OoTheNigerian

sometimes, I make a lot of sense.

Tag Archives for: Competition

Xenophobia vs. Protectionism: How should local Nigerian startups compete with ‘foreigners’?

20 January 2014 by Oo Nwoye

 I read a post that would not be too out of place if it came with the byline of BNP’s Nick Griffin.

The crux of the post is that we should be afraid of the foreigners coming to Nigeria to take it all from the Nigerian tech scene and “forcing them back into the Lagoon” is the way forward.

I suggest you read it

Ideally, it would not have been worrisome but the fact that it was written by a poster boy for the Nigerian internet space and wholly endorsed by Sim Shagaya, CEO of Konga who called it “words of wisdom” makes it so

If people do not state early, their opposition to such xenophobic (irrational fear of foreigners) thinking, it could easily be misconstrued as a true representation of the view of Nigerian tech ecosystem.

This is coming on the heels of a Nigerian commentator/activist advocating that foreigners should not be allowed to run malls in Nigeria

Interestingly, Nigerians are particularly known for traveling far places to do business and are usually on the receiving end of “these foreigners are our problem” thinking.

Why the fear of Rocket Internet?

Rocket Internet is an Incubator funded by 3 German brothers, the Samwers. Their business model initially was copying businesses that had gained traction in USA but yet to enter Europe then sell these companies to the original US companies when they are ready to tackle Europe.

Version 2 of their current business model is aggressively building ecommerce verticals in Africa, Middle East and South East Asia.  They centralize and reuse technology in Germany and then hire a person to lead the operations execution in the country they are tackling. They sell and leave as quickly as possible

When they come into a market (it is rumored that operation leads on the ground, aka co-founders, are given $1million to check out the market) they move aggressively, hire and quickly spend lots of money (in the local ecosystem) in a very short time.

This of course causes a mini inflation in the local tech scene as they poach staff, cause an increase in the ad buying cost etc, mainly making things much more expensive. No local startup certainly likes it since it makes business unnecessarily more expensive to run

My views on Rocket Internet have evolved over time. Before, I thought they were a net negative to our ecosystem since they play the pure extraction short term game. Meaning, they build solely to sell and when they sell, they take the money out and move to the next area to extract from; leaving a wake of over stretched local startups and questionably self-sufficient businesses.

But that was one dimensional thinking on my part. Rocket internet is majorly responsible for the urgency we have in our local tech system especially in the ecommerce space. Alongside stretched startups, they leave in their wake human capacity trained on their dime a more developed market and of course a new investor holding the bag. I’m certain the local advertizing companies are also not complaining.

A negative remains though. In other successful tech ecosystems, local money is a major part of the tech scene so when there is an exit, the money is poured back to the local economy and it gets bigger. With the Rocket model, nothing like that happens.

How do you solve a problem like Rocket Internet? Protectionism or Xenophobia?

What is worrisome in Jason’s post is the fact that a legitimate problem (the Rocket extraction model is not the best for a fledgling ecosystem) is muddled with the xenophobic “stop the foreigners” solution.

What is bad for the Nigerian ecosystem is the extraction game irrespective of who plays it.

[Side note: Interestingly, Nigerian politicians and to a large extent ‘business men’ are guiltier in playing the extraction game. They take money from Nigeria (usually foreign loans) and go and develop Dubai. At least Rocket is bringing in money before planning to take out their spoils.]

I’m in favour of protectionism to an extent.

Protectionism are laws created to protect local companies from foreign (company) competition especially if the locals are operating at a disadvantage. The value in protecting home companies is based on the assumption that they will employ residents, pay tax and limit capital flight. They more they succeed, the more tax they will pay and more people they will be employed locally. Local companies could be run by New Zealanders for all anyone cares. i.e citizenship of local company owners does not matter.

Hypocritical words

Jason states:

“We are at the cusp of losing the key internet 1.0 verticals to non-indigenous players. This is something which would be dire for the ecosystem at large.”

 

“My simple thought. Our fathers lost the Telecoms, PayTV and other technologically driven industries to foreigners. Let’s not make the same mistake and lose our internet industry.”

So what exactly is he arguing are we losing?

If he is talking of returns, shouldn’t those who take risk be rewarded? When Konga and IROKO eventually successfully create a massive liquidity event, who would win?

Well, their approximately 100% foreign investors.

Is he talking about losing by building foreign capacity as against building local capacity?

Jason’s Co-founder, first angel investor and IROKO COO Bastian (who runs the company) is ironically, German (same with Rocket’s founders). DealDey (Sim’s previous company) is run by a foreigner. Konga and IROKO have foreigners in leadership positions.

