The International Opportunity
One question that people keep asking me is how did I decide to start Medico.com. Not why, but rather, how, did I come up with the idea. On the one hand it seems pretty obvious. Of course every country should have a high quality online health site, but on the other hand its one of those ideas thats almost too obvious, and that one assumes already exists in every country.
There are a number of fairly simple techniques to get a sense of whether there is indeed an international opportunity for your company or idea. I’ll walk you through some of them in this post.
The World is a Big Place
Most companies in the US, and in fact in most countries, don’t think much about the international opportunity for their business. However, the world is a big place, and a surprising number of internet users are outside the USA. In fact, US internet users make up only 11.6% of the internet users in the world.
In addition, one assumes that there are certain inalienable rights for all internet users: search that works and is always available, free web-based email, free voice and video chat, free classifieds, social networking, and many more. Indeed most of these products are available internationally and have significant usage worldwide. This is especially the case for communication and social tools, which users use to create their own content in their own language, even if the UI hasn’t been localized. Examples of these are Skype, Facebook, and Gmail. Facebook had significant international usage even before they released their crowd-sourced Facebook Translations app at the end of 2007, which allowed them to launch Spanish and French UI’s in April 2008. But when you look at other types of online products, you will see that there may be significant differences from market to market.
Consider these two heatmaps, the first for Craigslist, and the second for Facebook.
Searches for Craigslist around the world (normalized by overall searches per country):
Searches for Facebook around the world (normalized by overall searches per country):
Note: these heatmaps, which were generated by Google Insights for Search, don’t compare absolute volumes, rather they compare the ratio of searches for a specific query in a country to all searches in a country.
The only countries in which there is significant interest in Craigslist are the US and Canada. Conversely Facebook is popular in many countries, in fact the country with the most interest in Facebook is Turkey, closely followed by Venezuela, Italy, and a whole bunch of other countries. Of Facebook’s 700M users, only 150M are in the USA. There may be many reasons for this difference, not the least of which is that Craigslist, being a marketplace, is possibly fairly challenging to launch in a new market.
From these heatmaps, one might come to the conclusion that there is an opportunity in the international classifieds space. However, before diving in and working on your Y Combinator application, you may want to stop and verify your hypothesis with another nifty tool. Google Ad Planner allows you to “Search by Audience”, and to display all the websites in a country, neatly organized by vertical and sorted by traffic. Here are the top classified sites in the UK:
From this list, its apparent that the classified space in the UK is quite healthy. Gumtree.com has 10.2% reach, and generates approximately 66 PV’s/user/month. This isn’t quite as good as Craigslists 22% reach and 380 PV’s/user/month in the US, but it is nonetheless a very strong incumbent. Ad Planner is a very powerful tool for learning about the online landscape in international markets.
In 2006 there were many markets around the world without a strong incumbent, and in fact, Fabrice Grinda, even without Ad Planner (it launched in 2008) came to the conclusion that there was an international opportunity in the classified space and founded OLX.com which went on to do quite well.
Smart Local Entrepreneurs
In some countries, notably Germany and China, there are local entrepreneurs and investors that specialize in rapid copying of successful US online businesses. StudiVZ (the German Facebook), Qype the German (now European) Yelp, and Youku and Tudou (Chinese Youtube clones) are some of the more well known examples, but there are many more. US companies that don’t think about their international strategy at an early stage run the risk of losing these significant international markets to smart and aggressive local entrepreneurs.
The International Rollup
Some products require a significant amount of local content for them to be useful, like Yelp for example. And launching a product like Yelp internationally isn’t that easy. In order to launch Yelp in a country, you first need to load it up with a list of all the restaurants and local businesses in that country. This requires a business development person from Yelp to find a local provider in each country that they want to launch in, from which they could license this list, on reasonable financial terms. In fact they probably need to license multiple data sources from multiple providers, one for businesses, and another for restaurants, and another for utilities (post offices, train stations, etc.), and probably many more. And then their engineers would need to learn how to parse the different address formats so they would be able to handle them correctly. And then they’d need to launch it locally, perhaps city by city as they did so well in the US.
At this point, the management team at Yelp might understandably have thrown up its hands and said, “lets punt on ROW for now, and lets revisit after the IPO, at which point we’ll buy the leading local Yelp clone in each country.” This, in fact, is a time-honored tradition executed to varying degrees of success by companies such as eBay and currently by Groupon. In Yelps case, it appears as though they are actually trying to go international on their own. Lets hope they aren’t too late, Qype launched in Europe barely 18 months after Yelp launched in the US. BTW - we can track Groupons progress using Insights for Search:
While I was at Google, we analyzed the development of the internet market in Africa. We created a matrix, with countries down one axis, and internet verticals (classifieds, online dating, etc.) along the other axis. We colored in the boxes with green for verticals that were well covered, yellow for verticals that weren’t well covered, and red for verticals that were essentially non-existent. It was surprising how many yellows and reds there were. An enterprising, tech-savvy, computer science graduate should immediately realize that this means opportunity. And they’d be right. Why are these opportunities just lying there for the taking? Again, when you stop to think about it, it makes sense.
To create an environment conducive to entrepreneurship, especially online entrepreneurship, you need several elements to be in place. You need a good technical university that creates lots of smart computer sciences graduates. You need investors with experience in investing in startups. You need a legal and regulatory regime that is supportive of startup companies. You need mentors and role models who have done it before. There are very few places in the world with all of these elements in place. And even when all these elements are in place, you need to think about the size of the market.
The US is unique in that it not only has all of the elements in place to create a vibrant ecosystem, but it also happens to be a really really big country. The US is so big, that entrepreneurs can create hugely successful businesses not just in top-level internet verticals, like social networking, classifieds, online dating, online financial services, but in sub-verticals and even sub-sub-verticals. Not only is the market big enough to support all of these niche businesses, but there are enough experienced engineers, investors, mentors, marketers, designers, and sales people to build and run all of these businesses.
In most countries, not only is the market too small to support a niche internet business, but there aren’t enough trained people to run all of the niche businesses that are successfully operating in the USA. Most markets can barely manage to create local businesses to cover the top level internet categories, and many of them don’t have particularly great technology, design, or content. Not to mention the sub and sub-sub verticals.
Go International, young entrepreneur!
All of this means that there are significant opportunities out there. Instead of launching yet another iPhone photo-sharing app, take a look around the globe. I believe that there are opportunities to build significant businesses both in large individual markets, and also to build businesses that are designed from the outset to be international. For many web businesses, you don’t even need a local presence until you need to establish a sales team on the ground. Facebook is hugely popular in countries in which a Facebook employee has never set foot. One can go a long way using LinkedIn and Skype to meet partners, AdWords and Facebook to get traffic, oDesk and Paypal to hire translators and local contractors.
This is why I founded Medico.com. We think there is an opportunity to build a global health information and community site, which will provide much needed information and resources to millions of people around the world who can learn about topics as varied as diabetes and cancer, and which should become a pretty good business as well. Four months ago we launched our Spanish edition, targeting Spain, Latin America and the US Hispanic market, followed last month by our Portuguese edition, targeting Brazil, and we will be launching in more languages and markets in the very near future.