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Using zero-rating to improve the mobile experience in Africa

(Image credit: Image source: Shutterstock/ESB Professional)

While the pace of technological revolution continues to speed and increasingly impact the lives of people around the world, the reality is that financial limitations continue to create disparity for millions of people in emerging markets. For instance, Africa is the least wealthy continent by gross domestic product (GDP) at $1,809 per person vs. the world average of $10,300.

Strikingly, many consumers in the African market pay some of the highest mobile Internet rates. Case in point is South Africa, where 1 GB of data costs the equivalent of two days’ work. Despite the financial disparity, however, Africa is one of the fastest growing regions for mobile subscribers, with a compound annual growth rate (CAGR) of 4.6 per cent expected through 2025, resulting in the number of mobile subscribers increasing from 456 million in 2018 to 623 million in 2025. 

Savvy mobile operators recognise the opportunities available by providing affordable, creative mobile solutions for economies like those in Africa and in a number of other emerging markets. One key strategy is for mobile network operators to differentiate themselves by providing zero-rated advertising funnels.

Redefining zero

At first the concept of offering a service at “zero” might seem counterintuitive. However, the strategy behind zero rating is a win for mobile operators, advertisers and consumers.

Traditionally, opening the homepage of a key publisher in South Africa requires between 1-2 megabytes of data, and up to half of that data consumption is spent on ads that users have no intention of rendering or viewing. As such, the brands – or advertisers – are seen as the bad guys because they cost users money in the form of data. In a place like Africa, where data can be disproportionally expensive, this strategy penalises users who have no control over the advertising content being rendered on their phones.

While it’s important for operators to monetise advertising, the fact is that users – especially those in economically challenged locales – should not be charged to view advertising. This is even more important when considering media-heavy ad formats. For instance, the average advertising video is 15 seconds and requires up to 3 megabytes to view. But for the average South African, 3 megabytes is more than 10 per cent of their daily allowance.

To rectify the situation, many operators are offering zero-rated advertising, wherein users are not charged in the form of data when they view advertisements. For operators, the cost of this data is sponsored by advertisers, making both advertisers and operators the good guys of this story. Another option is data rewards advertising, in which users engage with advertising content in exchange for receiving 5-10 megabytes of data as an award from the advertiser or brand.

For mobile operators, the benefits of an ad-funded free mobile Internet platform are two-fold: The service answers a critical subscriber need for Internet coverage, while also initiating a new revenue opportunity for operators. Within the portal, subscribers are given the option of digitally topping up their service for increased airtime or data. Ad support for the free service provides mobile network operators (MNOs) a 1.5 per cent boost in topline revenues from advertising.

Ultimately, this strategy enables mobile operators to generate advertising revenue when they would otherwise receive no income from customers who would not or could not purchase their next top-up. Because subscribers are supported by their mobile operator when they most need it, customer satisfaction is boosted, loyalty increases, and churn is reduced. That’s why operators need a new effective strategy and approach.

Plan in action

The ad-funded free Internet platform was utilised by Vodacom, South Africa’s largest mobile operator. In South Africa, the vast majority of mobile subscribers are prepaid, and the cost of data is high, with more than 10 million mobile internet users regularly finding themselves out of data or without Internet access at any given time.

By utilising ad-funded free Internet, Vodacom now provides Internet access to 25 million mobile users in South Africa. Already, 55 per cent of Vodacom’s subscriber base engages with the portal, and users are averaging nearly six minutes as they “snack” on the free digital content available in the platform.

Subscribers that run out of data are automatically redirected to the Vodacom Flex portal, where they continue to have access to essential Internet services, including web search, local and international news and weather reports. The portal also gives subscribers the option of digitally topping up their service for increased airtime or data. 

For all of the amazing things the Internet has done in the world, the reality is that technology is not a silver bullet that will solve the inequalities that exist, especially for people with limited income. But MNOs have a key opportunity to provide uninterrupted access to the Internet in a transparent and user-centred way, ultimately creating a more inclusive model that will bring millions – if not billions – online.

Kostas Kastanis, Head of Strategy, Upstream

Kostas Kastanis is the Head of Strategy at Upstream.