Market Segmentation and Internet Segregation

Posted by Hyder on November 20th, 2007

When it was announced through ProBlogger that WidgetBucks, a popular advertising network many bloggers use to monetize their blogs, would stop monetizing international (non US) traffic last week, it caused quite a bit of controversy. And of course, some of the feedback probably could have been posted in a more constructive way.

As someone who have been making money online through ad networks since the turn of the millennium, the fact that US traffic pays dividends while international traffic is far less valuable is nothing new. In fact as a European myself, I have even experienced being denied access to certain web services like for instance Pandora (Internet Radio) and hulu (Online TV and more) simply because of my geographical location.

While these two examples only offer restricted access based on geographical locations due to licensing constraints, the same reasoning can be applied to why certain advertising networks only pay for US based clicks and conversions, and thus effectively are segregating the internet, which is supposed to serve as a global network without concern for national borders.

Market Segmentation = Online Segregation

The main reason US based businesses are only willing to pay for attention from US based people, is because of what is known in the business world as Market Segmentation. They are located in the United States, and as a result it seems to make the most sense to target a certain segment of their target audience, in this case based on geographical location.

This is actually quite common, traditional business practice, as it is generally perceived as easier to establish a strong foothold within your home market. This is mostly attributed to cultural differences, and the fact that normally your products will be tailored to the culture it has been developed in.

So we should accept Internet Segregation?

No. United States based businesses (and many other businesses from other nations) are proving themselves as inept when it comes to seeing the big picture here. When connected to the internet, cultural differences are not that significant. Especially people in the western hemisphere are more open than ever to importing products from other countries, and international trade barriers such as customs are becoming less significant every day, especially when it comes to business to consumer related transactions.

As an example, the nations within the European Union have completely removed all customs between their nations. It is also becoming easier for all European citizens to import products from the overseas. The trade barriers that once made it difficult for people to purchase products internationally are finally starting to diminish in the wake of globalization and the ever shrinking world, but unfortunately traditional licensing and copyright laws are still lagging behind, especially for older mediums such as TV.

What are the effects of Internet Segregation?

As long as the majority of businesses that use the web for their advertising ventures continue to seek mainly the attention of those located in the United States, they will keep pushing up the prices for each of these clicks, and subsequently devalue those from people abroad.

This will also result in that those businesses who recognize the opportunity of going international will be able to get a relatively cheap entry because of the deflated prices for the attention of people situated outside of the United States. I personally believe that it is only a matter of time before this happens, especially when you consider the fact that in a lot of other western countries, people have a significantly higher disposable income on average compared to those living in the United States.

It is also likely that those forms of licensing that arose with the reign of older mediums, in particular TV, will have to be conformed to the digital age. Even though there might have been a certain purpose in these restrictions when national TV stations were the key distributors of visual media, it just doesn’t suit the day and age we live in now.

And while we wait for these changes to gradually take place, perhaps you should start targeting the international market if you run your own business, and capitalize on the opportunity these growing pains the internet as a global medium and network is still experiencing?

Category: Internet