Combating the Constraint of Costly Connectivity
Nathan Eagle is on a mission to bring free and unrestricted internet access to a billion people across the emerging markets.
Interview by Justin Harlow | Editor
JH: Today I’m here with Nathan Eagle, the CEO of Jana, a mobile advertising company on a mission to provide free internet access to a billion people in emerging markets. Nathan first discovered the pitfalls of costly connectivity while working as a Fulbright Professor at the University of Nairobi in Kenya. After developing a revolutionary text service to improve blood bank logistics, he realized that the system was failing due to the prohibitive cost of data for nurses. Since then, he’s been on a mission to revolutionize the model for mobile data, reducing costs for users and bringing millions of new people online. Nathan, it’s great to have you with us today.
NE: Hey look, thanks for having me.
JH: So, I mentioned your work in Kenya, what took you there in the first place?
NE: I ended up going to Kenya after finishing my PhD at MIT. My doctorate was basically on programming mobile phones and using phones in ways that are not just two-way communication devices, but that can be used for a lot of other things. I finished my PhD in 2005 and in 2005 I was seeing that mobiles weren’t necessarily achieving the potential that I envisioned they could have in North America or even in Western Europe. But, they were becoming life-changing pieces of technology in markets like Africa and back in 2005, East Africa was the fastest-growing mobile market in the world. So, I ended up joining the faculty at MIT, but instead of having an office in Cambridge, I ended up moving to where the action was, in this case, moving to Kenya and attempting to build out mobile apps and mobile services to meet the needs of these next billion users.
JH: So, tell us a little bit about this blood bank project, which seems to be a really pivotal moment in your evolution and later Jana’s evolution as well.
NE: Right. I ended up moving to this relatively small village off the coast of Kenya. It was there where we serendipitously found that there was this real issue around blood supply levels. Blood supply in these areas was essentially measured by someone who drives around from hospital to hospital and then looks at how much is at each local blood bank and if it’s below some certain threshold, the next time this individual comes around, they’ll provide a replenishment. But that creates a latency of upwards of 30 days, from when the blood is needed to when it is ultimately delivered. And so, we thought there could be a useful application of mobile phones here, to be able to provide more real-time data about what the current blood supply levels were in Kenya and more importantly, where blood was needed.
So, we originally built an SMS blood bank system. A system that let these rural nurses text in with the day’s blood supply levels. We built this beautiful front-end visualization to enable individuals working in these centralized blood banks to see the blood supply levels in real-time. When we launched, there was a reasonable amount of publicity around this and frankly I felt quite proud about being able to demonstrate a real-life example of how mobile phones could be used in ways that transcended two-way communication devices.
…but about two weeks in about half of the nurses stopped using the platform and by the end of the very first month, virtually no-one was using this platform anymore and ultimately it was deemed a failure.
JH: Now that seemed to give you an idea around solving these prohibitive costs in a broader sense. Tell us a little bit about how you used that original blood bank project to really gear up for a movement to reduce the cost of data for people in emerging markets.
NE: When we saw that the system wasn’t being used anymore because these nurses justifiably didn’t want to take a pay-cut to use the platform, we had to figure out a way to remove that friction. At that point in time, I was really lucky, I was in the right place at the right time. At that point in time through my work at MIT, I had unique read-write access to the back-end billing systems of virtually every mobile network operator in East Africa. What that enabled us to do is build what became the genesis of Jana.
We built a platform that for every properly-formatted text message with the day’s blood supply levels, we would go out and essentially credit that rural nurse with about 10 Kenyan shillings, enough to cover the cost of sending the text message and a penny to say thank you. It was 20 lines of python code at the time, it was a relatively trivial script, but it was that trivial script that laid the groundwork for what we ultimately built into a pretty substantial company today.
JH: So, tell us a little about that story. I’ve performed a little research and I’ve seen a couple of pivots along the way and I’d love to hear the story of Jana from when you started to the current incarnation of your model.
NE: While there have been a lot of different applications of the core tech, the core tech has always been the same. We have been wedded to this idea of essentially putting money into somebody’s pre-paid account, money that can be used to make connectivity cheaper and ultimately make connectivity free. What we ultimately did with the blood bank system was credit that nurse with money into our account to essentially enable them to send us that data and then all of a sudden, we have all of these nurses reengaging with the platform. The mobile network operators got really excited about this. They’re really concerned with something called ARPU, Average Revenue Per User and ARPU is plummeting across the board in these emerging markets because essentially mobile phones, and this is a good thing, are getting into the hands of poorer and poorer people as they become more and more accessible. That means that they’re average subscriber is making less and less money and is able to afford less telecommunication services.
