Social media in Indonesia

Eat, pray, tweet

Social-networking sites have taken off in Indonesia. Who will profit?

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Jan 6th 2011 | JAKARTA | from the print edition

WHAT does the most populous Muslim nation do in its spare time? Increasingly, it swaps gossip online. Indonesia is now the world’s second-largest market for Facebook and the third-largest for Twitter, according to several web research firms. For industry insiders, however, the most exciting statistic is not how many Indonesians use social media, but how many still don’t. Of 230m or so Indonesians, fewer than 20% are connected to the internet.

Foreign firms see untapped potential. Facebook doesn’t even have an office in Indonesia, yet it has grown like crazy, to 30m users. In May last year Yahoo! ventured into this fizzing market by buying Koprol, a location-based social network. Indonesian culture seems particularly receptive to online socialising. People love publicity, don’t fret much about privacy and gleefully follow trends. “Everything is about friends and location,” says Andy Zain, the founder of MobileMonday Indonesia, a networking forum.

The biggest question for everyone is how to make money from Indonesians’ interest in connecting with one another. Michael Smith, who led Yahoo!’s acquisition of Koprol, says the payoff will take time: “I always tell people that the volumes and willingness of customers to pay in Indonesia [are] so low that you can’t expect gargantuan revenues from it today.”

Western firms are only just beginning to grasp the eccentricities of the Indonesian social-media market. Thanks to years of price wars between Indonesia’s three major telecommunications companies, mobile contracts in the country are dirt-cheap. For Indonesians living in North America, it is often cheaper to buy an Indonesian SIM card and roam with it than it is to sign up for a local plan.

Phones are cheap, too: the country is flooded with Chinese handsets costing only $30-40. Indonesia is also one of the largest markets for Research In Motion (RIM), the maker of BlackBerrys. Indonesians typically connect with each other via mobile devices, not personal computers.

Facebook and Google make money in North America and Europe from display advertising, but this is much harder in Indonesia. Few locals have credit cards or bank accounts, making it hard for them to click on a link and buy something. For large purchases online, payment is generally made by bank transfer. Social-media firms are investigating whether they can tap the microtransactions market—say, by offering virtual currencies or goods that users can use as barter—though forced partnerships with local telecoms firms threaten the profitability of such schemes.

So far, only one firm has cracked the payments nut. Inspired by China’s QQ and Grameen Phone of Bangladesh, Mig33, a firm whose main product is a mobile social-networking application, has set up a virtual economy. Some 4,000 merchants in 150 countries sell “credits” to users, who then can spend them online: sending messages to friends, playing games, or sending virtual gifts. The firm has raised $34m in funding since its inception in 2005. Its founder, Steven Goh, says it will post profits this year. Indonesia is its largest market.

When hobnobbing in cyberspace, Indonesians are especially likely to use avatars rather than real pictures of themselves, says Mr Goh. “Indonesia is a moderate Muslim country where people are creating new virtual identities completely different [from] their real identities,” he explains. Users with black eyes and black hair, say, may create virtual personae with grey eyes and blond hair.

This is common elsewhere in East Asia and in the Middle East, too. But Indonesia is a special case, reckons Mr Goh: its social networks freely integrate both real and imagined selves. The archipelago could prove a useful test market for tech firms seeking to enter the wide-open and barely understood social-networking markets of the rest of Asia.

from the print edition | Business