There is no noticeable difference between the citizen structure i.e the citizen composition of the employees of either Sim/Jason’s company and an average Rocket Internet company e.g. EasyTaxi and Jumia (until recently) are Nigerian run.

I have previously written about why we are losing the investment game to foreigners.  In summary, there is less risk and turnaround time in investing in traditional tangible opportunities like real estate. Only those who have made money via software can see the internet opportunity. Sadly, they are not much around.

Competition:

The absence of international competition is the reason why Nigerian payments infrastructure has been way behind. Without competition in PayTV, we would have been at the mercy of HiTV that broadcasted premier league matches without sound or halftime commentary.  Without competition the customers will lose.

The world is flat and companies can no longer hope to be protected by artificial political borders. From day one, you should build like the biggest player in the world is going to launch in your market tomorrow.

The sole reason Silicon Valley is the outright leader in technology startups globally, is the combination of the concentration of talent brought by the high priority placed on competence irrespective of origin and a lot of money.

What is the way forward?

Asides the xenophobic card, how do local ‘underfunded’ companies compete against the foreigners especially those playing the extraction game?

Ironically, Jason answered  this in the beginning of his post referencing the Alibaba movie

“a great company culture, locally focused product development and a fierce belief in your local market can withstand and defeat a massive global competitor”

In addition to the above the government has a role in ensuring local capacity is built. Local businesses are encouraged to  operate/employ locally,  Yadda.. yadda  yadda..

 

First they came for Rocket Internet, but I did not speak up because I was not German..

Then they came for the Kenyans, but I did not speak up because I was not Kenyan..

 

PS:

  1. I do not for one second think either Jason or Sim are xenophobic one bit. Jason is even arguably British. But playing the xen? card for short term individual business advantage is VERY detrimental to the general ecosystem at large in the long term.
  2. Make no mistake, I am a very biased man all things equal, if a local company is executing at 70% of their foreign counterpert, I will go with a local. Same with friend vs. non –friend, family vs. non-family. Etc. However, I will not go attacking the other.
  3. Being pro x is cool, being anti y, had better be justified and being foreign is the worst of justifications.
  4. Triple irony is that Alibaba’s major investor was Yahoo! – a foreign company founded by a Chinese immigrant who would not have founded an American company if Silicon Valley was anti-foreigner (this is getting too meta for me).
  5. Oh. The Alibaba story was told by a foreigner.

33 comments | Categories: Commentary, Nigeria, Uncategorized | Tags: , , , , , , , , , ,

Google Vs. China: My Thoughts On Why The Chinese Did It.

13 January 2010 by Oo

Google has threatened to pull out of China citing human rights, security breach backed by the government, etc. and it is really a big deal! Below are my thoughts.

In my humble and simplistic view EVERYTHING happening in the world is a big chess game between the US, China, Russia and United Kingdom (hahahaha!! Of course I am kidding about the UK part).

Before now, the King (Super Power) of the world owned the largest weapons, then it moved to energy (Oil).  Now the Internet has changed all that. HE WHO HAS INFORMATION IS KING! In my post talking about Google’s dominance on the Internet, I spoke about governments being a major competition/obstacle for Google because of the amount of information it has on its citizens. You see, Google is an American company based in the US, so there is little you can to to convince me, the Chinese or the Russians that America does not have access to the information (= intelligence). For heavens sake Google parks their private jet in NASA! It is no surprise to me that Google is not the dominant search company in either Russia (Yandex) or China (Baidu).

On a side note, Facebook is not in China too.

So why did Google do it?

There are two schools of thought currently in the blogosphere

1. Human rights issues. They are just living up to their motto “Don’t be evil”.

My thoughts on this point:  Why did they go to China in the first place?  Google had always censored results in China before now I do not think they discovered their ‘conscience’ overnight.

2. Because they are loosing market share they need an excuse to succumb to defeat with their heads held high while getting a bit of positive PR.

As regards to this point, I think it is a ridiculous assertion. Google is not known to be making any loss (The are expected to hit $600M revenue this year) in China, so it makes absolute no sense to leave. Secondly, will be stupid to throw away  the human capital/knowledge (employees)  they have built up over the years  for reason of loosing market share. Moreover they will not burn the bridge with China (which they have effectively done)  if they just want to leave the business of search in China.

So i’ll say neither.

My theory (speculation) is this: Google must have realised that it has been infiltrated by by the Chinese government both form within and outside and must have lost some IP, which will be important in the battle for “organizing the worlds information”. They realize they have much more to loose than gain by operation in China.

So why did the Chinese do it?

Simple! They are now global players and they have to be on top of things. They cannot allow an American company/government have all that intelligence on their people. It will not happen now, it will not happen in future. The Chinese tactic is simple, lure greedy American companies to the country (1.3 billion is one hell of a market opportunity); Give them enough market share (some scores of millions) to allow them satisfy their greed while not compromising national security. At the same time getting enough  knowledge of the IP/Technology they own. It is a win-win deal….for the Chinese.

