenger service (45%).

Wireless carrier Econet launched an affordable data package earlier this year that includes unlimited WhatsApp service, and the messaging service now accounts for nearly a quarter of all network activity. While WhatsApp and Facebook may not benefit financially in the near-term (since those data fees are going to the carrier itself), Facebook is mostly content with figuring out its monetization strategy later on for its planned $19 billion acquisition.

For now, WhatsApp's dominance in Africa is a good reminder of why Facebook wants it in the first place: it perfectly complements Facebook Messenger as a more popular service in emerging markets.

If Facebook builds it, advertisers will come
Facebook's strategy in any market is to start by attracting users, and then to work on the monetization front through advertising. Hitting 100 million MAUs is an important milestone on the first part of that equation. The challenge with getting African users on Facebook in the first place starts with the cost of connectivity, as data plans can be prohibitively expensive.

That's precisely why Facebook launched Internet.org last year with a handful of partners, whose stated purpose is to bring the Internet to the developing world. In July, the organization launched the Internet.org app, which offers various subsidized "basic services," making them free to users. The app is initially available to Airtel subscribers in Zambia. Naturally, Facebook is included as one of said "basic services," as is Facebook Messenger and with Google search, among others.

The second step of growing the advertising business will require a lot of localization, as Facebook is aware that different markets require different products. Facebook says it has partners like Unilever that it will work with to test different ad solutions.

As Facebook continues to grow Internet adoption (via funding Internet.org), its MAU figures in emerging markets like Africa should continue to rise. As those new netizens begin using Facebook and WhatsApp to connect, advertisers should follow and Facebook's business should keep on crushing it.