CHAPTER 1.3 Internet adoption continues to vary widely across countries. The average Internet penetration rate in Africa is 14 percent—vastly lower than the 85 percent rate in Understanding North America, according to the World Bank. Given the well-recognized role that wider Internet adoption plays in Digital Content and accelerating economic growth, raising Internet adoption rates is an imperative, particularly for developing Services Ecosystems: countries. Barriers to Internet adoption also vary across countries. Although the lack of affordable infrastructure The Role of Content is considered to be a major obstacle, a lack of local, relevant digital content and services is equally important. and Services in Boosting According to a Pew Research Center survey, 34 percent of offline individuals in the United States mentioned that Internet Adoption the Internet was not relevant to them.1 Eighty percent of the Wikipedia articles are written in just 28 languages, BAHJAT EL-DARWICHE whereas 80 percent of the world’s population speaks MATHIAS HERZOG one of 80 languages. Even the quantum of content MILIND SINGH available per user continues to be widely uneven. RAMI MAALOUF Akamai data show that in the United States, page views Strategy& in the media and entertainment category peak at 282 (formerly Booz & Company) per Internet user, while in Africa this number dips to 32 per user—highlighting the dearth of content relevant to African users.2 Ensuring a sustainable supply of local, relevant digital content creates incentives and reasons for subscribers to get online; such content is an imperative for driving Internet adoption for the 60 percent of the population not currently connected. Beyond the availability of such content, because creating and maintaining digital content continues to be an expensive proposition, it is important to understand how to ensure the sustainability of these ecosystems. This chapter seeks to answer fundamental questions regarding the development of digital content and services ecosystems. It defines the building blocks of such systems, identifies the major players in providing those building blocks, and analyzes the lessons of the historical evolution of the ecosystems of different countries, focusing on the United States, Germany, and the Republic of Korea. A data-driven model for measuring the maturity and economic sustainability of digital content and services ecosystems is devised, and insights applicable to future paths for many developing countries are derived from the resulting data. Finally, the chapter discusses the pivotal role that public- and private-sector stakeholders can play in jumpstarting ecosystems in developing countries. DEFINING THE DIGITAL CONTENT AND SERVICES ECOSYSTEM In assessing the state of the digital content and services ecosystem, we recognize three major dependencies: supporting infrastructure, devices, and local-language support. A strong content ecosystem cannot be developed without the availability of strong fixed and mobile infrastructure. Additionally, the devices and hardware components that are available have a The Global Information Technology Report 2015 | 39 1.3: Understanding Digital Content and Services Ecosystems Figure 1: Digital content and services Reasons for people to get connected To access To access To access To participate entertainment information utilities in business services Video News Gov’t services E-commerce Gaming Jobs Health Banking Music Sports Education Online services ... ... ... ... To facilitate sharing platforms To facilitate communications Source: Strategy&. significant impact on the type and nature of the content who funded both the initial development and then the being consumed, and even on how frequently it is subsequent monetization of these services. The cases consumed. Finally, support for local languages and show that the development of the ecosystem was character rendering by major operating systems and generally in sync with the underlying economic structure platform vendors plays a critical role in driving local of the country, thus ensuring sustainability. content ecosystems. Although these factors are both interdependent and important, the content ecosystem The United States is assessed separately from these variables, primarily in In the United States, communication services such as order to determine the differences and patterns that exist email, chat, and messaging were the early motivators in the evolution of content and services ecosystems, that drove consumer adoption. Part of this adoption given the steady improvement in other drivers such as was facilitated by the push by enterprises to move format support. communications online—a push driven mainly by From the perspective of a consumer, the digital the associated productivity gains and cost savings content and services ecosystem is composed of yielded by efficient communications. As adoption six major categories: entertainment, information, of communication services and Internet increased, utilities, business services, sharing platforms, and shareholders funded the development and expansion communications (see Figure 1). Four major players of several consumer-focused Internet services, such can have a significant role in the development of the as AOL, whose Instant Messenger service reached ecosystem: governments, brands, operators, and more than 22 million unique users within three years content developers. of its launch in 1997. The rush at this stage was to gain access to viewers, which fueled the first dot-com HOW DIGITAL CONTENT AND SERVICES boom and brought companies such as Yahoo to the ECOSYSTEMS EVOLVE fore—a monetization model was then less of a priority. The evolution of the digital ecosystems in the United As the proliferation of information services continued, States, Germany, and Korea was examined to better platforms emerged to enable ad-subsidized models, understand how digital content and services can which provided a monetization mechanism for content influence Internet adoption. The experience of these developers and further fueled the content boom. In countries illustrates the similarity of the sequencing of addition, between 1995 and 2001, entertainment and content that generates reasons to get online, although commerce became key drivers of Internet adoption, the process of evolution differs among various countries providing more avenues for content monetization and and markets. In addition to the ways in which the content sustainability. This resulted in the emergence of players and services ecosystems evolved, the sustainability such as Amazon, eBay, and Netflix. At the same time, of these ecosystems was assessed to determine search platforms such as Google were created to allow 40 | The Global Information Technology Report 2015 1.3: Understanding Digital Content and Services Ecosystems people to seek relevant information rather than finding it games, streaming, and service, along with online pre-aggregated. advertising. As the US digital content ecosystem matured after 2001, social network services such as Friendster, The Republic of Korea MySpace, and Facebook, along with the professional Unlike in the United States and Germany, gaming was social network LinkedIn, became dominant reasons one of the major motivators driving Internet adoption for Internet use. The development of video streaming during Korea’s early evolution—fueled in part by early platforms such as YouTube (set up in 2005) also fueled government incentives and the country’s emphasis on Internet growth and use—particularly by increasing and support of broadband infrastructure. Multi-player the time spent online. In addition, as consumers online game providers Nexus, Lineage, and Hangame started spending more time online, business services launched in 1996, 1998, and 1999, respectively. In accelerated their adoption of Internet as a service just three years, Lineage was the leading worldwide channel, leading to growth in business-to-consumer subscription-based online game, with more than 3 million services such as financial services, e-government subscribers—mainly in Korea—and 250,000 concurrent services, and customer care. users. Online gaming became so popular in Korea that The first phase of the US content and services multi-player gaming competitions were broadcast on ecosystem was therefore powered by enterprises moving national television, starting with the Starcraft competition online for productivity gains, followed by shareholders in 2002. As Korea’s digital ecosystem evolved further, funding development and growth of services. This from 1999 to 2006 the national government played a development phase was followed by monetization key role in improving digital literacy and driving adoption, through e-commerce or ad-funded models. The involving 11 major e-government initiatives, including subsequent phase involved enterprises moving more Cyber Korea 21, e-Korea Vision 2006, e-procurement, services online to enhance productivity and customer customs e-clearance, a Knowledge Portal, and the Ten experience. The cycle of services moving online, followed Million People Internet Education Project. by monetization and growth, continues to drive new Alongside gaming and government services, content categories such as Uber and Airbnb, which take education emerged as a key driver of Internet adoption spending in the physical economy and monetize it in the in the country, with online tutorial sites such as digital economy. Megastudy growing rapidly. In addition, government