The only party that might loose from Google pulling out is the US government. Google will make lots of money in other parts of the world (if other governments do not follow suit), The Chinese people do not use Google anyway, and the Chinese government will lure in the next greedy company to take the space vacuum created by Google .

Did I hear you say Bing? (it even sounds Chinese!)

4 comments | Categories: Politics, Technology | Tags: , , , ,

Is Google strong enough?

06 January 2010 by Oo

googleopoly Disclaimer: I love Google!

Now lets move on.

Please understand that this post is not deep or analytical is any way it would be too long. I have assumed previous following of TechCrunch, Mashable, GigaOm and Technology news generally (Who the fuck do I think I am?)

Yesterday, Google launched the Nexus phone to add to the unending list of products and services provided by almighty Google. This is has added to the list of competition (and enemies) Google has created and I am really getting worried for Google. let me go over a list of the major ones I know

Google vs.. Microsoft: These guys are battling over everything but Google is going directly after Microsoft’s cash cows, the Windows operating System (With Chrome OS) and Microsoft Office (With Google Docs)

Google vs.. Apple: Google is going after iTunes which invariably means iPod (with their music search) and more importantly The iPhone (With the Android presently represented by various phones most recently the Nexus One)

Google vs.. Facebook: This is not so straightforward but let me say Google Friend connect is the clear one. Google Wave is looking quite suspicious though.

Google vs.. Mobile Phone companies: With Android, Google might just wipe out Nokia.

Google vs.. Amazon: Google wants to scan as many books as possible and offer them free.they want to democratize

Google vs.. Voice Carriers and Skype: Google Voice is going to break the stronghold telephone companies have on their subscribers by deeply democratizing the phone number

Google vs… Traditional Television (via YouTube): Just take it that YouTube will kill cable television soon

Google vs.. PayPal: Remember Google check out? Well if you don’t you will when you decide to buy the Nexus.

Google vs… Newspapers: I really don’t understand this fight, but just know Rupert Murdoch is not happy with Google.

Google vs.. Governments: This is when things start getting complicated! The amount of information that Google has on citizens of other countries is crazy. Google can actually predict trend of things like flu based on user searches! It the exact reason China is not letting Google get any significant market share. Google earth is another story entirely

Google vs… OnePage: Heard of Google Profile? This last one may seem hilarious but it is the one that might turn out to be the most dangerous. What OnePage represents here is the ordinary little peeps in the basement trying to launch a start-up.

Ill explain all this long talk a bit below.

Google’s “Sand, Sand for Garri”, “mixing  reggae in blues” strategy:

To non Nigerians, this basically means playing the role of a spoiler. You see, Google’s core business is advertising and 95% of all revenues come from it. Therefore, Google is actually making losses on all their ‘spoiler products’. Using their leverage, they have the ability to release products that cause a lot of problems to companies without having to make money. they use the claim of trying to be open as an excuse to level the ground. if Google is really an open company, let them open source the algorithm of their search. Nope, will never happen

Now the stupidly funny thing is that what Google is doing cannot be termed monopoly or unfair. people like Microsoft actually have as many products as Google but are being trounced in market share. Actually In a myopic view, Google is actually helping the average Joe the Plumber. More importantly, Microsoft or any other big company are free to try and play spoiler in Google search business; but you see, no one can make a better search engine than Google.

So what the hell is this post about then?

Google not being unfair to their big competitions does not mean in anyway that all these big companies will try to play fair back or sit and watch as two small boys blow their company into oblivion. Remember what is said about your enemies enemy? Now Imaging if all those other forces come together. The main problem for Google will be when the little guys realize there is little hope for them creating the next billion dollar company without Google coming in and levelling the playing ground. Go and ask Loopt what they feel about Google latitude.

My belief is very soon the big companies and those afraid of Google’s growing power and influence will realise that the best way to challenge Google will by hitting below the belt…BAD PR, dent Google’s image. Once those companies start making the average man afraid of Google’s size, it will be really bad for them. The George bush scare tactic never fail. I am VERY afraid of what will happen if Google pulls the plug on me.

I asked Marissa Mayer about this when I met her at the  CUTEC conference (sorry, i had to mention it again) and she pointed at Twitter as an example of what Google had missed. Meaning that they did not have their hand in every pie and people can still compete easily. I do not think so and I believe people do not think so too.

So what about you, do you think too big? Is Google is strong enough to take on everyone?

For a more interesting analysis of what I have just blabbed on, read Google, Rome and Empire.

2 comments | Categories: Technology | Tags: , ,