So, the carriers were thinking how to reverse that trend and what they saw in this example was that suddenly the Minister of Health is putting money into the platform to be able to fund this project and if the mobile network operators could extract money from the Ministry of Health then why not the Gates Foundation or the World Health Organization or even Procter & Gamble or Unilever. These mobile network operators that I was originally working with as an academic got really excited about having the script plugged into their billing system. If you fast-forward to today, it’s now far more than 20 lines of python, but we’ve integrated it into the billing systems of 311 mobile operators across 32 countries. What it enables us to do is now credit, put money into the accounts of over 4.5 billion pre-paid mobile subscribers.
If you fast-forward to today, it’s now far more than 20 lines of python, but we’ve integrated it into the billing systems of 311 mobile operators across 32 countries.
You alluded to the different iterations we’ve gone through as a business and it’s true, we’ve tried a lot of different things, but the core tech has always been the same. We’ve always just wanted to figure out reasons to put money into people’s accounts. When we first started we actually had Nokia as one of our first clients and it was around translation. We wanted to figure out how to translate particular words that Nokia cared about in many of the local languages in Kenya. We’ve tried outsourcing, going out and trying to find work that traditionally would be sent to India and instead, enable people on their phones to start doing that work and earning that compensation.
Ultimately, we landed on advertising. What was unique about advertising is that there is so much money being spent on advertising, especially in emerging markets. Close to 300 billion dollars is being spent on advertising and most of that isn’t going to digital. It’s going into the pockets of people who own the billboards outside of Delhi, the radio stations in Lagos or TV channels in Sao Paulo, it’s going to the 1% of the 1% of the 1%.
JH: Exactly, and in these markets some of these conglomerates own pretty much all of those things.
NE: Right. And so, our mission is to provide a billion people with free, unrestricted internet access. If you start looking at the amount of revenue we’re going to need, we’re going to need tens of billions of dollars to pull that off. No matter how big we would get as a market research company, where we were paid to get people to fill out surveys, we’re never going to achieve that level of revenue to be able to accomplish our mission.
But, if we could get just 10% of this money that the big global brands are spending to engage with consumers in these growing emerging middle-class economies, that would get us enough money to provide a billion people with free, unrestricted internet access.
But, if we could get just 10% of this money that the big global brands are spending to engage with consumers in these growing emerging middle-class economies, that would get us enough money to provide a billion people with free, unrestricted internet access. That’s why we went with advertising. We need 10% of the ad market, to get that money redirected away from those people who own the billboards and ultimately directly into the pockets of these very consumers that these large, global brands are trying to reach in the first place. So, that’s kind of how we’ve become a company that is supported by ads.
JH: I love the way you’ve revolutionized the cost model and really redistributed the burden from users to other stakeholders and you’ve mentioned users, advertisers, carriers and governments. How do you determine who pays for what? Is it the same in every market or is every market different?
NE: That’s a good question. What we’ve found is that the mobile network operators don’t pay for anything. From their perspective, they’ve already built the infrastructure and in many instances, they’ve put tens of millions of dollars into building the capability to provide people with connectivity. So, from their perspective they see us as another reseller. So, we go out and buy bulk internet from them at wholesale rates. We do that just like they sell internet access to any other wholesaler. Instead of reselling it, which is the normal way to do it, we give it away, but from the carriers’ perspective they kind of don’t care. As long as we keep buying bulk internet, they’ll keep selling it to us.
The question is where is that money going to come from? Given that we’re going to need close to 30 billion dollars a year to fulfil our mission, the only entities that can really do that are governments through taxes and you’re seeing governments already doing that in markets like the Philippines, where they are actually starting to think about the internet as a right for citizens and if it’s not government, it’s going to be large companies through advertising.
Advertising is this umbrella term that I think needs to be teased apart a little bit. When we talk about subsidizing connectivity through ads, we’re talking about a lot of different things. For example, right now if you’re one of the tens of millions of people a day who are getting online through our mCent browser, yes you’ll see some banner ads and occasionally an interstitial ad, but it’s not that prominent and it’s not that large a fraction of our total revenue stream. Display advertising is probably less than 20% of our total revenue, which we are using to offset these data costs. So, the other 80% that we get through “advertising” is a lot of other things outside of just pushing a display ad in front of someone.
We had somebody last week outside of Delhi buy a flat-panel TV through our browser. The commission we received from that single purchase covered internet access for basically his entire community over that day.
