The Internet market in Brazil

Back in August of 2010 I wrote a small text answering questions about the Brazilian Internet market for Michael Myers, a Professor at the Denver University.

Michael Myers [15], a think tanker for the Mobile and Social Media area, who also writes the excellent blog Cruces, published some of my notes on his blog under the title “Cultural Notes on Brazil”.

The original question was about the following twitter graph:

Myers asked me : what is up with Brazilians?!?!?

Worth noting, the Brazilian numbers are beyond twitter. The UN released in 2010 the following graph (Internet users by country):

Brazil is the 5th largest market in the world with 80 million users – bigger than any European country.

Here some of possible reasons to explain such position:

* Early adoption of the Internet. As matter fact, I am a living proof of it: Back in 1994, together with PhD Professor Fernando William Cruz (see references at the end of this post) we started the first ISP (Internet Service Provider) in the Brazilian State of Goias. Our company, Netline, offered dial-up connections in a state bigger than Italy or Poland.

*Over the years, Brazilians have developed strong on-line culture with local web companies, important media providers (uol.com.br, terra.com.br) and one of the highest use of social media websites. Brazilians were the number 1 in 2004 spending time on the Internet.

* Brazilians are famous for their entrepreneurship, with an estimated one in eight adults being “entrepreneurs”. That has been a great source for new websites, blogs and communities that found in the Internet a cheap medium to address customers.

* A continental country (bigger than US if you subtract Alaska) with lots of traveling (goods, services and people) and long distance relationships (commercial and personal). In such environment, telecommunication costs are important and there is no doubt, the Internet helped Brazilians to cut telecommunication costs.

*The Brazilian culture loves to show off (just look at Carnival), to tease and to be ‘modern’ – these are good ingredients for social media activity, websites such as Orkut and Facebook had a massive adoption in the Brazilian society.

*A Young population: 15-30 years old – are majority in the country.

* “To be social” is part of the culture, a very natural behavior for Brazilians. Famous for parties, happy hours and gatherings with friends and families. Naturally, the social media just catalyze even more their natural behavior.

Now lets talk about another staggering number : Cellphones. The Anatel (the official cellphones entity) released the numbers for September/2011 : 166 million cellphones in use throughout the national territory.

About 85% of the phones are prepaid, usually simple and cheap units. Also from that number, less than 10% are smart phones. As a result, the Internet traffic coming from smart phones is still very low. If the Brazilian market follows the world tendency (highly probable), the proliferation of smart phones could increase the Brazilian Internet users to surpass the 100 Million mark. This can represent an ocean of opportunities to many companies and service providers.

To end my post, let me touch another subject: on-line shopping.

Although strong in the Internet with impressive social media and mobile numbers, Brazilians don’t shop as much as their fellow Americans through the Internet. Don’t get me wrong, Brazilians love to shop and their strong economical development in recent years would give plenty of reasons for the same boom in Internet sales. It has growing substantially but still, the numbers could be much bigger:

In 2008 – 5,3 billions,
in 2009 – 6.9 billions,
in 2010 – 9,8 billions.

The detail about these numbers: just 20% of the Internet users buy on-line. It is a very small percentage, comparing to developed countries. The reasons for such figure in my opinion are: Fear of having credit theft, lack of trust in the product vendor and, the post office system.

Having your credit card number hacked was until recent years the number one concern (recent poles still point as the number one reason). Although the poles still showing that opnion, I have the impression among my friends, when I ask about it, they are less concerned these days about giving their credit card through the web.

The lack of trust in the product vendor is somehow logic, the country is still creating the on-line institutions that will set the standards for on-line shopping. These numbers should decrease as the institutions get more approval in the public domain.

The post office system is more complicated, The national post-office system “Os Correios” is a fairly good institution, a little bit more expensive than the US post but still liable.

So what would be the problem ? The great majority of Brazilians don’t have what makes shopping through the Internet easy and charming on developed economies: the power of doorstep delivery.

In developed countries such as the US and Canada, people don’t realize how much impact the safe-doorstep-delivery has on shopping. Giving the counter example, in Brazil, if you deliver a box at your doorstep, I bet 5 minutes would be enough to make Dave Copperfield look like a kid.

The box will be gone with the wind.

So, just a small percentage of Brazilians shop on-line. For the rest, delivery is also a concern (and it will be even more in the future when less privilege classes start shopping on-line). Of course, we could leave the products in the post-office for later pick up, right ?
Guess what ? Post offices are not everywhere and they are usually located in the commercial district. If I have to go out, get my car, go through traffic jam, parking . . . well . . . better go to the actual market and do it myself, no risk, no fear and I might even get a discount bargaining!

I am sure the creativity, famous among Brazilias, will find solutions for such a problem but, so far, still a road block. In any case, the Brazilian Internet market keeps growing at steady rates, the social and private institutions are getting stronger, the mobile market is solid, the social media is absolutely ingrained in society behavior: