IDC just released its 2014 smartphone growth forecast. Mature markets are expected to grow only 4.9%, while emerging markets will continue to soar at 32.4%.\n\n\nSome emerging markets are growing much faster than IDC average. ForbesIndia reports:\n\n\n\n\u201cthe market [in India] for smartphones grew by a whopping 300 percent last year\u2026 While only 10 percent of India\u2019s 700 million-plus mobile phone users were using smartphones at the start of 2013, the figure shot up exponentially to 29 percent by Q1 2014.\u201d\n\n\n\n\nIn emerging markets, the dynamics of smartphone growth are different than in mature markets. Lacking a widespread fixed-line infrastructure, many emerging markets leapfrog mature markets and use mobile broadband technologies to deliver high-speed internet access to the mass market. Demand from emerging markets fuels the growth in both smarthphone and mobile broadband subscriptions. Two very different examples of this are China and India.\n\n\nThe China Internet Network Information Center (CNNIC) reported:\n\n\n\n\u201cAmong the Chinese Internet users, the proportion of mobile Internet users rose from 74.5% at the end of 2012 to 81%, much higher than the proportion of the Internet users that access the Internet via other devices. It is indicated that mobile phone is still the major driving force for the growth of Chinese Internet users.\u201d\n\n\n\nIn India, the dependence on the mobile internet is more extreme.\n\n\n\nIn emerging markets, smartphone revenues represent a significant opportunity, although they involve with razor-thin margins. But ongoing ecosystem revenues from advertising and app downloads are even more important. Kleiner Perkins\u2019 Mary Meeker pointed out in her 2014 Internet Trends report that advertisers spend only 4% of their budgets on mobile advertising, compared to 22% for internet ads. In many emerging markets, smartphones are the primary or only internet access device, making them the primary target for advertisers through search, ecosystems, and mobile ad networks. Proportionately more ad dollars will be spent on mobile ads in emerging markets, increasing the importance of mobile ecosystems.\n\n\nCiting Android as the catalyst behind smartphone growth, IDC also reported that emerging markets will represent 73.5% of worldwide smartphone shipments, or 920.8 million in 2014; 88.4% of these units will be Android devices. The latest release of Android KitKat with more efficient memory management and a smaller footprint has made it possible to build sub-$100 smartphones that perform well and won\u2019t contribute to the oft-cited Android multi-version fragmentation that plagues app compatibility. In emerging markets, this has been a huge problem because manufacturers chose Android Gingerbread, an older version that ran efficiently on underpowered, low-cost hardware.\u00a0\n\n\nBut there are really two Android platforms: the Android Open Source Project AOSP, and Android plus all of Google services, such as search, Gmail, Maps etc.\n\n\nAndroid One is a good example of Google injecting its ecosystem into the Indian market. Google has partnered with indigenous smartphone manufacturers Micromax, Karbonn, and Spice to deliver sub-$100 versions of the Android One, which include the Android Play ecosystem that monetizes Android for Google through mobile advertising. In response to the Android One introduction in India, Xiaoying Zhong of Evercore partners said:\n\n\n\n\u201cIndia has been a source of strong sales for iPhones, especially the 4S, which despite its age is still a popular model.\u00a0 After the introduction of iPhone 6, it is likely that plastic-backed iPhone 5C will become the new low-end option.\u00a0 A recent survey found that Apple is the most desired brand in emerging markets, however, its products are still unaffordable to most people who often choose lower priced [Android] alternatives from Samsung.\u201d\n\n\n\nAdding Google\u2019s 90% search market share in India, Google is well positioned to monetize smartphone growth in India.\n\n\nBut Google hasn\u2019t had the same luck in China, where the government has blocked its ecosystem. Chinese company Xiaomi is the smartphone market leader in urban China, according to Kantar Worldpanel. The company ships its Android AOSP-based MIUI OS with a skin that looks more like an iPhone and is devoid of any traces of Google\u2019s ecosystem. Google\u2019s Play services opportunity is limited, and, compounding this, Google is in a distant second place with 10.9% of the internet search market, far behind indigenous Baidu with 81.7%\n\n\n\nGoogle isn\u2019t the only western company whose growth in China is also facing challenges. According to Kantar Worldpanel, which measures consumer products in the urban centers of China, Apple has been losing market share during the last three quarters.\n\n\nPresumably, Apple\u2019s market share woes could be attributable to competition from Xiaomi. Xiaomi has an Apple-like hardware and software look and feel, but its smartphones cost about $250 much less than an iPhone.\n\n\nThe open question is whether the established mobile ecosystems can capitalize on emerging smartphone growth, as it looks like Google can in India if it can exploit its strong position. Or will these ecosystems be preempted by indigenous competitors and government-set limitations like in China?\n\n\nThe same is true for smartphone manufacturers; without an ecosystem paired to smartphones, can manufacturers import smartphones to the intensely price-competitive emerging markets and make more than a razor-thin hardware margin?\n\n\nIDC's outlook for emerging market smartphone volume is 1.4 billion units by 2018, growing to 79.5% of worldwide volume. Given the challenges of monetizing these smartphones, Facebook and Google are already preparing to overcome indigenous market obstacles.\n\n\nAccording to an email from Zhong:\n\n\n\n\u201cFacebook \u2013\u00a0\u00a0 Recent acquisition of Ascenta, a UK-based drone company that could be used to deliver internet from the sky, supports a push to connect the entire world to the internet through Zuckerberg\u2019s internet.org initiative.\u00a0\u00a0 Another acquisition focused on connecting the \u201cnext billion users\u201d was Pryte in June 2014.\u00a0 Pryte has developed technology that lets app makers and carriers sell mobile data in incremental (i.e. very low-priced) packages based around particular app usage or other parameters making data more affordable.\u00a0\u00a0 Further, Facebook\u2019s recent acquisition of WhatsApp has given the company a massive presence in the international messaging market with 450 million users worldwide. Notably, it has a strong presence in India, Brazil and Mexico.\n\n\nGoogle \u2013\u00a0 Google is also competing to find innovative ways to deliver internet to emerging markets.\u00a0 In April 2014 it also bought a drone company with the aspiration of delivering internet to the most remote places.\u00a0 Titan Aerospace manufactures high altitude drones capable of flying for up to 5 years at a time and can be used as a hub to create voice and data networks.\u00a0 Its technology also supports Project Loon, Google\u2019s effort to deliver internet through a network of balloons travelling on the edge of space.\u201d\n\n\n\nThis next wave of smartphone growth will be different than what has been observed in mature markets. If their success in mature markets is going to carry over into emerging markets, established ecosystem companies will need to execute as well as Google can based on its strong position in India, and they\u2019ll need to be prepared to circumvent the indigenous obstacles created by competitors and governments in other markets.