by Oo Nwoye
When I read about the Rocket – MTN tie up, I thought “WOW!” for a second. Then was a little puzzled as to how a deal between the telco giant and an eCommerce juggernaut made any sense. I slept woke up and my eyes opened literally and figuratively.
I sent out a tweet to which Eghosa responded quite accurately
My main worry stems from Net Neutrality or more accurate the possibly death of it and the implications
Net neutrality (also network neutrality or Internet neutrality) is the principle that Internet service providers and governments should treat all data on the Internet equally, not discriminating or charging differentially by user, content, site, platform, application, type of attached equipment, and modes of communication – via Wikipedia
Last year, Pando covered a company, ItsOn that makes it easy for web/mobile companies to pay for the cost of interacting with their application. I did not think it was a good thing then
Under this deal, Rocket Internet is financially aligned with two telecom firms MTN and Millicom (which also owns part of Rocket Internet and which is in turn funded by Kinnevik) that have access to over 200 million subscribers.
So how does his affect competition and consumer choice?
What if for MTN/Millicom subscribers to browse/shop on Jumia does not cost you any bandwidth/money and opening the Konga.com homepage wipes out 50MB? Where do you think people will go shopping? What about Movies/Media?
This no longer becomes a level playing ground. With this deal, “level don change”.
Of course, I will have to fearfully salute the Rocket guys and their obviously forward thinking backers for blowing up the ecosystem upping the stakes so drastically in less than 3 years on this continent. Can you blame them if they are within the law?
The way forward?
Those that are policy experts are better versed on how to allow the ’free market’ operate within the context of avoiding monopolies that harm the consumer.
Interestingly, net neutrality is at an important turn in the US and the result will change EVERYTHING
by Oo Nwoye
I have been thinking a lot about why Mobile Money is yet to catch up in Nigeria like it has in Kenya and maybe Uganda. Below are my thoughts.
I believe the primary issue stems from the fact that, although the circumstances that allow Mobile Money to thrive in Kenya are not available in Nigeria, we are still trying to push it as if it were.
So what are some of these circumstances?
- The novelty of Mobile money allowed for it to be created like a startup, the whole shindig of product-market fit. The technology was adapted to the particular environment without pressure as it was initially funded by Vodafone UK (No, mobile money was applied but not created in Kenya).
- As a result of its newness, the regulators did not see it coming and hence, did not have the opportunity to fuck things up. Paraphrasing @WhiteAfrican, regulation is the antidote of innovation.
- The newness of mobile money allowed the pioneering telco Safaricom, which happened to have an overwhelming massive market share move fast, thereby surmounting the network-effect limitation (I will explain what I mean shortly).
- When Mobile Money launched in Kenya, the absence/limitation of alternative ways to digitally move money quickly meant the necessity of adoption to try it out was much higher.
What I am basically trying to say is that, if MTN Nigeria with its almost 50% market share had a 3 year head start vs everyone else, CBN was not putting stumbling blocks all around, and internet payments were not readily available, Mobile Money adoption would have been much faster.
Anyway, that is not the case and there is an obvious need for a more inclusive payment system. How do we make it happen?
First of all, let me explain how I understand money, cash/liquidity and the bank.
- Money is simply stored value.
- Cash is a common agreed representation of that value backed by the government.
- The bank is a third party place licensed by the government where we keep that stored value and acts as a ledger.
- Liquidity is the ability to exchange one form of value to another. Cash is in most cases, the most liquid form of value as it is a commonly agreed representation of value.
At the risk of digressing further, let me use an example.
I have some yams. That is value for someone who needs yams and I want an iPad. If I can directly exchange that yam for an iPad, then the Yam is liquid. Most times it is not the case besides I might not need to get an iPad at the moment I have the yam. And most times we do not know how many yams are worth an iPad. So I turn my Yam into a representation that is universally acceptable, Money/Cash. This does two things.
- There is a common ground for exchange.
- My money cannot spoil so I can keep it until I need an iPad or something else.
- The bank is where it is usually kept.
