<h4 style="text-align: justify;">Indonesia, a trailblazer in both mobile and social media markets but a relative Internet laggard, has reached an important point in its evolution as a connected society. Internet penetration stands at just below 25% with a total of 55 million unique users accessing the web - predominantly via mobile phones or tablets, rather than desktop or laptop computers. This is part of the broader focus across many industries to capture the so-called ‘next billion’ consumers across the globe. The propulsion of Internet access to a truly nationwide, mass market proposition - with a widespread usage culture being enabled by the ubiquity of affordable mobile devices and service plans - will be the contribution that Indonesia makes in connecting the next billion consumers.</h4>
<h5><b>Indonesia is fast becoming a truly connected society</b></h5>
<p style="text-align: justify;">Our expectation is that Indonesia's 55 million internet users will grow by up to 30% per year in the period to 2017, which will position Indonesia as one of the largest connected populations in the world. In turn this growth will be a catalyst for profound economic, political and social change - particularly in communities outside of the primary cities.</p>
<p style="text-align: justify;">This growth in the Internet base will come not only from first time users in the outlying regions of Indonesia, but also from younger, upwardly-mobile users who are seeking to create new lifestyles in the burgeoning economies of the second and third-tier cities.</p>
<p style="text-align: justify;">This transformation will generate ground-breaking investment opportunities, as new business models emerge and as consumers extend the usage of their devices from basic voice and messaging services towards entertainment, information and commerce.</p>

<h5><b>Affordability, accessibility key to mass market adoption</b></h5>
<p style="text-align: justify;">The users who comprise these new segments in Indonesia share a number of characteristics:</p>

<ul style="text-align: justify;">
	<li>They are becoming more aspirational, but are still community-oriented and family-centered</li>
	<li>They exhibit increasingly higher service expectations, fuelled by their personal network interactions and exposure to mass media channels</li>
	<li>They are tech hungry and explorative, but not universally tech savvy</li>
</ul>
<p style="text-align: justify;">However despite having increasing levels of discretionary household income, they remain cost-constrained and highly price sensitive. Two particular aspects highlight the currently skewed nature of the mobile market in Indonesia:</p>

<ul>
	<li style="text-align: justify;">80% of mobile phones in use are low cost, second generation feature phones with limited capability to access mobile data services, including the Internet. This mix will change only gradually, with smartphones unlikely to outnumber feature phones until 2017 (see graphic below).</li>
	<li style="text-align: justify;">Additionally, 90% of smartphone users do not utilise the full Internet and mobile data capabilities of their devices. They opt instead to use just basic voice and messaging services such as SMS and IM, supplemented by free over-the-top messaging services such as WhatsApp, Kik Messenger and KaKao Talk.</li>
</ul>
<img class="size-full wp-image-2265 aligncenter" alt="Post - next billion graphic" src="http://redwingconsulting.com/wp-content/uploads/Post-next-billion-graphic.jpg" width="692" height="384" />
<p style="text-align: justify;">In keeping with other developing markets, smartphone penetration in Indonesia is highly correlated with the selling price of the equipment. A retail price of USD 100 for a low-end smartphone was considered to be the critical threshold for mass market breakthrough in 2011, but two years on price points of around USD 50 are now being achieved by new wave manufacturers like Cross and MITO.</p>
<p style="text-align: justify;">These vendors are blurring the distinction between high end devices such as the iPhone or Samsung Galaxy on the one hand and feature phones on the other by offering a range of 'basic challenger smartphones' which provide users with reliable e-mail and internet access as well as bundled VOIP calling applications.</p>
<a href="http://redwingconsulting.com/analysis-posts/connecting-the-next-billion-users-and-the-part-indonesia-will-play/attachment/post-next-billion-table/" rel="attachment wp-att-2266"><img class="size-full wp-image-2266 aligncenter" alt="Post - next billion table" src="http://redwingconsulting.com/wp-content/uploads/Post-next-billion-table.jpg" width="477" height="388" /></a>
<p style="text-align: justify;">In combination with affordable credit plans provided by Indonesian retail distributors such as Trikommsel and Erajaya, this development will invariably accelerate both new device sales and handset upgrades.</p>
<p style="text-align: justify;">Hence the challenge for providers is to offer compelling device, service and price combinations that will meet the hierarchy of needs associated with these new consumers:</p>

<ul>
	<li style="text-align: justify;">Connectivity to messaging and social networking functionality that facilitates closer ties with family, friends and business associates</li>
	<li style="text-align: justify;">Access to applications and content tailored to local communities which in turn generates sustainable commercial opportunities for locally-owned and operated businesses</li>
</ul>
<h5><b>Existing business models are obvious reference points</b></h5>
<p style="text-align: justify;">The success of two showcase ventures in Indonesia points the way forward for new entrants seeking to address this new market opportunity with context-sensitive consumer offerings.</p>
<p style="text-align: justify;">Firstly, the mobile social platform mig33, which enables subscribers to chat, play games, engage through micro-blogging and buy virtual goods for their family and friends, was initially targeted at the entry level feature phone segment.</p>
<p style="text-align: justify;">Using an innovative approach to multi-level marketing, a network of local merchants collects cash as stored value credit payments from unbanked mig33users in their community. The combination of social commerce and a convenient payment mechanism has yielded average revenues per user of USD 3 per month which is double that of the typical mobile phone user in these markets. It is also one of the fastest growing social entertainment platforms in Asia-Pacific.</p>
<p style="text-align: justify;">Secondly, with the e-commerce category set to explode in Indonesia over the next two years it is pioneering companies like Sophie Paris who have established widespread acceptance for non-traditional retail shopping amongst the newly-emerging consumer segments in Indonesia.</p>
<p style="text-align: justify;">Jakarta-based Sophie Paris is a direct selling retailer offering ready-to-wear fashion, cosmetics and bodycare items.  The brand has tapped into the aspirational needs of the secondary markets by establishing an affordable and trend-setting portfolio of products which is sold through a highly efficient multi-level marketing infrastructure, supported by an active website. The company has over 1 million active members who sell over 50,000 products a day – far larger than Indonesia’s pure e-commerce retailers.</p>
<p style="text-align: justify;">Opportunities for innovative business models of this nature will abound in Indonesia as web connectivity and usage becomes pervasive over the next five years and the power of social networking and e-commerce is unleashed across the entire breadth of the archipelago.</p>