For example, one of our largest clients is Amazon. We essentially pre-install bookmarks. We have these quick links when you open up our browser, these are easy ways to get access to particular destinations on the web and we use Amazon as a quick link. For our ecommerce partners, we can earn anything from 2–10% of the purchase price for anything that’s purchased through our browser. And that money can go directly to subsidize internet access. We had somebody last week outside of Delhi buy a flat-panel TV through our browser. The commission we received from that single purchase covered internet access for basically his entire community over that day. So, that’s an example of how we’re using affiliate marketing or advertising to cover the cost of a community’s internet service.
Similarly, we have a search partnership with Microsoft’s Bing. So, having Bing set as the default search engine enables us to share revenue with them for the search ads that they display. Advertising can mean a lot of different things. It’s not just shoving a banner ad down someone’s throat.
JH: Right, it seems like you’re a little more sophisticated than that. So, you’ve mentioned a couple of countries. How do you decide which markets you want to enter and what behavioral differences do you see between mobile users on your platforms across countries?
NE: There are two very different questions there and to some degree they are related. In terms of how we prioritize particular countries, sadly it’s not a priority based on where I think the service is needed the most, but rather where advertisers have the largest appetite to get in front of these emerging market consumers. We have to go where the ad spend is and it’s one of the reasons why that although we launched in Kenya, we haven’t been able to spend as much time and focus on East Africa as I would personally like to. That market will take off, there’s going to be a massive amount of new capital going after these emerging middle-class consumers across Africa, but the reality is that those advertising dollars are not here yet, whereas they are in markets like India, Indonesia and Brazil. So, those are the markets we are prioritizing, the ones where we can get a large share of growing ad dollars from brands who are increasingly desiring to get in from of these emerging middle-class consumers. That’s how we prioritize markets.
In terms of the differences that we see across these different markets, one thing that really jumps out is how people treat their social network and think about how they spread the word to their friends. We grow via word of mouth. When you get free internet on your phone it’s kind of a magical experience. You almost feel compelled to show your friend and say, “look at this, it’s a web browser that enables me to get online and I don’t have to pay for it!”. We also try and facilitate those kinds of interactions. We provide our users with a little bit of additional free internet to tell their friends about us.
What we find in a market like the Philippines, the cultural norm is to Select All in your WhatsApp address book and just spam everybody. Whereas in Pakistan, users are very reluctant to do anything other than one to one messaging, rather than broadcasting. We find these types of nuances everywhere, across cultures, across continents. I think the one unifying thing that we’ve found is that no matter what country you live in you want to pay less than what you’re paying right now for mobile data. Everyone wants free connectivity and that’s what’s nice about our model. It does feel like we have this universal carrot, this thing that every consumer wants almost independent of where they are in the socio-economic spectrum. Everyone want to be able to pay less for connectivity.
JH: You’ve mentioned a lot of countries and your footprint is really impressive, but do you think that there are any locations where the Jana model wouldn’t work?
NE: A variant of that question is “why aren’t you guys operating in North America or Western Europe for that matter?”. What we’re doing is providing users with upwards of 70 megabytes of free internet in a market like India. But, the reality is that although it is really meaningful for a user living outside of Delhi, that level of connectivity and price saving is not as motivating for users in North America. While I think we would be able to provide a deeper discount on phone bills because we would be getting paid by advertisers, the reality is we’re focused where growth is.
We’re focused on where these emerging middle-class consumers are and ultimately where their pain point is the most palpable and those countries are not in North America or Western Europe. And also, when you start talking to advertisers and this is true if you’re an advertiser like General Motors or Toyota or Kraft or Facebook of Google frankly, everyone knows their future revenue and earnings growth is not coming from this country and it’s certainly not coming from Western Europe, it’s coming from growth markets like Brazil, India and China. From that perspective, that’s where we want to be as well.
I believe that connectivity is inherently empowering, everything from getting information about your medical care, to education, to the economics of figuring out the price of a particular crop or being able to sell your moped.
JH: There’s a hardware component to this and a software component. In emerging markets, sometimes you’re reliant on governments and some other relatively unpredictable characters, are you comfortable that the hardware side of the business will keep up with your ambition?
NE: I guess it depends on what we’re talking about when we say hardware. The Android operating system has actually become the fastest technology adoption in human history. It has very little to do with the quality of that software and everything to do with the price-point that these white-label handset manufacturers can manufacture an Android phone. You can now go into China and get a chip that has 3G, GPS and Bluetooth, slap a screen on the front and a battery on the back and you now have a smartphone for less than 20 dollars.