Phew! Let’s get back to Mobile Money.
At the very core, a Mobile Money account is a bank account with much lower KYC/regulatory requirements. Simple. If it is looked upon like this, then it makes things much easier.
One of the basic issues with the poor adoption of Mobile money it the perceived high TTL (Time To Liquidity).
Remember, cash is the most liquid form of money. Nigerians want to be as near as possible to their cash or an understood representation of their cash (the bank balance).
My recommendations to help the adoption of Mobile Money in Nigeria
- Reduce Time To Liquidity: Presently, you are able to withdraw money from your mobile money account (abi na wallet?) from quite a number of ATMs. So time to liquidity is not technically an issue but it is because it is not really known. It is why I said perceived. If every Mobile Money wallet had a debit card, it would help this perception a lot. At first, people will be withdrawing their cash immediately it hits their mobile money account but over time, they will be willing to leave it.
- Interconnectivity of Wallets/Accounts: I hope Mobile Money operators understand they are not competing with each other but with adoption. It is a no brainer that since no one has the necessary network effect that Tigi had when they launched in Kenya, inter connectivity between wallets is necessary. Banking would not be viable if I needed to have an account with all 22 banks because I could not move money from GTBank to Diamond Bank.
- Open up APIs: APIs allow for the extendibility of services. Banks via Debit/Credit cards have allowed for the extendibility of payment online, POSs etc. If ‘mobile money’ accounts are connected to the card system, that would be a shortcut. But in the absence of them, there is a chance for innovation and adoption if the APIs are opened up and more efficient methods of moving money are created.
- Improve Communication: The communication of Mobile Money is frankly, confusing. I personally would do away with the term mobile money and call them what they are, accounts; if not Bank accounts. While running the idea of this post with Mark Essien, is suggested the name Mini Bank accounts. Perceived competitors should come together and unify communication. Imagine if Diamond bank called the cheque book something different from GTBank?
As things are, the banked (Mobile Money) market is for the Banks to lose. From outside, Stanbic looks the best positioned so far. Paga has done a great job and I am rooting strongly from them. I foresee Paga morphing into a branchless bank such as ING direct.
I’ll end here for now. I think I have 2 more payment blogposts in my head.
Thanks to Mark Essien for listening to my ramble and feedback which enabled this post to finally come out almost one year after I was due to write it in response to Mbwana’s question
by Oo Nwoye
You must have seen Loy’s post.
GBEDU.FM as a product is far from dead. Moving servers just took longer than planned. It was down but not out. As a startup though, GBEDU.FM was in zombie mode.
When GBEDU.FM launched early last year, albeit arrogantly, I had plans that did not end up materializing. Unfortunately, for the music business and most consumer startup plays, you need quite a bit of runway before you can self sustain as a business. Sadly, I never got that runway, which meant that I could not focus on GBEDU.FM. December came, things happened and I decided to reevaluate.
There are two parts to building a successful technology startup. First, you have to build a bit of the product, then you need the market that can sustain it. You then keep improving both sides. Whereas, if you are say, selling generators, the product is already built. You just need to find your market. With a startup, you are juggling both. One begets the other. Kinda delicate. I salute those that juggle it successfully.
Back to GBEDU.FM.
If it is neither dead, nor a zombie, what is it?
I would call it hibernating. Just there, not trying to move but not dead. It exists for my personal pleasure and that of the few hundred people that love it. Although the code has not been touched in a year, I still believe it is a great place to listen to Nigerian music online.
iRoking, Spinlet, TruSpot and co are spending quite a bit of money, trying to solve the problem of creating the best way to discover, listen to and share music from the African continent. Presently, you are better off downloading from the gazillion music blogs out there and playing your music locally. That is until Deezer launches in Nigeria fully.
For the future of music, especially in Africa, I strongly believe in the following.
Most music will remain free
Like on YouTube, the breakout of a song or artist should be democratic. Power would not be centralized with a few OAPs and radio DJs
Discovery of new acts and songs is really important.
