Navigating The Digital Road To Global Gold
The slowdown in the world economy tagged to the U.S. malaise, the destructive impact of spiking oil prices, and stressed relations with emerging markets and strategic nations flexing their political muscles are prompting some American companies to moderate their 2009 expectations. While soaring business abroad now contributes to half or more of total revenues for Google and General Electric, the pathway to those new dollars could prove slower and more treacherous for other players seeking to offset painfully slow growth at home. PricewaterhouseCoopers puts global entertainment and media growth at an average annual 6.6% to $2.2 trillion in 2012, with double-digit growth in video games, TV subscriptions and license fees, wired and mobile Internet access--led by 20% average annual increase in wired and mobile Internet advertising. The BRIC nations of Russia, China, India and Brazil will grow at double that rate, with an average annual rate of 13.6% to $250 billion by 2012.
Global media and entertainment advertising and consumer spending each are growing at a compound annual rate of about 6%--with end-user revenues providing the lion's share. With digital mobile projected to reach 11% of total global revenues by 2012 and the Internet expected to comprise 19% of global advertising, the U.S. is scrambling to catch up to a 3G and 4G world. As a result, online video advertising--now creeping along in the U.S.--is expected to reach $3.3 billion in Asia and $2.5 billion in Europe by 2012, due partly to the acceleration of high-speed broadband, eMarketer says. Forrester forecasts that the global enterprise Web 2.0 market--involving technologies and applications for more efficient interaction and exchange of content and data in the workplace--will grow six times larger to $4.6 billion by 2013, with businesses in Europe and Asia-Pacific taking the lead.
In fact, in many places in the world, new interactive consumers come online at levels of digital mobile technology and the mobile Internet to which some of the U.S. still aspires. China will have an estimated 373 million Internet users and $5 billion in online advertising spending by 2012, according to eMarketer. Russia will have an estimated 40 million Internet users by year's end on the way to nearly 60 million by 2012, making it the-second largest online population in Europe after Germany, with $685 million in online ad spending.
With gross domestic product five times higher in China and more than three times higher in Russia than the mere 1.5% in the U.S., renewed Cold War or adversarial relations jeopardize market growth that cannot be replicated in too many other places. Times have changed, and America needs some of the world's growth markets just as much as the world once needed America.
News Corp. and Viacom, Yahoo and Microsoft, Walt Disney and Time Warner are among the many media-related concerns that have been at this game for decades, maneuvering the pitfalls and opportunities of international wealth with local partners. Still, they are wrestling with new rules of play, unstable politics, and markets that are more capable and powerful. The goal was once making far more in sales than was lost to flagrant piracy; today it's more than offsetting permanent slowed and strained domestic growth in countries that have gained confidence, economic power and technological capabilities of their own. It's impossible to miss the bravado emanating from China and Russia these days.
So it is problematic when MySpace and FaceBook continue their struggle to monetize themselves domestically and roll out services abroad, while Russia and China successfully develop their own homegrown versions--some of which are backed by foreign investors and some of which are periodically squashed by their overbearing governments. Yahoo, often treated like an also-ran in the U.S., has a stronger foothold in the BRIC countries than either Google or Microsoft. The barriers to entry--even in a ubiquitous digital age--still can be exhausting. For instance, Twitter's international growth has been stymied by an inability to secure affordable access with foreign carriers. File-sharing Joost--experiencing technical issues in the U.S.--is finding a more receptive market in China, given the turmoil there. News Corp. has decided to sell many of its Russian assets, opting instead for super vendor status through the content of its Dow Jones Enterprise Media Group, an expanded global WSJ.com and Fox.
Even as opportunities abound, environments for free capitalism deteriorate in a rush of military might, government censorship or economic disruption. Still, GE chairman and CEO Jeff Immelt this week said his company's business in China will double to $10 billion annually by 2010, heavily contributing to the 15% to 20% annual sales growth for GE's clean-energy technology as it works to address China's pollution problem. Fortified by a new $8 billion global partnership with Abu Dhabi-based Mubadala Development Co., which will be one of its top institutional shareholders, GE is expanding its already deeply grounded infrastructure and industrial bets throughout emerging markets like Asia.
However, a younger and reasonably well-educated growing middle class and the expanding investment in emerging markets--which will be just as significant as corporate and government spending--will be a surefire catalyst for global entertainment and media business as long as companies remain well-researched and positioned. What supersedes lower costs led by cheaper labor and the explosion of highly competitive skilled talent is product innovation, as evidenced by the international sales of Apple's iPhone. Analysts expect a lower-priced, more widely global distribution of iPhones to quadruple overall sales this quarter.
If U.S. companies can maintain innovation and enterprise, they can continue to be leading competitors and wealth beneficiaries in emerging world markets. Clearly, that means embracing portable interactive technologies in new and more aggressive ways. If international growth forecasts are to be believed, then if U.S. players build for wireless mobile Internet, the rest of the world will come.