Last year whilst visiting an aunt in south west area of Tanzania called Kyela, near Lake Malawi- I put my samsung cheap android smartphone on the dinner table . My cousin immediately reached it pulled up the Facebook app and used my profile to friend request me! I remain hidden on Facebook and he wanted to make sure we stayed in touch. I was shocked- I am pretty sure he had never seen an Android Samsung before- but had clearly been on Facebook on internet cafe’s or through his feature phone- especially given that this remote part of Africa is a 2G/Edge zone.
In the beginning… What makes a social network successful?
Social networking is fragmented in Africa- there is no clear winner. Also unlike the rest of the world, African consumers may skip portals such as Yahoo! and other local variants and leapfrog straight to social networks. The battle ground is mobile as the key platform to grow the next stage of users- arguably feature phone and those who upgrade onto smartphones such as Android. Facebook is growing at double digit rates across most African countries that matter, some would even argue that Facebook is helping drive ICT adoption in Africa. Of the 140M Internet users in Africa, almost 40M users are on Facebook- or just over 1 in 4. And I would argue that by current no.s they are now neck and neck with Mxit as the largest social network in Africa (over 40M users). Although Mxit is clearly a leader in active users in South Africa (10M).
Time spent on any network is really important for obvious reasons-but one of the most important is that its a means for many apps to reach and try engage the masses of where they spend most of their time. Also advertising spend follow eyeballs. As such the importance of social networks in Africa cannot be understated. First of, entry and exit points into these networks are key. For example, Yelp was initially discovered via google search due to the lack of local listings on Google, this gap provided an opportunity for Yelp to be discovered via SEO and even led to a buyout offer from Google. Yelp may IPO this year. And a few weeks ago, you saw what happened with Mocality? A rogue Kenyan employee tried to destroy the value they had created by stealing their listings. Using Mocality as an example- its important to consider 2 distinct value generating strategies for social networks- one sided vs two sided. Mocality built up a huge business listing in Kenya which then provides a clear value to attract users to the service. Without a large enough listing, you don’t provide enough value to users. Contrast this to a more one sided value such as Mxit and even Facebook. They built up value by allowing users to communicate with each other. With Facebook it was photos to communication. For Mxit it was clearly communication, offering a way for users in the African context to communicate cheaply instead of using expensive SMS. Only later once they built a huge audience, did they offer solutions for business and brand pages and become a 2 sided network as means to start generating advertising revenue to connect the 2 audiences.
Mobile is clearly a strong entry point for networks in Africa as Mxit has proved over the last 10 years to become the biggest social network in Africa and are now being challenged by Facebook given their momentum on mobile as well. Now with the growth of broadband and mobile internet, there is bound to be a shakeup. Mxit needs to adapt and move upstream to richer formats and larger screens, and Facebook needs to come down stream (hence the purchase of Snaptu last year). And then you have wildcards like Binu who are sneaking in with real practical solutions using BOTH feature phone adoption and the cloud to offer an entry point to other services mainly messaging, Twitter and Facebook and other content such as ebooks in the absence of smartphones… Lets use Facebook as an example again- what was their entry point? I would argue “the connected generation” at Universities- starting from vanity photos and growing all the way to social games and applications- controlling your entry point as an online community leads to very different outcomes. The Facebook generation is not the myspace generation is not the yahoo generation.
Facebook has a very creative localization strategy for making the network available in key languages (something Mxit has not yet addressed if they plan to expand across Africa and indeed the world). However Mxit has figured out how to monetize on mobile given their starting point, something which facebook has not on mobile yet nor remotely in Africa (although there are increasing no. of Africa advertisers). Mxit was recently bought for a rumored bargain price of 5OOM rand (~$60M) by World of Avatar. Alan Knott-Craig, now at the helm, may be looking to beef up and flip Mxit to a big network such as Google. But at this rate they feel more like a “yahoo!”-highly relevant still especially given their obvious local strengths and mobile offerings, but quite an old network by standard measures.
At $2-4 a user- Facebook probably generates at most $80M/year in revenue from Africa. Comparison with Mxit (if you take the lower bound on mobile, they are probably generating $20M minimum revenue a year from monetizing the 10M users in South Africa. South Africa is a key battle ground given the favorable demographics, spending power and maturity of advertising networks (by that I mean brands actually know how to spend money online to reach users vs many parts of Africa where billboards, radio, TV and print still dominate). But the growing middle class and the fact they will spend time on mobile across Subsaharan market provide excellent growth opportunities.
Vanity metrics (like registered users or visitors per month) can mask real underlying engagement drivers. For Facebook, the fact that half users come back every day is very impressive and the fact that they are the biggest social networks around photos make it a great platform for reaching a broad audience with their fine grained targeting features. Meanwhile, Some networks are just a cheap way for users to send messages (IMs) in the face of SMS costs- this is a category that Mxit falls into (with some 750M messages sent per day), although they now have games, music, news etc… but its not a robust a publisher/app development platform as Facebook- Facebook has an army of developers growing every day that can build social apps outside and inside its network from Games to Music and of course, simple like buttons.