There are several unpiratable business models that will reward the artists (e.g call back tunes, merchandising, concerts) that are yet to be be executed well
The best music service and not the best funded will get the users. For now, downloading from music blogs is the best. (Note that Hulkshare, 4shared, et al get their references from the music bloggers)
Africa has the best chance of innovating a new business model for music. 95% of songs are indie made, therefore, the unfortunate supplier power stranglehold that exists in the west is absent.
This philosophy encapsulates my thinking about the music startup business
“Music startup” is a misnomer, most music startups are actually music file startups. If you want to actually create a music startup you have to combine cultural understanding of music + identification of new acts/trends that haven’t been picked up by existing labels & media, with a deep understanding of new media technologies. Basically, think of the Web 2.0 equivalent of a Suge Knight. Nobody has ACTUALLY started a music startup yet — probably because it is hard to have both cultural and technical sophistication.
If someone creates a really authentic new digital space with authentic new artists, and uses the new digital medium to deliver the close personal relationship today’s music fans / etc want out of their bands and personalities, they are likely to make a fortune. Redistribution of existing content owned/controlled by labels and (equally evil) rights agencies is an epic failure of a business model, and does very little to address the massive thirst in the marketplace for new, interesting, authentic culture
– Numair Faraz on why it is difficult to build a music startup
Until someone executes this, this music business will still be at the back of my mind. Yes, back. 🙂
Thank you to all of you that have relentlessly supported me no matter how ridiculous my idea may have been. From the depths of my heart, I am grateful.
So what’s next for me?
Thanks to Nmachi for feedback on a draft of this post
by Oo Nwoye
While attending Pivot East in Nairobi a few months ago, I learnt about the Savannah Fund, a Silicon Valley backed fund. As described on their website,
Savannah Fund is a seed capital fund specializing in US$25,000-US$500,000 investments in early stage high growth technology (web and mobile) startups in sub-Saharan Africa. Initially focused on East Africa, the fund aims to bridge the early stage/angel and venture capital investment gap that currently exists in Africa
I was excited the funding challenges facing African startups were slowly coming to an end even though I was a bit jealous that their initial focus was East Africa. So I was rather surprised when I read on TechLoy that Savannah’s first investment was in an Australian company called biNu. But here’s the twist, their product is targeted towards Africa and other ‘developing countries’. There’s more, a founder of bINu is from Zimbabwe.
So here is the question. What criteria do we use to define an ‘African Startup’? Location? Target Market? Founder’s origin? ⅔ of the above?
Is Eskimi an African startup considering that a vast majority of their users are on this continent?
Here’s why it might matter
First of all, I have to acknowledge the venture investing is a capitalist venture (obviously!). The main aim is to maximize returns.
I do not believe in “hand-out” styled charity, however, I do believe in impact investing. I believe for Africa to be self sufficient, we need to start producing more. In this software-eating age, the products are digital and the factories, startups.
The reality of the situation is that the ‘western world’ is far ahead of us in terms of human and capital resources required to tackle “African opportunities”. Based on pure competence, I think African based technology startups are at a disadvantage to their western counterparts. Which is why Wired Magazine titled their famous article “Want to become an internet billionaire, move to Africa”. The operating words are “move to”. Meaning the people to tackle such opportunities are not on the continent.
- What is the best approach in reducing this competitive gap African startups face from a financing perspective?
- Should we push to have more ‘African funds’ focused on the continent?
- What criteria should be used to define African startups?
Personally, I’d prefer extra support and incentives for Africa based internet companies regardless of founder’s origin or target market. Also, my criteria of being based on the continent would mean that majority of ‘production’ (design and programming) is done here on the continent.
I’d like to know what other people think.
To be very clear, I am in no way criticizing Savannah’s funding philosophy. I think they are doing something amazing. I also consider Erik, one of Savannah’s partners, as the singular most important startup supporter we have on this continent. I just thought I should put my thoughts out there to get a better perspective.
BTW, the application for Savannah’s Nairobi based accelerator program is closing soon.
Mbwana, Managing partner of Savannah Fund has responded below.