Facebook Inc. (NASDAQ:FB) will launch a tech incubator in Nigeria sometime next year. With the new community hub, the company plans to impart digital training to 50,000 Nigerians and also help in developing technology startups in the country.
Reuters quoted Facebook saying that the program will be offered to software developers, entrepreneurs and students in four Nigerian cities namely Abuja, Port Harcourt, Calabar and Kaduna.
We believe these initiatives will significantly drive Facebook’s user base in the region and sustain the share price momentum. Notably, Facebook has gained 57.2 year to date, substantially outperforming the industry’s 25.4% rally.
Efforts in Africa
Facebook opened its first office in the continent back in 2015 in Johannesburg, South Africa. Before that, the company had collaborated with telecom companies in the region to make Internet available through its Internet.org program to users who cannot afford it. The company also rolled out Facebook Lite, a trimmed down version of its Facebook app that requires significantly less data but operates faster.
Founder Mark Zuckerberg mentioned last year that out of the 42 countries where the Free Basics initiative is available, Africa accounts for more than half of them.
Moreover, Facebook partnered with France-based Eutelsat Communications in October 2015 to launch a satellite that would beam Internet in sub-Saharan African regions. However, the rocket exploded on the landing pad during the test run in September 2016, killing with it the satellite that was designed to bring Internet access to mobile users in West, East and South Africa.
Advertising forms the mainstay of Facebook’s revenues. In 2015, the company, in order to get an idea about the advertising market in Africa, launched The Creative Accelerator program there. Last year, Facebook hired new executives to increase its adoption in the continent and thereby attract more advertising dollars from small and medium sized businesses there.
The recent move follows founder Mark Zuckerberg‘s Africa trip last year when he visited Lagos-based technology companies and also announced an investment of $24 million, through his charitable foundation, in Andela that trains software developers in Africa.
Notably, search giant Alphabet’s (NASDAQ:GOOGL) Google also launched an initiative in July to offer online training to 10 million people in Africa over the next five years.
Internet Market in Africa
Per a June 2017 report, Africa has a population of around 1.25 billion, out of which only 160 million use Facebook. Internet users in Africa represent 10% of total global Internet users. This clearly indicates the immense scope for growth in the region even though it may take a lot of time.
However, over the time frame of 2000-2017, Internet users’ in the region have increased by a whopping 8,503.1%, adds the report.
In Africa, the highest number of Facebook subscribers is based in Egypt, followed by Algeria, Nigeria and South Africa. We note that the total number of Internet users in Nigeria is over 91 million, the highest in the continent. We believe that with the launch of this new community hub, the company will be able to attract more Internet users in the country.
Per Facebook, it has 22 million monthly users in Nigeria alone, with 10 million users logging in daily from mobile devices.
We note that the lack of physical infrastructure has propelled the increasing use of mobile Internet in the region, which is in tune with Facebook’s growth strategy.
Last year, The Guardian quoted GSMA’s head of mobile Yasmina McCarty lamenting the fact that “Free Basics offers a solution to the affordability issue, but three remaining barriers – infrastructure, content and education – need to be “attacked” to get the next billion online”.
Africa has been facing challenges because of low Internet penetration. Facebook, though resolving problems of Internet access, will still have to overcome other hurdles like lack of awareness regarding social media platforms and unavailability of smartphones in the near term.
Africa can prove to be a difficult market for Facebook but with the kind of potential that it holds, the risk might be one worth taking.
Zacks Rank & Key Picks
Facebook carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader technology sector include Micron Technology (NASDAQ:MU) and NVIDIA Corporation (NASDAQ:NVDA) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Long-term earnings growth rate for Micron and NVIDIA is projected to be 10% and 11.2%, respectively.
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