Startup Networks- What can African Social Networks do to differentiate?
I decided to start with the big networks for a reason- it should follow logically from above how tough it is to build online communities and social networks. Mocality, Mxit and Facebook provide great examples of some best practices of how to reach scale and hence some big barriers that exist if you try to compete with them head on (it is advisable to leverage their size now given their critical mass- learning Facebook app development to build social apps in Africa should not need explaining anymore than building Android Apps)
- Regional or Diaspora affordable Communication: These networks start out as mainly 1 sided networks that allow users to communicate with each other. The recently launched Afroterminal– is more focused on Diaspora Africans. Understanding local customs, languages and culture is key to success.
- Business and Commerce related African Needs: Mocality mentioned earlier, focused on being the place to find local listings. Getting business online is a key initiative and battleground (ahem, Google) as it is an onramp to monetize small businesses and besides Kenya you have many opportunities for this in other African countries. Take Tanzania, there is Bongolive and Rasello that are starting to do this. In this category I would also add networks that provide career related networks (LinkedIn becomes a gorilla to compete with)
- Entertainment & Lifestyle: Some networks are purely a place to go find enjoyment. For instance Naijapals provides an avenue for users to watch nollywood movies. Others can be formed around music, games and even gossip. In Tanzania, Jamiforums (Lifestyle) and Issamichuzi (Gossip) are some of the most trafficked sites. Accessing and delivering content, often in a user generated matter is core skill.
- Strong Vertical Needs: I could class these as serious needs in Africa such as health. For instance Young Africa live from the Praekelt Foundation is an example of a network around health issues. These type of networks have a big enough audience with a very defined and often pressing need. Again, strong unique content or having a strong entry point around the core need is necessary to get these sort of networks going.
Key challenges for building an African social network
- Ability to technically scale the website with real engineering talent and managing cloud computing infrastructure. Remember Myspace or Friendster?. Anyone can put together a pretty looking site but it takes real engineering skills to scale a service to millions of users. Mxit has over 150 staff, Twitter and Facebook have armies of engineers that make the site load super fast. This is a key weak point for many new startup networks in Africa.
- No monetization path– Presence of online advertising networks as well consumer payment platforms for online transactions and/or subscriptions (e.g. virtual currency). Mobile operators are well positioned to partner with social networks and integrate mobile payments as virtual currency in Africa. Mxit already offers a currency, Moola, that users can use to purchase virtual goods. Facebook does also allows users to buy Virtual currency in some countries in Africa including Egypt Algeria and Nigeria- surprisingly no South Africa as of this blog posting or maybe via PayPal? Whoever wins the payment wars might get some of Facebook’s credit business across Subsaharan Africa. Note that many emerging market countries already accept payment by mobile payment providers Boku or Zong and even in remittance services such a Western Union or moneybookers- could I buy and send my cousin Facebook credits via a remittance service similar to how Willstream remittance works for healthcare?
When talking any payment currency- its important that users are also validated with a real identity, for terrorism and anti-money laundering services, again, good mobile operator relations here may help.
- Provide a targetted audience for advertisers– Mxit is clearly positioning themselves as one of the largest mobile advertising platforms in Africa. If you go down the advertising model, you need good sales and account staff who can actually convince brands to switch away from advertising on radio, TV, print and billboard and use networks. Some networks in Africa have started to tap this but as you scale you need more sophistication- ability to track results and engagement and provide feedback and accountability to advertisers so that can see they are actually getting good value from their advertising dollars. Local presence is critical and works well with big brands. What about smaller businesses? Its much harder due to their fragmentation- is there a self serve system? Look at how creative Mxit has been in targeting diaspora e.g. targeting students for colleges abroad in this Boston University example- of course African students want educational opportunities!
- Inability to innovate fast enough to address new emerging needs and platforms and take an ecosystem approach to maintain distribution and relevance. E.g. don’t get caught in the transitional period- like going from feature phones to smartphones, the challenge that Mxit faces right now. Be available everywhere (inc. feature phones) so that users can actually reach you on their device of choice and if they switch or upgrade. Strong networks will embrace and design for diversity- i.e. mobile web and tablets (HTML5) whilst having native apps on key platforms- Android, Nokia, blackberry and of course features phones.
Mapping the Africa social and interest graph has potential unlock a huge amount of value. Facebook and twitter are already providing citizens with a greater voice to scare Governments as we saw with Nigeria, Tunisia, Libya and Egypt in Africa alone in the last year. Beyond that what other change can these networks bring? Oh, and I am still waiting for an African Social Game that I might be able to play with my cousin in Kyela, Tanzania whether Facebook, Mxit or another Platform.