NYT reports on the paradox of high growth with low profit potential that web 2.0 companies have to deal with in international markets –
Web companies that rely on advertising are enjoying some of their most vibrant growth in developing countries. But those are also the same places where it can be the most expensive to operate, since Web companies often need more servers to make content available to parts of the world with limited bandwidth. And in those countries, online display advertising is least likely to translate into results.
This intractable contradiction has become a serious drag on the bottom lines of photo-sharing sites, social networks and video distributors like YouTube. It is also threatening the fervent idealism of Internet entrepreneurs, who hoped to unite the world in a single online village but are increasingly finding that the economics of that vision just do not work.
Perhaps, a lighter version of the service in bandwith-starved Asia and Africa is not such a bad thing. Perhaps, Asia and Africa should build their own web 2.0 companies that are designed for low bandwidth.
