Just over a year ago, Facebook (NASDAQ:FB) launched its Internet.org service in Zambia in partnership with local wireless carrier Airtel. Since then, the service has expanded to 17 countries covering 1 billion people. Facebook recently made Internet.org available to any carrier interested in offering free Internet service to its subscribers.
It was inevitable that Facebook would have to take a more hands-off approach with Internet.org to reach its goal of connecting every single person to the Internet. By working closely with the first 20 or so partners, Facebook can extend what it's learned to carriers and deal with specific issues only when they arise. The question, though, is whether carriers will sign up to subsidize their subscribers' data service.
The compelling reason carriers should sign up
During the first year of Internet.org's work with various carriers, the Facebook-led initiative found a couple of very interesting statistics. First, Internet.org brings new users onto mobile networks over 50% faster compared with carriers without the free service. That means carriers with Internet.org are more likely to win new customers than those without the free service.
The bigger upside for carriers is that Facebook also found that more than half of the people who use Internet.org end up buying a data plan within the first 30 days. That's a clear and quick return on investment for carriers.
Basically, carriers can view Internet.org as advertising for their data service. It's especially effective in countries with low Internet penetration, because consumers aren't going to be very interested in data service if they don't know what they'd use it for. By providing limited Internet access to consumers, Internet.org is the equivalent of a freemium game that charges you to unlock extra levels.
Facebook doesn't want to be an ISP
Facebook is testing all sorts of ways to send Internet signals to areas without access. From lasers and solar-powered planes to satellite connections. Still, the most effective in terms of access and cost is convincing wireless carriers that offering free Internet service is the best thing they can do for business.
Facebook's bigger focus is on making its apps accessible to everyone in developing countries, where Internet connection speeds can be significantly slower than the rest of the world. Facebook recently unveiled a tiny version of its flagship app called Facebook Lite that's just 252 kilobytes and is optimized for slower connections with limited data caps.
Meanwhile, the company continues to work on its messaging services, WhatsApp and Messenger, which provide alternatives to the very phone carriers Facebook's trying to convince to pay for Internet users. Both services complement each other geographically, with WhatsApp popular in more developing markets.
Facebook's user base currently consists of around half of the world's Internet population. While it's slowly making progress with steady absolute user growth, Facebook won't forever be able to continue adding users like it has. Increasing access to the Internet is one of the best ways for Facebook to prolong that user growth.
Internet.org provides the added benefit that Facebook is one of the first experiences users have with their new Internet access. After pressure from net-neutrality advocates, however, Facebook opened up Internet.org to other developers with strict restrictions on data use.
With 1 billion potential users covered within one year, Facebook is off to a great start with Internet.org. Opening up to more carriers will certainly accelerate its coverage. The next step is for Facebook and carriers to persuade people to sign up.
Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.