Android has grown because it’s open source. For free you can put that on as the operating system and put it into the market. These dynamics around the hardware is the reason that cellphones and specifically smartphones are becoming increasingly ubiquitous in these emerging markets. I don’t see that changing so from a hardware perspective, cellphones are going to get cheaper and cheaper and cheaper.
The other component of hardware is obviously the cellular networks and specifically the cell towers. But even that, the price-point of mobile data, thanks to savings and new advances in technology on the operator side, has meant that we’re forecasting the price of a megabyte to actually half between now and 2020. That’s another thing to a certain extent that works in our favor. Now, the challenge here is that the price per megabyte is going to half and the average consumption of this data in these markets is going to go up by 6x as people are consuming more and more content on their phone and it’s becoming richer media content. Even if the price per megabyte halves, if content consumption goes up by 6x, that essentially means that the average user is going to be spending three times as much on mobile data in 2020 compared to today. So, this problem gets exacerbated.
JH: So, there are other providers of free internet out there, most notably Facebook’s Free Basics service. How is Jana different to Free Basics and other services that are out there?
NE: In the Free Basics case it’s free Facebook and although in some cases it’s maligned, it’s a really valuable service for our users if they can consume as much Facebook as they want without incurring data costs, that’s a big deal. That said, what we’re doing is providing unrestricted internet access, but it’s not uncapped. We’re not giving you completely unlimited data for free. We’re providing upwards of 70 megabytes per day. What is unique about us versus Facebook is that while Facebook is uncapped, those 70 megabytes that you can earn through our browser is truly unrestricted. You can go anywhere on the web. You can do anything on the web. There are no strings attached. We really value net neutrality. It’s really important that we’re not biasing these next billion users of the internet towards a specific type of content or news source, rather we’re providing open access and a gateway to the internet.
JH: That seems really logical given Facebook’s troubles in India around net neutrality, it seems like you’ve made a smart decision there and avoided some of the issues they’ve run into, right?
NE: Yes, given that we are essentially putting money into people’s accounts and that money can be used to access all content online, we haven’t had any of the regulatory net neutrality issues that some of our competitors have had.
JH: What broader societal issues do you think we could solve if data was free to more users across the world? You gave us the wonderful example of the nurses in the blood banks in Kenya, but I’m sure that’s the tip of the iceberg. What other issues do you think you could solve with the Jana model?
NE: I believe that connectivity is inherently empowering, everything from getting information about your medical care, to education, to the economics of figuring out the price of a particular crop or being able to sell your moped. It’s hard to point at one thing on the internet and say well that’s going to be really impactful. It’s everything, this literally is a life-changing technology and the more people that get access to it and the lower the friction associated with that access, it’s empowering across every dimension of life.
JH: Do you ever see a day when all data is free for users? It seems like your model’s working and that seems to be the direction it’s heading.
NE: Remember, we’re providing 70 megabytes in a market like India, so it’s not all data. We aspire to make the internet truly free. That said, data consumption is just going up, up and up. So, the reality is that we’re never going to be able to provide completely unrestricted and uncapped data access to a full billion people. At a minimum, what we aspire to do is provide some amount of connectivity every day for free to a billion people and if we can do that, in my mind, we declare mission accomplished. That is the mission of the business and to date we’ve given nearly 50 million people free internet, so we’re a twentieth of the way there.
JH: That’s fascinating. It sounds like with 70 megabytes you could probably get the essentials into everybody’s hands, but who knows what essentials are these days? That might be blown on Snapchat rather than helping blood banks.
NE: At the end of the day, I don’t think it’s up to us to decide and that’s my point on the net neutrality front. What we want to do is provide access, not direct people to one thing or the other.
JH: Agree 100%. So, what’s next for Jana?
NE: Well, we’re only a twentieth of the way there. So, we’re just trying to get to a tenth of the way there and then a fifth. We’re just continuing to scale. In terms of obstacles to preventing that scale and challenges that we look at, the biggest is finding those advertisers who are willing to make that leap from billboards and radio and television onto digital and mobile specifically. As more and more of that advertising spend switches to mobile, ultimately our job gets easier and we can provide more and more of the population with free connectivity.
JH: Well, Nathan, it’s an incredible company and dare I say an incredible cause, which isn’t a word usually associated with for-profit entities. It seems like you’re doing right and doing well at the same time. I can’t wait to hear about the day when you reach that billionth customer, please invite me to that party wherever it is. I really appreciate your time today, it’s been a fantastic interview.
NE: Thank you for inviting me, I appreciate it as well. Take care.
JH: Take care Nathan.
